Policy Lever: Enhancing Market Practice
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
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The Financial System We Need: Aligning the Financial System with Sustainable Development
Date: 08-Oct-2015Download 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
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The Financial System We Need: From Momentum to Transformation
Date: 29-Sep-2016Download 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
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Making Waves
Date: 17-Apr-2018The Inquiry into the Design of a Sustainable Financial System was initiated by the United Nations Environment Programme to advance options to align the financial system with sustainable development. ‘Making Waves: Aligning the Financial System with Sustainable Development’ is its final, global report. This report reviews the Inquiry’s core analysis, summarizes progress made in aligning
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Fintech and Sustainable Development – Assessing the Implications
Date: 14-Dec-2016The 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
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Accelerating Financial Centre Action on Sustainable Development
Date: 12-Dec-2017Mobilizing the world’s financial centres is essential to make progress on climate change and sustainable development. The momentum towards a sustainable financial system is clear and yet insufficient to deliver the Paris Agreement and the Sustainable Development Goals (SDGs). The world’s financial centres now have a historic opportunity to help close this gap by accelerating
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A Review of International Financial Standards as They Relate to Sustainable Development
Date: 22-Feb-2017The 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
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Financing the Transition – How Financial System Reform Can Serve Sustainable Development
Date: 15-Nov-2016This report is focused on understanding how the growing number of policy and regulatory measures taken in the financial system can support a real economy in transition, seeking to answer the question: ‘what measures are most needed to deliver efficiency, effectiveness and resilience in ways that the financial system can contribute to specific sustainability priorities
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Bangladesh Country Report
Date: 09-Oct-2015Bangladesh 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
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France Country Report
Date: 23-Nov-2015This 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
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Lessons from Inclusive Banking Experiments in South Africa and Kenya
Date: 23-Aug-2015This 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
Further Reading
- Credit Rating Agencies: Reducing Reliance And Strengthening Oversight
Financial Stability Board (2013). Progress Report to G20 29 August 2013. Basel: FSB.
- State of the Climate Bonds Market 2014
Climate Bonds Initiative (2015). London: Climate Bonds Initiative.
- Translating ESG into sustainable business value Key insights for companies and investors
WBCSD/ UNEPFI (2010). Geneva: UNEPFI.
- A New Angle on Sovereign Credit Risk. E-RISC: Environmental Risk Integration in Sovereign Credit Analysis
UNEP (2013). Phase 1 Report. UNEP Finance Initiative.
- Shifting Private Capital Towards Climate Friendly Investments: The Role of Financial Regulatory Regimes, Working Paper
Thomä, J. Dupré, S., Chenet, H. and Clerwall, U. (2013). Paris: 2 Degrees Investing.
- Integrating Natural Disaster Risks & Resilience into the Financial System
Douglas, R. (2014). London: Willis Research Network.
- A Legal Framework for the Integration of Environmental, Social and Governance Issues Into Institutional Investment
Asset Management Working Group (2005). Geneva: UNEPFI.
- Stability and Sustainability in Banking Reform: Are Environmental Risks Missing in Basel III?
Alexander, K. (2014). Cambridge: CISL & Geneva: UNEP FI.