The Global Green Finance Index (GGFI): how it is calculated and why it is useful

Sushree Behera

The Global Green Finance Index (GGFI) is a project to rate the level of Green Finance activity in financial centres in terms of both quality and depth. The GGFI is a factor assessment index based on a range of instrumental factors and a worldwide survey of finance professionals. The GGFI ranking is important because it provides insights into which financial centers are leading the way in green finance and which ones are falling behind. 

The latest GGFI ranking shows that confidence in green finance appears to be strong. All centers improved their rating in GFCI 11, and the average rating is up just over 10%. The GGFI ranking covers the world’s 55 largest economies based on the World Bank’s 2019 GDP purchasing power parity ranking.

We will provide a comprehensive guide to the latest GGFI ranking, including an overview of the top-performing financial centers and the factors that contribute to their success.

How is the GGFI calculated?

The computation of the GGFI (Green Global Financial Index) is an intricate process. It is grounded in a factor assessment model. This model meticulously considers various elements pertaining to the environmental sustainability and green initiatives of financial hubs.

Instrumental factors embraced within the GGFI model are systematically grouped into four expansive domains, namely sustainability, infrastructure, human capital, and business. The astute evaluation of financial centers encompasses a host of specific factors:

  • Sustainability: This domain delves into a financial center’s environmental sustainability. It encompasses vital aspects like the robust adoption of renewable energy sources, the prominence of green edifices, and the seamless integration of sustainable transportation systems;

  • Infrastructure: In this sphere, the focus lies on the comprehensive infrastructure of a financial center. This infrastructure encompasses several facets. These include the accessibility of green financing alternatives, the prevalence of green bonds, and the commendable development of cutting-edge green technologies;

  • Human capital: Within this purview, emphasis is placed on the human capital that propels the financial center. This encompasses factors such as the level of education and training endowed upon the workforce. Additionally, it includes the thriving presence of environmentally conscious job opportunities and the progressive cultivation of green skills;

  • Business: This domain concentrates on the business environment of a financial center. It appraises attributes like the establishment of green regulations, the quantum of green investments, and the burgeoning development of sustainable markets.

The GGFI model uses an entropy weight method to calculate the GGFI of various provinces and cities. However, this method is not susceptible to subjective factors. It is important to note that the GGFI is not the same as the Global Financial Centres Index (GFCI). The GGFI ranks financial centers based on their competitiveness.

What are the key findings of the GGFI ranking?

The Global Green Finance Index (GGFI) is a ranking of international financial centers based on their performance in delivering green finance. The GGFI 10 report was compiled using 149 instrumental factors, and the GGFI 11 report was compiled using assessments from individuals. Here are the key findings of the latest GGFI ranking:

  1. London and Amsterdam maintained their first and second positions in GGFI 9, both improving their rating by more than 10 points;
  2. Zurich ranked third in GGFI 11, up from fifth in GGFI 10;
  3. Frankfurt ranked fourth in GGFI 11, up from seventh in GGFI 10;
  4. Paris ranked fifth in GGFI 11, down from third in GGFI 10;
  5. New York ranked sixth in GGFI 11, down from fourth in GGFI 10;
  6. Hong Kong ranked seventh in GGFI 11, down from sixth in GGFI 10;
  7. Singapore ranked eighth in GGFI 11, down from second in GGFI 10;
  8. Sydney ranked ninth in GGFI 11, up from eleventh in GGFI 10;
  9. Toronto ranked tenth in GGFI 11, up from twelfth in GGFI 10.

Compared to previous rankings, there have been some notable changes in the rankings of financial centers. For example, Zurich and Frankfurt have both risen in the rankings, while Paris and Singapore have both fallen.

Some financial centers that have performed well in the latest GGFI ranking include London, Amsterdam, Zurich, and Frankfurt. These centers have all improved their ratings compared to previous rankings. On the other hand, Paris and Singapore have both fallen in the rankings.

What are the implications of the GGFI ranking for the global green finance landscape?

The Global Green Finance Index (GGFI) ranks financial centers worldwide based on their performance in delivering green finance. The GGFI ranking helps identify the financial centers that are leading in terms of their commitment to and implementation of green finance practices. 

The GGFI ranking raises awareness about the importance of green finance and encourages financial centers to prioritize sustainability in their operations. It incentivizes centers to develop and implement policies, regulations, and initiatives that support green finance, leading to increased investment in environmentally friendly projects.

The GGFI ranking promotes transparency in the global green finance landscape. By evaluating and comparing financial centers based on various instrumental factors, it provides valuable insights. These insights shed light on the strengths and weaknesses of different centers’ green finance ecosystems.

Read more: All about GreenVesting: the best opportunities for investing in the green economy

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