Green Finance Progress Report

Policy Lever: Enhancing Market Practice

 Levers to enhance market practice are focused on improving the efficiency and accountability of financial markets. They  improve risk assessment and pricing - ultimately seeking to improve investor decision-making and returns.  This has to date been the most popular approach to internalizing sustainable development into financial decision-making.

Examples

Key approaches include:
  • Fiduciary duty and capacity: clarifying that duties to clients include sustainability factors and including requirements for knowledge and training on sustainability for fiduciaries.
  • Incentives: Encouraging asset owners to ensure better alignment of incentives along the investment chain.
  • Prudential risk management regulation: Integrating sustainability into guidance & requirements on risk management and controls.
  • Stress tests: Developing scenarios to test impact of environmental shocks on assets and business models.
  • Capital requirements: Calibrating capital requirements to incorporate environmental factors.
  • Disclosure requirements: Making environmental reporting by financial institutions and non-financial corporations mandatory.
  • Equity analysis: Encouraging greater transparency in equity analysis of incorporation of sustainability factors.
  • Credit ratings: Encouraging the integration of sustainability risk factors into credit analysis.
  • Green assets Adjusting standards and rules to facilitate capital raising (e.g. green bonds, green sukuks, green IPOs, yieldcos).
  • Indexes: Ensuring that benchmarks and indices reflect critical sustainability factors.

Impacts

These measures provide critical foundations of information needed to sensitise financial decision making to environmental impacts and risks, but they are likely to have a modest impact unless they are combined with additional shifts that make these risks financially material.   

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

  • A Review of International Financial Standards as They Relate to Sustainable Development

    Date: 22-Feb-2017

    The report, a companion to the second edition of “The Financial System We Need”, examines how the international financial standards currently relate to the goals of sustainable development and explores opportunities for better alignment as a way to promote greater stability, resilience and fairness to the financial system. The key messages are: Financial standards have

  • UK Country Report

    Date: 14-Jan-2016

    This paper looks at the steps that the UK has taken towards a sustainable financial system shaped by its role as a global financial centre and a distinctive dynamic between social entrepreneurs and civil society organisations, market innovation and policy frameworks.The City of London is not only home to some of the world’s largest financial markets, but

  • 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

  • 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

  • Input from the Netherlands to the UNEP Inquiry

    Date: 20-Oct-2015

    This note summarizes the input provided to the Inquiry at a meeting with representatives from the Dutch financial sector ranging from public policymakers and regulators to the largest banks, asset managers, insurance companies and sustainable frontrunners. The policy recommendations include best practices, financial market policy and regulatory innovations to help bring about the green economy

  • 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

  • Roadmap for a Sustainable Financial System

    Date: 20-Apr-2017

    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

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