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.
CALL FOR CONSULTATION UN Environment and the World Bank Group view the over-arching objective of a sound financial system as being to provide finance that meets the long-term needs of an inclusive, environmentally sustainable economy. While there is no single blueprint or unique pathway for creating such a “sustainable financial system”, it is possible to describe
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