In April, the Paulson Institute and its partners—the Institute of International Finance (IIF), the UN Environment Inquiry into the Design of a Sustainable Financial System, the Securities Industry and Financial Markets Association (SIFMA), and Bloomberg Philanthropies—held the Mainstreaming Sustainable Finance event. The meeting of global financial leaders and senior policymakers was the latest convening in a series of events facilitated by the partners in support of the work of the G20 green finance study group—now the G20 sustainable finance study group under the Argentina G20 Presidency—and provided an opportunity to share the latest insights and perspectives. The intent was to explore how green finance can be brought into the mainstream architecture of the global financial system.
The first session, ‘Sustainable Finance and Inequality,’ was moderated by Simon Zadek, Co-Director of the UN Environment Inquiry into the Design of a Sustainable Financial System and a conversation around addressing income inequality from the sustainable development angle. Senior leaders from leading financial institutions discussed green finance’s role in alleviating the effects of climate change and environmental degradation, effects borne disproportionately by the world’s poorest regions and highlighted ways that effective policy design, pricing mechanisms, and technological innovation could divert capital to these regions.
Led by Deborah Lehr, Vice Chairman of the Paulson Institute, the second session, ‘Sustainable Finance in Emerging Markets,’ highlighted the role that emerging markets play in sustainable development. China, for example, has made adoption of green finance a top priority, with panelists from the World Bank and HSBC agreeing that China has “leapfrogged people in the green game” rapidly taking a leadership role in the emerging markets.
The Chinese firm, Ant Financial’s popular app, Ant Forest, is an example of innovative technology that can be used to change behaviors of its users. And concerns were raised however about the Belt and Road Initiative as a means of exporting green finance and setting sustainable development standards – and the importance of ensuring that the standards are transparent and open. Input from regulators and research institutions also stressed the importance of data collection on sustainable projects to improve investor confidence and enable emerging markets to attract financing.
The World Bank displayed the creative thought being given to creating market mechanisms to finance solutions to global challenges. The issuance of pandemic bonds by the World Bank is an example of an innovative financial mechanism to address one of the world’s biggest challenges.
Global financial institutions are also playing an important role in the policies that they adopt. HSBC, for example, announced its intention to stop financing the construction of coal fired power plants. Their position—along with those adopted by other financial institutions—can have an impact on development in emerging markets.
The final session, ‘Mainstreaming Sustainable Finance—Investor Perspectives/TCFD,’ discussed the need for consistent climate-related financial disclosures for investors to move toward mainstreaming sustainable finance. While the growth of green investment products is steadily increasing, the definition of ‘green’ for lending purposes still remains to be determined and will be key to future progress. These disclosures and an agreed upon definition for ‘green’ will allow for critical comparisons across investment opportunities for current and future investors.