Climate Finance And Moral Risk Transfer: Pricing Intergenerational Equity In Sustainable Capital Allocation

Abstract

Climate finance has become an overriding tool of dealing with climate change by aligning capital to mitigation and adaptation policies. Nevertheless, all alongside its economic goals, climate finance also incorporates ethical conjectures regarding the manner in which climate-induced threats and accountabilities can be apportioned over time. This paper looks at the transfer of moral risks in sustainable capital allocation such as whether the existing climate finance mechanisms are sufficient to price intergenerational equity. The study scores green bonds, transition finance, carbon markets, and climate insurance schemes using a mixed methods approach that incorporates both qualitative policy analysis and quantitative financial modelling. According to the findings, even at current market-based discount rates of 68 these would result in the incorporation of 1829 percent of long run climate damages in current financial values, and 5575 percent of future climate-related expenses remain unpriced. Such scenario modelling also demonstrates that the use of lower social discount rates (132) would turn the project valuation inside out such that the net present value would decrease by USD up to 140 million on long-term projects, revealing the degree of hidden intergenerational reverse burdens moving. The comparative analysis with the current literature makes sure that this underpricing is not a mainly data or uncertainty issue, but a structural consequence of financial valuation norms. The paper will conclude by determining that, unless racism specifically incorporates intergenerational equity into the risk pricing and capital allocation frameworks, climate finance will remain a temporal risk-shifting machine, and not a process that can achieve real climate justice.