The State of Sustainable Finance in the United States discusses the topography of financial sector surrounding the sustainable momentum in the US. While US financial institutions have at times enjoyed a reputation of being something of a laggard on sustainability issues versus their European counterparts, significant changes and innovations are under way which are beginning to drive meaningful change.
Record levels of awareness on sustainability issues in the US, including from millennials, are accelerating activities such as:
- Increased levels of sustainable and responsible investing.
- An increased focus from the largest US banks and other financial institutions on sustainability risks, lending practices and related opportunities.
- US insurance companies and related regulators are also developing and evolving sustainability risk frameworks.
- Federal and State policies are accelerating the ongoing US low carbon energy transition.
Financial innovation is driving meaningful change in many investment sectors while social innovation and culture development also continue to evolve.
Making the Jump: How crises affect policy consensus and can trigger paradigm shift 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 to support and facilitate linking economic sustainability, financial regulation, markets, and climate change. The following ten observations are developed in this paper:
The Equator Principles are a voluntary code of conduct and a risk management framework for determining, assessing and managing environmental and social risks in projects, such as energy or infrastructure projects. Since their foundation in 2003, they were lauded for integrating social and environmental assessment practices into project assessments. Critics reason, however, that without fundamental implementation efforts and enforcement, the Equator Principles will not contribute to any change with respect to effects of projects on sustainable development.
Building a Sustainable Financial System in the European Union presents a stock-take of actions under way at the European Union level and in selected Member States to align the rules governing the financial system with environmental sustainability.
Looking across the range of innovations across the EU, five broad policy priorities emerge. The central challenge of financing sustainable development in the EU is one of capital reallocation. Enhancing frameworks for risk management, clarifying the core responsibilities of financial institutions and improving reporting and disclosure across these dimensions will be necessary to fully unlock flows of sustainable finance. A growing number of Member States are delivering on individual aspects of these priorities, and others are acting within given asset classes. The debate is now advancing to the system level and the need for a strategic reset, seeking to link previously unconnected initiatives and to enhance the capacity of the financial system to support renewed economic competitiveness and improved sustainability performance.
How Paris Became the Capital of Climate Finance traces the evolution of the ‘networked solution’ to finance that came together at the COP21 in Paris, linking the formal negotiations with a broader set of actions by financial regulators, by financial institutions and also by civil society. It explores the creative dynamic between France’s efforts to stimulate action within its own domestic financial system, and the international steps harnessing the financial system for climate security. It closes with reflections on how this new approach can be deepened in the year ahead.