Policy Lever: Directing Finance Through Policy
ExamplesExamples 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.
ImpactsMeasures 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.
In this paper Andrew Sheng argues that central banks, when purchasing financial assets, should consider selecting assets that will promote sustainability, including climate change mitigation and adaptation. Social impact investing he argues is consistent with a central bank’s mandate to maintain price stability. They could incentivize bankers and asset managers to invest in, or lend to, climate mitigation activities and low-emission
The paper examines the role of central banks in ‘greening’ financial systems. Given the enormous investments needed to bring about a green transformation, the financial sector will have to play a central role in allocating resources towards a sustainable and green economy – and stop financing activities that harm the environment. Against this backdrop, the
This briefing summarises the discussions held during a roundtable for market and policy leaders in Washington, D.C. on 20 April 2017. The goal of the event was to explore pathways to scale and speed up green finance and to harness its benefits for long-term sustainable growth and competitiveness. The key messages are: Green finance made
The Green Finance Taskforce was convened in 2014 by the People’s Bank of China and the UNEP Inquiry. The Taskforce brought together leading Chinese experts on financial markets, policy and regulation from government, academia and from the private sector together with international experts and practitioners. One of the inputs to the deliberations of the Taskforce
The paper also shows how the objectives of financial policy-makers—such as investor protection, transparency, maintaining the safety and soundness of financial firms, financial stability, tackling systemic risk, reducing information asymmetries, tacking market failures and developmental objectives— offer multiple avenues to legitimize policy measures that can contribute to the greening of the financial system. In particular,
The contribution of the insurance industry to sustainable development relates to its three roles as a financial loss “shock absorber” in reducing real risks to assets, in safety and health, and as a significant investor in the real economy. Particular areas where the insurance industry is responding to sustainable development challenges are in relation to
This briefing summarises the discussions held during the “Greening the Financial System: Exploring the Ways Forward” event in Washington, D.C. on 12 October 2017. The goal of this convening, the fourth in the series, was to examine lessons from developing and implementing green finance initiatives over the last few years and to highlight successful examples
This report finds that green tagging around real estate and energy efficiency is growing at a critical time. Based on a survey of the 10 participating banks, the report identifies five key trends around green tagging: New green business opportunities are a stronger incentive for green tagging than improved risk management for banks. This practice
This working paper was produced for the early stage of the Inquiry to provide an inital overview of the areas where the financial sector can have an impact on moving the green economy forward and the extent to which green financial policy is already actively being practiced. The paper is focused on financial regulation and the instruments of financial policy that
The rapid and continuous increase of environmental incidents in China in recent years has led to severe impacts on its sustainable social and economic development and public health. This paper sets out the case for green insurance as a market-based risk management mechanism which could play a proactive role in preventing and transferring environmental pollution risks and