It should be finance’s job to spread prosperity
the only one). Given the current trajectory of global fossil-fuel use, the planet’s temperature is likely to rise by 4ºC to 6ºC above its pre-industrial level, an increase that would be catastrophic for food production, human health, and biodiversity; indeed, in many parts of the world, it would threaten communities’ survival. Governments have already agreed to keep warming below 2ºC, but have yet to take decisive action towards creating a low-carbon energy system.
The financial industry has a central role to play in catalysing the global transition to inclusive, sustainable growth.
After all, effective financial markets should convey accurate long-term information to savers and investors, thereby enabling businesses, pension funds, insurance pools, sovereign wealth funds, and others to allocate their resources to projects that provide solid long-term payoffs, and protect their savings from financial calamities. Given climate change, that means accounting for whether, say, entire low-lying coastal areas or agricultural regions will be able to cope.
Effective financial markets should also channel far more global saving from highincome countries with relatively weak long-term growth prospects to low-income regions with relatively strong growth prospects, owing to new opportunities to leapfrog development with smart, information-based infrastructure.
Just a decade ago, hundreds of millions of rural Africans lived outside of the flow of global information. Now, with the rapid spread of broadband, once-isolated villages benefit from online banking, transport services, and information communication technology-enabled agribusiness and health and education programmes.
To seize the benefits of these new technologies at scale, and to avoid investments that aggravate cascading environmental crises, the finance industry will need to understand how the SDGs will reshape the investment landscape.
The time has come to embrace the concept of true long-term investing, which requires marshalling the capacity of institutionally mobilised capital to support investment opportunities that will secure a sustainable future for all.
We know that enormous public and private investment is required for the transition towards a low-carbon economy, to win the global fight against poverty and disease, and to provide high-quality education and physical infrastructure worldwide. Today’s savvy investors, and the financial industry as a whole, need to look ahead, beyond today’s market prices and policies to the market prices and policies of the future.
For example, today there is no global price on carbon to shift energy investment from fossil fuels to renewable sources; but we know that, in order to keep global warming below the 2ºC limit, such a price is coming soon.
Practical ways
As stewards of long-term capital, today’s investors cannot ignore the coming carbon price and the shift towards low-carbon energy sources. That means devising practical ways to finance and encourage the required shift.
We believe that financial leaders want their industry to play its vital role in sustainable development, and we urge them to contribute actively to the unique opportunity that this year represents. Today’s financiers can choose to be remembered either for the 2008 crisis, over which they presided, or for their creative and resourceful efforts to encourage long-term sustainability.
Assuming that they choose the latter, the financial industry should work with governments to create a global investment framework that includes appropriate incentives to take on the challenges of sustainable growth. This implies the continued globalisation of finance.
Financial leaders should also involve citizens (the savers) in the journey to a fairer and more sustainable global economy. That means encouraging responsible investing by adopting ever higher standards of stewardship.
Since the Industrial Revolution, finance has been a powerful enabler of human progress. The great task of this generation’s financial leaders is to mobilise investment in the skills, infrastructure, and sustainable technologies that can end poverty, spread prosperity, and protect the planet. Those who act first will be the wiser – and wealthier – for it.