Making the Jump

Policy Lever: Harnessing Public Balance Sheets

Goverments are using their public balance sheets to provide fiscal incentives, risk guarantees or public investment in ways that improve the risk adjusted returns of green investment and seek to 'crowd-in' private investors.  Incentivizing sustainable finance through the use of the public balance sheet has been a feature in every country reviewed by the Inquiry.

Examples

Steps that can be taken to develop new green investment incentives, or to align existing incentives to sustainable development include: 
  • Target fiscal support: Establishing and optimising fiscal incentives to mobilize private capital for green investment.
  • Review fiscal incentives: Reviewing the alignment of existing fiscal incentives for savings, investment, lending and insurance with sustainability.
  • Sustainability mandates of public financial institutions: Strengthening sustainability as part of the mission and operation of development finance institutions and sovereign wealth funds.
  • Establish new green institutions: Launching new green investment banks and funds.
  • Blended finance instruments: Developing and using financial instruments designed to share risks and overcome barriers to private investment (such as through risk underwriting & results based financing).
  • Central banks refinancing operations: Extending refinancing operations to include green assets.
  • Central bank asset purchase programmes: Incorporating sustainability factors into asset purchase programmes.
  • Public procurement criteria: Introducing sustainable development performance into procurement of financial services by the public sector.

 Impacts

These measures are widely adopted and can be effective, but the scale of new funding available is limited. Nevertheless the financial system is already the recipient of, and conduit for, significant public financial support, which has the potential to be aligned to sustainable development.      

Inquiry Publications

  • 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

  • Bangladesh Country Report

    Date: 09-Oct-2015

    Bangladesh has been a leader in developing policies to shape a greener and more inclusive financial system. It has a suite of green banking regulations and policies including concessional green refinancing, credit quotas for green finance and guidance and requirements on environmental due diligence. Green finance is growing but it remains modest compared to the scale of Bangladesh’s

  • Aligning the Financial System with Sustainable Development in the United States of America

    Date: 01-Feb-2016

    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

  • On the Role of Central Banks in Enhancing Green Finance

    Date: 20-Feb-2017

    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

  • India Country Report

    Date: 29-Apr-2016

    An India Advisory Council of the UNEP India Inquiry was convened by the Federation of Indian Chambers of Commerce and Industry (FICCI). This report highlights key proposals emerging from their discussions for aligning the Indian financial system with sustainability. In the Indian context, they call for development of a more robust and resilient ‘sustainability-oriented market framework’ focused

  • 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

  • The Role of Policy-Driven Institutions

    Date: 24-Aug-2015

    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

  • 3rd Update Report: Pathways to Scale

    Date: 07-Jan-2015

    This is the 3rd Update Report of the UNEP Inquiry, it is focused on the challenge of financing the low-carbon transition. It explores how innovative ideas and practices can be made more effective, adopted more widely, and taken to scale—and as a result move the trillions that are required. Scaling-up proven but limited innovations, is a common

  • Indonesia Country Report

    Date: 30-Apr-2015

    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

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