Green Finance Progress Report

Policy Lever: Directing Finance Through Policy

Policy directed finance approaches introduce requirements or prohibitions that shift capital allocation. Such measures in effect introduce new performance criteria into financial decision-making, which might reduce or increase risk-adjusted returns. The Inquiry found that measures that change the legal requirements facing financial institutions are perhaps the most contentious, but are also widely used.

Examples

Examples in practice include:
  • Lender and other liabilities: legal liability regimes for lenders, fiduciaries and insurers (and responses in terms of due diligence for environmental risk).
  • Capital requirements: adjustments to capital ratios to enable lending towards critical sectors (e.g. for SMEs, green assets).
  • Priority sector lending: integration of environmental and social factors into priority lending programmes.
  • Prohibitions: restrictionson financial transactions due to excessive societal costs e.g. lending to illegal deforestation (Brazil) and pollution intensive industrial plants (China).
  • Directed service provision: requirements that financial institutions provide access to particular financial services such as basic bank accounts and insurance.
  • Mandatory purchase requirements: mandatory requirements for purchase of key financial services (such as insurance) that are essential for system resilience in the face of environmental stress.

Impacts

Measures such as priority lending and strengthened environmental liability have a strong potential for driving change, but need careful design and market preparation to avoid unintended consequences.    

Inquiry Publications

  • The Financial System We Need: Aligning the Financial System with Sustainable Development

    Date: 08-Oct-2015

      Download the full report: [AR] [CH] [EN] [ES] [FR] [PT] [RU] Download the policy summary: [AR] [CH] [EN] [ES] [FR] [PT] [RU] This first edition of “The Financial System We Need” argues that there is now a historic opportunity to shape a financial system that can more effectively finance the development of an inclusive, green economy. This opportunity is based on a growing trend

  • The Financial System We Need: From Momentum to Transformation

    Date: 29-Sep-2016

    Download the policy summary: [AR] [CH] [EN] [ES] [FR] [PT] [RU] Download the individual chapters: Chapter 1: Mapping the momentum | Chapter 2: Harnessing financial technology for sustainable development | Chapter 3: Measuring performance | Chapter 4: Steps towards transformation Our follow-up annual report reveals a doubling in policy actions over the past five years to align the global financial system with sustainable

  • Fintech and Sustainable Development – Assessing the Implications

    Date: 14-Dec-2016

    The report, a companion to the second edition of “The Financial System We Need”, assesses how the financial system’s core functions are likely to be disrupted by financial technology (“fintech”) innovations and how they could help – or hinder – efforts to align financing with sustainable development. It considers ways to: Unlock greater financial inclusion by

  • China Report

    Date: 06-Oct-2015

    The Inquiry collaborated in an 18-month project, Greening China’s Financial System, carried out by the International Institute for Sustainable Development (IISD) and the Finance Research Institute (FRI), Development Research Center (DRC) of the State Council. The aim was to develop specific proposals for greening China’s financial system, based on an analysis of current practice in China

  • The Experience of Governance Innovations in South Africa

    Date: 17-Jun-2016

    This paper explores whether the extent to which Regulation 28, CRISA and JSE Integrated Reporting Standards (referred to as governance policy innovations) have influenced the level of investment that integrates Environmental, Social and Governance (ESG) in its decision making process. It finds that while governance innovations have increased actors’ awareness about interrelationship between ESG factors and financial performance it

  • Green Finance Progress Report

    Date: 11-Jul-2017

    The G20 Green Finance Synthesis Report adopted at the G20 Leaders Summit in Hangzhou in September 2016 set out seven options identified by the G20 Green Finance Study Group (GFSG) to accelerate the mobilization of green finance. This paper highlights some of the progress made against these seven options in G20 members and internationally since June 2016.

  • Lessons from Inclusive Banking Experiments in South Africa and Kenya

    Date: 23-Aug-2015

    This paper examines the experience of inclusive banking experiments in South Africa and Kenya. The Kenyan example revolves around the development of mobile money through market led innovation alongside evolutions in the legislative and regulatory process. In South Africa a different approach was taken, with the development of the multi-sector Financial Sector Charter and a National Bank Account (‘Mzansi’) Hawkins

  • Financing the Future

    Date: 06-Feb-2017

    Italy’s Ministry of Environment, Land and Sea, in partnership with UN Environment, launched the National Dialogue on Sustainable Finance in February 2016 to identify practical market and policy options to mobilize Italy’s financial system for sustainable development and climate action. The conclusions of the paper are: Italy faces a strategic opportunity to harness its financial

  • France Country Report

    Date: 23-Nov-2015

    This report highlights experience from France in improving the integration of sustainability issues into financial decision-making. A key area of focus has been on improving information and market analysis. Environmental, social and governance (ESG) reporting requirements were first introduced in the New Economics Regulation law of 2001, and strengthened by the 2010 ‘Grenelle II’ law and 2015 the

  • Green Finance for Developing Countries

    Date: 15-Jul-2016

    This report outlines key concerns and needs of developing countries in relation to green finance, particularly focusing on developing countries that are not members of the G20. It also highlights emerging innovations, drawing in particular from engagement with practitioners and regulators from Bangladesh, Colombia, Egypt, Honduras, Jordan, Kenya, Mauritius, Mongolia, Morocco, Nigeria, the Philippines, Thailand

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