With public and private finance taking centre stage at the UN Climate Change Conference (COP26) in Glasgow, the Green Finance Platform is better positioned than ever to support the global financial sector to align financing in support of the 2030 Agenda for Sustainable Development and support financial policymakers in the design of policy that help foster and measure this alignment.
The Green Finance Platform’s objectives are based on the assessment that financial institutions – through their risk management strategy and allocation of capital – have a key role to play in financing sustainable development, but it is the regulators and policymakers’ role to set stringent policy incentives and rule-based regulations that support financial institutions to align with the goals of the Paris climate agreement.
A new era of government intervention on green finance measures
An increasing number of green finance measures are being adopted around the world by policymakers and regulators in a shift towards green finance policy and regulation that goes beyond market-driven solutions.
Recently released figures from the Green Finance Measures Database show that over 680 green finance policy and regulatory measures have been implemented worldwide – a 264% increase since 2015.
Supported by the Global Environment Facility (GEF), the database is a critical tool to monitor jurisdictions’ green finance efforts while also allowing policymakers to benchmark their green finance regulatory landscape against their peers.
“This integrated data about the global allocation of capital for sustainable development is invaluable. Transparent and easily accessible information through this database will help foster collaboration and policy coherence in this important area,” said Gustavo Fonseca, Director of Programs at the Global Environment Facility.
The sustainable finance policy effectiveness working group
Since the Paris Agreement, policymakers and regulators worldwide have begun to systematically integrate sustainability-related considerations into financial policy frameworks. While a significant amount of activity has been within the framework of existing interventions, certain markets have witnessed a step-change in thinking around sustainable financial systems – and the need for broad, systemic and integrated frameworks.
To date, however, there has been no formal global assessment or meta-analysis of this shift in policy and regulatory practice, or the implications of these interventions.
In 2021, the Sustainable Finance Policy Effectiveness Working Group was launched by the Green Finance Platform, International Network for Sustainable Financial Policy Insights, Research and Exchange (INSPIRE), and Grantham Research Institute on Climate Change and the Environment.
The working group supports financial decision-makers in the design of green finance measures through a research project aiming at assessing policy and regulatory effectiveness in terms of efficiency and equity in different markets, as well as across environmental, financial and economic variables.
Aligning finance policies
Critical to aligning financial and capital markets will be measures within the financial system to green private finance through adjustments to key policies, regulations, standards and norms, as well as through market innovations.
In 2018, the Global Environment Facility launched the GEF Aligning Finance Policies project to build international consensus to align financial systems with the UN Sustainable Development Goals (SDGs) and develop national regulatory actions.
In 2022, the Green Finance Platform will be supporting this project in sharing knowledge and best practices, signalling policy commitments, and facilitating the joint development of international standards.
You can contribute to the Sustainable Finance Discussion by joining the Green Forum.
Looking ahead
To increase awareness of how the financial sector can support the global goals, the platform engages with organizations at the forefront of sustainable finance. As of the end of 2021, the Green Finance Platform is currently working with 36 Knowledge Partners, and looks forward to continuing that work in 2022.
Despite the rapid growth of green finance regulations and acceleration of climate alignment targets by both states and financial institutions, implementation of such commitments remains a challenge. Compliance is not effectively controlled or monitored, nor real climate impacts accurately quantified.
Through these critical tools and agenda-setting activities, the Green Finance Platform sees 2022 as an opportunity to support the design of finance measures that will create a positive impact in the real economy and align financial systems with the goals of the Paris Agreement.
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