Quiet fi­nan­cial rev­o­lu­tion nur­tures green growth

China Daily (USA) - - G20 2016 CHINA -

The global econ­omy is in tran­si­tion. Any­where you look in the world, you can see this. From pri­vate com­pa­nies em­brac­ing clean technology and clean en­ergy, to coun­tries putting sus­tain­able growth at the cen­ter of na­tional plan­ning, the drive is to­ward in­clu­siv­ity and the green —– both are ur­gently needed.

Such changes have been her­alded both by the Paris Agree­ment on cli­mate change and the adop­tion of the United Na­tion’s 2030 Agenda for Sus­tain­able De­vel­op­ment last year. These are su­perb am­bi­tions and the right di­rec­tion for our fu­ture.

That is why the G20’s core ob­jec­tive of sus­tain­able growth can only be achieved by align­ing pol­icy with these am­bi­tions.

As we watch the change play out and help it quicken, we see that it is driven by for­ward-look­ing coun­tries and busi­nesses. But a piece of the puz­zle is still miss­ing. What is miss­ing is the ef­fec­tive ser­vice of the global fi­nan­cial sys­tem. We need tril­lions of dol­lars of in­vest­ment to both fix what we’ve done to our planet and to erad­i­cate ex­treme poverty. We need this in­vest­ment for a fu­ture where we are not blighted by cli­mate shocks, fail­ing ecosys­tems and wide­spread in­sta­bil­ity. To un­lock that in­vest­ment, we must re­shape the fi­nan­cial sys­tem. Many lead­ers in the fi­nan­cial sys­tem have long un­der­stood this. And­many over time have made at­tempts at new­fi­nan­cial prod­ucts and busi­ness mod­els to help meet the need. De­spite some ex­em­plary progress, how­ever, there is a long way to go in over­com­ing back­ward-look­ing in­ter­ests and pol­icy and reg­u­la­tory frame­works in­sen­si­tive to what is needed to se­cure an ef­fec­tive, ef­fi­cient and re­silient fi­nan­cial sys­tem. But there is some­thing brew­ing. A quiet rev­o­lu­tion has been un­der­way in re­cent years. Bold pol­i­cy­mak­ers, reg­u­la­tors, in­vestors, bankers and in­sur­ers, of­ten from de­vel­op­ing coun­tries, have been ex­per­i­ment­ing with newmeth­ods and mea­sures to build the fi­nan­cial sys­tem we need for a sus­tain­able fu­ture.

This “quiet rev­o­lu­tion” was first chron­i­cled in aUNEn­vi­ron­ment Pro­gramme re­port called “The Fi­nan­cial Sys­temWe Need” in 2015. What we found was re­mark­able: an un­prece­dented rise of pol­icy and mar­ket in­no­va­tions in­de­pen­dently tak­ing place around the world, from Bangladesh to Brazil, and from France to Kenya.

In­ter­na­tion­ally, the bur­geon­ing green bond mar­ket is pre­dicted to sur­pass $150 bil­lion in mar­ket value be­fore the year is out. A num­ber of credit rat­ing agen­cies have em­bed­ded cli­mate risks in their rat­ings. And cer­tain reg­u­la­tors and stock ex­changes are pro­vid­ing in­for­ma­tion on sus­tain­able de­vel­op­ment in­for­ma­tion to in­vestors and savers.

Green fi­nance is be­com­ing a source of com­pet­i­tive­ness. Lead­ing fi­nan­cial cen­ters such asHong Kong, Paris, Zurich and Lon­don are jock­ey­ing to po­si­tion them­selves as the world’s hub for green fi­nance.

And un­der China’s G20 Pres­i­dency, this quiet rev­o­lu­tion is be­com­ing main­stream, as green fi­nance has, for the first time, be­come a topic con­sid­ered by the world’s lead­ing fi­nance min­is­ters and cen­tral bank gov­er­nors. China and the United King­dom are co-chair­ing this ini­tia­tive, and are lead­ing by ex­am­ple.

Zhou Xiaochuan, gover­nor of the Peo­ple’s Bank of China, has presided over the cre­ation of China’s Green Fi­nance Com­mit­tee. This com­mit­tee is im­ple­ment­ing pol­icy, reg­u­la­tory and in­sti­tu­tional mea­sures, de­vel­oped with in­ter­na­tional co­op­er­a­tion co­or­di­nated by the UNEP, to green China’s fi­nan­cial sys­tem. Zhou has said that “es­tab­lish­ing a green fi­nance sys­tem has be­come a na­tional strat­egy”, and it is now en­shrined in China’s 13th Five-Year Plan (2016-20).

Mark Car­ney, gover­nor of the Bank of Eng­land, has over­seen a re­viewof the risks posed by cli­mate to the UK in­sur­ance sec­tor, as well as over­see­ing a task force on cli­mate-re­lated dis­clo­sure in his role as Chair of the G20’s Fi­nan­cial Sta­bil­ity Board. He has made his view­clear, stat­ing “there is a need to re­set the fi­nan­cial sys­tem”, if it is to play a role in ad­dress­ing cli­mate change and broader sus­tain­able de­vel­op­ment chal­lenges.

The UNEP re­mains deeply en­gaged in ad­vanc­ing such a re­set and we will re­lease our sec­ond global re­port on progress made in align­ing the fi­nan­cial sys­tem with sus­tain­able de­vel­op­ment at the forth­com­ing In­ter­na­tion­alMone­tary Fund an­nual meet­ings, pre­sent­ing an early frame­work for mea­sur­ing progress and with a fo­cus on the role of fi­nan­cial technology.

We are part way through a pro­found global eco­nomic tran­si­tion. From en­ergy to trans­port to agri­cul­ture to man­u­fac­tur­ing, change is hap­pen­ing at an in­cred­i­ble pace. But the threat of cli­mate change and the ur­gency of de­vel­op­ment means we need to quicken this pace. Global fi­nance sys­tems are key to these changes, and the G20 can and must con­tinue to drive such changes. An am­bi­tious di­rec­tion was set last year in Paris and New York. Now we need to put this am­bi­tion at the heart of the fi­nan­cial sys­tem. The au­thor is ex­ec­u­tive di­rec­tor of the Unit­edNa­tions En­vi­ron­ment Pro­gramme.

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