Washington D.C., 17 April 2018 – Huge progress on reforming the global financial system over the last four years has started to deliver desperately needed financing for sustainability and set up the next wave of action, according to a new United Nations report released today.
The final report of the UN Environment Inquiry into the Design of a Sustainable Financial System highlights opportunities to align the financial system with sustainable development, as well as pathways to success. The report offers real signs that a shift to a sustainable financial system is well under way.
“Over the four years of the Inquiry’s operations, we have seen reform of the global financial system gather pace as banks, investors and regulators realize they must step up – not just to protect people and the planet, but their bottom lines,” said Erik Solheim, head of UN Environment.
“This is hugely encouraging, but we now have to turn widespread acknowledgement of the need for change into a global movement that delivers the finance we require to provide a better future for everyone.”
Evidence of change
The Inquiry, which completed its four-year mandate in March 2018, worked with policymakers, international organizations, financial institutions and civil society to help put sustainable finance at the heart of the development debate.
Its final report, Making Waves: Aligning the Financial System with Sustainable Development, finds that sustainability is now becoming part of routine practice within financial institutions and regulatory bodies.
Green bond issuance grew from US$11 billion in 2013 to US$155 billion in 2017. Key to this growth has been the market-creating role of public authorities, including key development banks. Yet such progress needs to be set against the scale of the global bond market of around US$100 trillion.
Divestments in carbon-intensive assets reached an estimated US$5 trillion in 2016, set against investments in coal, oil and gas over the same period of around US$710 billion.
National action is critical, and there are a growing number of ambitious roadmaps on sustainable finance. The number and range of policy measures to advance sustainable finance has increased. At the end of 2013, 139 policy and regulatory measures were in place across 44 jurisdictions. Four years on, the number of measures has risen to 300 in 54 jurisdictions, with a substantial rise in system-level initiatives.
There has been a striking growth in international initiatives, such as the G20 Green Finance Study Group (GFSG), co-chaired by China and the UK, with UN Environment serving as its Secretariat.
However, report also cautions that current financial flows are still nowhere near enough to deliver the trillions of dollars needed each year to finance the Sustainable Development Goals and the Paris Agreement.
Getting the financial system we need
Although the report finds that capital is beginning to flow to the new economy, it cautions that far more is continuing to support the old economy.
“Making Waves shows that systemic change is possible, in this case in how global finance aligns to sustainable development,” said Simon Zadek, Co-Director of the Inquiry. “It also reminds us that this is unfinished business – we need more waves of action to deliver the timely scale of changes needed to get the job done."
However, the engagement of increasingly influential players, the growth of powerful coalitions that support collaborative action, the shifting focus towards areas such as digital finance, the roles of rating agencies, and key policy platforms such as the G20 all point to further action.
“Most of the initiatives that are now underway to accelerate sustainable finance, whether by central banks, pension funds, credit rating agencies or insurance companies, would have been simply unthinkable when the Inquiry started back in 2014,” said Nick Robins, Co-Director of the Inquiry. “This should us give us confidence that we can achieve the alignment of the financial system with sustainable development.”
Although the Inquiry’s mandate is fulfilled, its work to catalyze change will continue through UN Environment, Sustainable Finance at the G20, coalitions for actions such as the Network of Financial Centres for Sustainability, the Sustainable Digital Finance Alliance and the Sustainable Insurance Forum.
NOTES TO EDITORS
Download additional quotes, graphics, facts and figures, and the executive summary of the report from the Inquiry website.
About the Inquiry
UN Environment initiated The Inquiry into the Design of a Sustainable Financial System to advance options to align the financial system with sustainable development. Established in January 2014, the Inquiry’s work was extended for another two years in late 2015.
It has published three editions of its global report: the first in October 2015, the second in October 2016, and third in October 2017. ‘Making Waves: Aligning the Financial System with Sustainable Development’ is its final, global report.
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