Also, we need to develop innovative structures to diversify risk, through for instance, pooling a large set of projects in many jurisdictions backed with guarantee schemes or other de-risking solutions. Blended finance structures can unlock private sector financing of the transition to a low carbon economy.
Risk models and risk management in general are based on the assumption of normal market conditions, where willing buyers and sellers exist, with adequate market liquidity to enable assets to be priced in the market. What happens when the market collapses? It is clear that risk management models perform poorly in such circumstances.