Green finance is a strategy for financial sector and broader sustainable development that is relevant around the world. But the context differs considerably for different countries. Developing countries, notably those with underdeveloped financial systems, face particular challenges in financing national development priorities.
Broadly, concern and action to align financing to sustainable development is concentrated in three areas:
- Preventing the financing of illicit practices or profiting from weak enforcement.
- Unlocking opportunities for green investment.
- Exploring solutions to dilemmas and trade-offs.
The paper reports out on the build out of developing country work following the global report, "The Financial System We Need“ launched at the IMF Annual Meetings in Lima in October 2015. In particular, the paper sets out some of the needs and concerns particular to developing countries, as well as innovations that have emerged to address some of these specific aspects. The paper highlights the importance developing country actors place on embedding green into a broader sustainable finance lens, the significance of international developments in greening the financial system given their dependence on foreign direct investment, and the evidence of and potential for leapfrogging in aligning their financial systems to sustainable development, for example through the deployment of fintech.