Policy Lever: Harnessing Public Balance Sheets
ExamplesSteps 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.
ImpactsThese 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.
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
This paper sets out the case for promoting the development of green industry funds as public-private partnerships (PPPs) to use limited government funding to leverage private capital into green sectors. It is envisaged that green industry funds will serve as the platform through which private capital can converge into professionally managed green investments with government as one investment
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
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
This paper outlines the dynamics behind the financial regulatory paradigm shift that began in 2008-2009. It seeks to identify parallels with and differences from the slower moving, even more consequential, global climate change crisis, and the fitful, still under way, policy paradigm shift that the United Nations Environment Programme (UNEP) and other stakeholders are trying
This paper argues that discounted interest rates for green loans can be an effective means to use limited public subsidy to stimulate private investments equalling several times the amount of seed fund provided by the government. It recommends that China: Expland the use of discounted greend loans for energy conservation and environmental protection projects. Sreamline and
This reports rovides an overview of the green bonds theme, innovative structures in the international market and potential application in China. A key message is that green finance, in addition to providing a green benefit, can assist in implementing and enforcing financial reforms that address imbalances in China’s financial system. Another message is that providing
This working paper was produced for the early stage of the Inquiry to provide an inital overview of the areas where the financial sector can have an impact on moving the green economy forward and the extent to which green financial policy is already actively being practiced. The paper is focused on financial regulation and the instruments of financial policy that
The paper also shows how the objectives of financial policy-makers—such as investor protection, transparency, maintaining the safety and soundness of financial firms, financial stability, tackling systemic risk, reducing information asymmetries, tacking market failures and developmental objectives— offer multiple avenues to legitimize policy measures that can contribute to the greening of the financial system. In particular,
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