Christine Lagarde, Managing Director of the International Monetary Fund (IMF) attends the session "The Global Economic Outlook" during the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland,
|in this January 23, 2016 file photo. [Photo/Agencies]|
Finance ministers and central bank governors from G20 countries will meet in Shanghai under the leadership of the Chinese presidency. With so many issues on the table for the G20 to deliberate this year, it is telling that the Chinese presidency has chosen to prioritize green finance. This is a topic that is key to ensuring the global economy's transition toward a more sustainable, inclusive pathway. It is also relevant in securing the underlying resilience and effectiveness of financial markets.
Last year, the international agenda on sustainable development and climate change achieved political consensus, with 193 countries committing to 17 Sustainable Development Goals. And at the Paris climate change conference, a historic accord was reached on how the international community could together address climate change and its impacts. While the consensus and impetus for change is truly unprecedented, this alone is not enough to realize our collective objectives. Significant barriers need to be overcome in implementing these agreements, of which securing the necessary finance is among the most challenging.
Transitioning to an inclusive green economy will require the type of support that only the financial system can provide. UN figures show that some $5 to 7 trillion will be needed every year to achieve the agreed global goals. Governments can only provide a small portion of this funding, with the bulk needing to come from private savings, essentially from banks and investors.
Such savings are available, but are currently not flowing sufficiently into greening the economy－of course, the rapid development of renewable energy investment around the world is an important exception. Ensuring that the financial community is ready and encouraged to increase green investments will help unlock the financial flows needed.
Bank of England Governor Mark Carney is right in pointing out that green finance cannot remain a niche. In that spirit, the United Nations Environment Programme has been reviewing current efforts at aligning the financial system with sustainable development to understand how such innovations can be scaled and accelerated.
Our findings are encouraging. From South Africa to France, and from Indonesia to Brazil, efforts are underway to sensitize the financial system to wide-ranging aspects of sustainable development. China is a case in point, with a set of 14 proposals covering fiscal, regulatory, judicial and institutional innovations developed by the Green Finance Task Force co-convened by the People's Bank of China and UNEP.
Green and inclusive finance is increasingly being embraced by financial institutions for straightforward commercial reasons. Likewise, green finance is being encouraged by central banks, stock exchanges and other institutions that set the rules of the financial system in order to ensure that risks and opportunities are correctly priced, investors are adequately informed, and the system's resilience to environmental shocks ensured. Ministries of finance, finally, are deploying fiscal and other instruments to encourage green finance as part of governments' broader economic and industrial development strategies.
The financial system we need is one that is aligned to sustainable development, and today's leadership practices provide insights and guidance as to how this can be done. That said, there is no silver bullet to greening finance, and clearly priorities and solutions will vary significantly from place to place. International cooperation can play an immensely useful role in identifying, developing and implementing such solutions.
The G20, in progressing work on green finance, can catalyze such learning that in turn can inform national and regional action. The UNEP, building on engagement in sustainable finance goes back over two decades, is committed to supporting these efforts.
The author is UN Environment Programme executive director.