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DISCUSSION PAPER PI-1208

Defining and Measuring Green Investments: Implications for Institutional Investors' Asset Allocations

George Inderst, Christopher Kaminker and Fiona Stewart

This definitional, stocktaking paper aims to provide a comprehensive review of the concepts and definitions related to 'green' investments that are currently used in the market place. The purpose of this research is not to take a position on a specific definition but rather to explore what is being generally used, whether there are commonalties and inconsistencies, and what lessons can be drawn from this analysis.
The paper examines how 'green' investments are defined across different asset classes (equities, bonds and alternative investments), as well as providing some estimates of the size of these investments. The paper concludes that, given the lack of consensus on the usage and definition of the term 'green', the most productive approach could be to take an open and dynamic stance towards definitions and standards, with international institutions and governments adopting a 'governance approach to green investment'.

Key words: pension funds, green bonds, socially responsible investment (SRI), environmental, social and governance (ESG)