21 Sep 2015 Press release Climate change

UN Environment Programme Executive Director Achim Steiner: Address at the International Seminar - the Financial System, the Green Economy an...

Excellencies, Colleagues, Ladies and Gentlemen,

In a few days in New York, the nations of the world will come together to adopt the Sustainable Development Goals. This is an unprecedented moment in our shared history.

An agreement by all nations, for all nations, will put the world on track toward a sustainable future.

The Goals establish the imperative for all countries - developed and developing - to tackle the most pressing economic, social and environmental issues of our time.

The SDGs alone would underline the year 2015 in any history of development.

But in December the world will gather in Paris to address the pressing issue of climate change.

This is another momentous event that can put in place the strategies we need to build low-carbon, resilient economies.

So I don't think it's exaggerating in the slightest to say that 2015 is the year we may descascar o abacaxi, if you'll let me borrow an expression.

Done right, the work toward these goals can lead the planet and its peoples toward a more prosperous, sustainable future.

But to be done right, the work needs to be done together.

Our world is composed of systems too complex, too integrated for one body to tackle alone.

That's why we are here today: to identify the new partnerships in the financial system that can deliver on our goals for a sustainable future.

For his work in forging these partnerships, I would like to pay tribute to the personal leadership of Murilo Portugal, a member of the UNEP Inquiry's international advisory council. His guidance and that of FEBRABAN has greatly contributed to the findings of the Inquiry.

Harnessing the Financial System

As one of the systems that ties our societies together, our financial system will be fundamental to the delivery of sustainability. This is why United Nations Environment Programme launched the Inquiry into the Design of a Sustainable Financial System in January 2014. We wanted to understand the need for action, identify progress and highlight options to accelerate action.

The challenge is clear.

According to UNCTAD, we need investment of US$5-7 trillion per year to deliver the Sustainable Development Goals.

Most of this is in the developing world, where there is a US$2.5 trillion annual financing gap for sustainability.

We also need to steer capital away from assets that deplete natural capital.

We need to strengthen the resilience of the financial system to increasing shocks coming from environmental degradation, such as more powerful and frequent natural disasters.

And we need to extend the horizons of financial decision-making to take into account the potentially catastrophic impacts of climate change. If we see 6 degrees of warming, the investment assets at risk total up to US$13 trillion.

There are three ways to mobilise the finance we need.

First, we can fix the signals in the real economy to create demand for green finance.

The IMF tells us that the energy sector is subsidized to the tune of US$5.3 trillion per year in terms of direct fiscal incentives and environmental costs that are left unaccounted for. We will need to price carbon and introduce effective environmental policies to drive green finance.

Second, we can deploy public finance to close the viability gap, while investing in critical public goods in the environmental arena.

This is critical - but we know that fiscal resources are constrained in all countries. Looking at an example in China, we see that that their next Five-Year Plan targets US$320 billion for green investment. However, only 10-15% of the capital that's needed for green investment is expected to come from the government.

This is demonstrating one of the key roles of public finance - that it must catalyze private finance.

Third, we can take action within the financial system itself: to better manage sustainability risks, to strengthen resilience, to promote innovation in the capital markets and to ensure coherence between financial rules and sustainable development goals.

The Inquiry's final report will be launched in Lima next month - but today is an opportunity to learn from the growing body of international practice.

It is very humbling for UNEP to see so many of our partners - from China, France, India, Indonesia, Kenya and the USA to name just a few - in the room today

A Quiet Revolution

The core finding of the Inquiry is that a "quiet revolution" is taking place. Policy makers and financial regulators are quietly addressing the need to create robust and sustainable financial systems for 21st century requirements.

In England, banking regulators are incorporating socio-environmental risks into prudential governance.

Stock exchanges such as Bovespa are introducing new disclosure requirements for listed companies.

Public finance institutions have in a number of instances primed the rapid growth of the global green bond market.

Pension regulators are making it clear that sustainability is part of fiduciary duty.

Insurance supervisors are examining the risks that climate change poses to the soundness of the insurance system.

What is striking is that much of these initiatives - this leadership - is coming from emerging and developing countries.

Brazil is in fact one of these leaders in terms of what its central bank, its stock exchange and its commercial banks have been undertaking over the past decade.

Next Steps

Our conclusion is that we can now be more systematic about how we build sustainable financial systems, both at the national level and internationally.

Nationally we already have inspiring examples of strategic approaches.

China has developed a 14-point strategy for building a green financial system.

France has set out a white Paper for financing the ecological transition.

Indonesia has launched a 10-year roadmap for sustainable finance.

We also have an opportunity to strengthen international cooperation on sustainable finance.

Here, too, things are already moving.

To complete a very busy few days for sustainability, the Financial Stability Board is considering the systemic threat of climate change this week.

This is something that would be unimaginable even a year ago.

The complexity of the global financial system means that there are many priorities for cooperation, but perhaps one stands out.

The financial system is governed by a set of soft law principles and standards. But there are no principles for a sustainable financial system.

A set of core sustainability principles could help guide the integration of environmental and social factors into banking, investment and insurance regulation.

These principles could also provide the framework for monitoring performance and guiding action.

Looking ahead, the key to success will be combining the innovative potential of financial markets with long-term policy frameworks to mobilise the trillions we need for sustainable development.

In essence, it is a matter of public choice. Pope Francis has spoken to the notion of the "globalisation of indifference". This is a reminder of not only the power of our individual choices, but also that we must accept our collective responsibility to act.

In this case the choice is a positive choice that is being made in an increasing number of countries and across a growing portion of the financial system.

Delivering this transformation will take ambition, stamina and vision - all of which we have here today in São Paulo.

I look forward to working with you today to take the next step in building a sustainable financial system here in Brazil.