Fintech and Sustainable Development – Assessing the Implications

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

  • 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

  • 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

  • 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

  • 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.

  • Green Finance Opportunities in ASEAN

    Date: 15-Nov-2017

    This report lays out ways in which the ASEAN region can unlock this investment and protect its people, environment and economies. It provides an analysis of green investment opportunities in the region from 2016 to 2030, assesses the characteristics of those opportunities, and estimates current green finance flows. Based on a literature review and expert

  • Establishing China’s Green Financial System: Progress Report

    Date: 16-Nov-2017

    The report finds that China – which put green finance on the G20 agenda during its 2016 presidency – is following through on its political commitment to boost the financing required to do this. The report looks particularly at progress since the State Council in August 2016 approved a set of recommendations for action on

  • 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

  • Scaling up Green Bond Market for Sustainable Development

    Date: 09-Dec-2015

    This guide argues that with the right support in place USD 1 trillion of green bonds could be issued a year by 2020 – providing a significant contribution to closing the investment gap for climate-friendly infrastructure in both developed economies and emerging markets. It argues for several sets of policy actions to support and enable the green

  • 4th Update Report: The Coming Financial Climate

    Date: 07-May-2015

    This is the 4th Update Report of the UNEP Inquiry, it is focused on the challenge of financing the low-carbon transition. Many approaches and instruments will be needed to deliver the financing needed. Public finance, funded by tax revenues and international transfers, will provide part of the solution.  However such finance will be inadequate. Private

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