Financing Sustainable Development: a ‘Quiet Revolution’ Underway
By Sunny Lewis
LIMA, Peru, October 13, 2015 (ENS) – The world’s leading development banks Friday pledged to boost climate finance by committing $100 billion a year by 2020 to help developing countries mitigate and adapt to a warming planet.
At the International Monetary Fund-World Bank Annual meetings held in Lima October 9-11, bankers explored exactly what financial support is required to keep the planet from tipping into climate catastrophe.
In Lima, they were offered the results of a two-year-long inquiry conducted by the UN Environment Programme summarized in a new report, “The Financial System We Need.”
The UNEP Inquiry found that “a quiet revolution” is happening right now.
World Bank Vice President and Special Climate Envoy Rachel Kyte called the changes “a new generation of policy innovations that aim to ensure the financial system serves the needs of inclusive, environmentally-sustainable, economic development.”
Financial policymakers and regulators are now integrating sustainable development into financial systems to make them respond to a 21st century facing rising temperatures and a burgeoning population in need of clean energy and clean water.
UNEP Executive Director Achim Steiner said, “UNEP’s Inquiry has for the first time compiled and analyzed inspiring initiatives from across the world that seek to better align the financial system with sustainable development, showing that there is much to be learnt from the developing world.”
Image: UNEP Executive Director Achim Steiner (Photo courtesy UN Environment Programme)
The inquiry documented an upwelling of sustainable development momentum driven by developing and emerging nations including Bangladesh, Brazil, China, Kenya, and Peru, championed by France and the United Kingdom.
The UNEP Inquiry reports that, “Amplifying these experiences through national and international action could channel private capital to finance the transition to an inclusive, green economy and support the realization of the Sustainable Development Goals.”
These 17 goals , adopted by the UN General Assembly in September, range from ending poverty and hunger, ensuring clean water and sanitation for all, urgent action to control climate change, and responsible use of forests and oceans, to making cities safe and resilient, and ensuring gender quality and justice across the world.
The UNEP Inquiry into the Design of a Sustainable Financial System was established in January 2014 with a mandate to advance policy options linking the financial system with sustainable development.
Backed by a high-level Advisory Council of financial leaders, the Inquiry has looked in-depth at practice in more than 15 countries related to banking, bond and equity markets, institutional investment, insurance and monetary policy.
To reach its findings, the Inquiry worked with central banks, environment ministries and international financial institutions as well as major banks, stock exchanges, pension funds and insurance companies.
The Inquiry’s report presents a Framework for Action with a toolbox of 40 different measures, a set of five policy packages for banking, bond and equity markets, institutional investors and insurance, and a set of 10 next steps to promote international financial cooperation.
Murilo Portugal, the president of Brazil’s banking association, FEBRABAN, and a member of the Inquiry’s Advisory Council, said Friday, “The Inquiry has catalyzed awareness of the need to align financial markets to sustainable development, and highlighted practical pathways to improving such an alignment.”
FEBRABAN offers three key insights based on the UNEP report:
- Financing for sustainable development can be delivered through measures focused on the financial system, as well as the real economy.
- A growing number of policy innovations have been introduced by both developing and developed countries, demonstrating how the financial system can be better aligned with sustainable development.
- Systematic national action can now be taken to shape a sustainable financial system, informed by current trends and complemented by international cooperation.
Bankers and financiers in many countries are already moving towards sustainable development. The UNEP Inquiry found over 100 measures that are already in place, including:
- In Peru, new due diligence requirements have been introduced for banks to help reduce social and environmental externalities.
- In China, a portfolio of 14 distinct recommendations advances China’s green financial system, covering information, legal, institutional and fiscal measures.
- Kenya has advanced financial inclusion through scaling of mobile-based payment services and is now also supporting green financing.
- In France, new disclosure requirements on climate change have been introduced for institutional investors as part of the country’s energy transition legislation.
- The United States is emphasizing fiscal measures to accelerate green finance and has made advances in disclosure and investor action.
Naina Kidwai, chairman of India’s branch of British banking and financial services company HSBC and director, HSBC Asia Pacific, is a member of the Inquiry’s Advisory Council.
Kidwai found the UNEP report useful, saying, “Too often the financial system and sustainable development have been tackled in separate silos. The Inquiry has shown for the first time how to systematically connect the dots, demonstrating practical ways in which we can mobilize the scale of capital needed in emerging markets, particularly for clean energy and clean water.”
Speaking in Lima, Yi Gang, deputy governor of the People’s Bank of China, said the UNEP Inquiry report “delivers a vision of embedding sustainable development into the core of financial and capital markets.”
“It should be a very useful guide and reference for many governments, financial institutions and international organizations in thinking about how to advance green finance,” said Yi.
The core definition of sustainable development is, “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”
It was first defined in the 1987 publication “Our Common Future,” by the UN World Commission on Environment and Development, also known as the Brundtland Report after former Norwegian Prime Minister Gro Harlem Brundtland, who chaired the commission.
Brundtland saw that the many crises facing the planet are interlocking elements of a single crisis of the whole and saw the need for the active participation of all sectors of society in sustainable development consultations and decisions.
These elements stand forth again nearly 30 years later in the UNEP Inquiry report presented to the World Bank and IMF fall meeting in Lima.
Dr. Atiur Rahman, governor of the Bangladesh Bank, and a member of the UNEP Inquiry’s Advisory Council, said in Lima, “For the first time, the Inquiry has mapped the many innovations around the world seeking to ensure that the financial system serves its purpose of financing inclusive, green development.”
Award-winning journalist Sunny Lewis is founding editor in chief of the Environment News Service (ENS), the original daily wire service of the environment, publishing since 1990.