Policy Lever: Enhancing Market Practice
ExamplesKey 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.
ImpactsThese 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.
Stock exchanges have historically played an important role in economic growth and development through enabling effective capital allocation. However, exchanges and markets more broadly have changed over time, in structure, inter-connectedness and rate of activity. This has happened against a backdrop of growing recognition of the unsustainability of the current economic growth path in both
A variety of interventions can be used to develop national financial systems and provide local access to affordable, long-term finance. This paper considers four key categories of actions: voluntary action; priority sector lending; regulatory or financial incentives as well as direct lending by policy-driven financial institutions. It particularly focuses on the role of policy-driven institutions such
The US financial system is undoubtedly among the largest, most innovative and most sophisticated in the world. It is also clear that this is both a benefit and an impediment to non-governmental investment in sustainability and inclusiveness. To date, the actual investment in infrastructure and sustainability does not meet current needs, especially those related to maintaining
This Report aims to mainstream and socialise the idea and opportunities associated with Green Finance, as well as to explore how Singapore as a financial hub can offer Green Finance as additional expertise to better serve the needs of the ASEAN and Asia region. Besides the members of the financial community, the Report hopes to
Placing Indonesia’s economy onto a green and sustainable development pathway, as envisaged in the National Long Term Development Plan, will require a large mobilization of investment. Estimates of the annual investment needed are in the order of US$300‐530 billion, with a large portion of this investment needed in critical infrastructure, as well as environmentally sensitive
This paper is intended to serve as a window on the Inquiry’s analytical approach, providing a deeper understanding of the unifying criteria for evaluation of multiple market designs for financial systems in a variety of economic, political and social settings. It is also intended to provide a foundation for investors and corporate management and policymakers,
Climate change creates two types of potential risks for financial institutions: Physical changes – both through gradual change and extreme weather events which are likely to alter the supply and demand dynamic of many industries and lead to physical damages to assets. The transition to a low carbon economy will alter the financial viability of a part of
As a contribution to the UNEP Inquiry the Brazilian Bankers Federation FEBRABAN established a partnership with the Center for Sustainability Studies at Getulio Vargas Foundation (GVCes) to develop three studies on the practice and potential for green finance in Brazil. The first looks at the legislation, regulation, and public policies aimed at socio-environmental themes related to the financial
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
Financial institutions today are unable to measure their exposure to climate change. There are equally no approaches to inform on the alignment of their investment strategies with national or international environmental goals. This report outlines international developments in measuring and managing climate related risk in instituional investment and banking. It outlines implications for regulators in