German G20 Presidency Launches GreenInvest Platform to Engage Developing Countries on Green Finance Needs and Opportunities

11 January 2017 - As part of Germany's G20 Presidency, the Federal Ministry for Economic Cooperation and Development (Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung, abbreviated to 'BMZ') is advancing the 'GreenInvest' dialogue platform in order to engage developing countries in the mainstreaming and mobilisation of green finance.

A first consultation of developing countries under the GreenInvest platform was held in Singapore on 9 and 10 January with participants from some 25 developing countries.

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About Us

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Mobilizing the world’s capital is essential for the transition to a sustainable, low-carbon economy. Today, however, too little capital is supporting the transition, and too much continues to be invested in a high-carbon and resource-intensive, polluting economy.

About Us

Mobilizing the world’s capital is essential for the transition to a sustainable, low-carbon economy. Today, however, too little capital is supporting the transition, and too much continues to be invested in a high-carbon and resource-intensive, polluting economy.

Market participants and others recognize that prevailing rules and incentives governing financial markets can disadvantage long-term, sustainable behavior. Long-term environmental risks are not being effectively counted and green opportunities are inadequately valued. Such distortions can lead to a misallocation of capital and a danger of systemic risks to the economy and the natural environment.

There is an urgent need to accelerate the transition to a green economy by better aligning the financial system to the resilience and the long-term success of the real economy. The UNEP Inquiry is intended to support such actions by identifying best practice, and exploring financial market policy and regulatory innovations that would support the development of a green financial system.

Over the past two years, the UNEP Inquiry into the Design of a Sustainable Financial System has mapped the practice and potential for advancing such an alignment. Its global report, The Financial System We Need, reflects an in-depth analysis of practice in more than 15 countries and collaborative research across critical sectors and issues, such as banking, insurance, institutional investment and capital markets, captured in over 70 working papers. It describes a “quiet revolution” as sustainability factors are incorporated into the rules that govern the financial system. Much of this innovation has taken place at the national level, providing the platform for new forms of international cooperation. This convergence of national-level innovation with international frameworks, goals and ambitions provides the opportunity to create a new pathway for promoting green finance in the broadest sense.

In moving from design to delivery, the Inquiry will support the scale-up, broadening, and exchange of policy options, advance new critical research areas, and continue its national, regional, and international engagements to embed sustainability into financial architecture.

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Events

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Singapore (Singapore)

Monday, January 9, 2017 to Tuesday, January 10, 2017

Stockholm (Sweden)
Wednesday, December 14, 2016


Geneva (Switzerland)
Tuesday, November 1, 2016


Milan (Italy)
Monday, September 12, 2016


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Country Engagement

National Engagements

Policy innovation for a sustainable financial system is taking place primarily at the country level, and the Inquiry wants to understand the driving imperatives behind innovations in specific locations, the lessons emerging and the potential for further developments. The Inquiry has now undertaken advanced work with national institutions and partners, focusing initially on Bangladesh, Brazil, China, the EU, India, Indonesia, South Africa, Uganda, the UK and the USA. This work will be critical to root the Inquiry’s thinking in the diversity of country realities and needs. Some highlights from the current work include:

Bangladesh's Central Bank takes an approach of “developmental central banking” and has deployed its financial, regulatory and persuasive powers to advance financial services to underserved groups. More recently it has extended this approach by establishing requirements that banks undertake environmental risk analysis, and direct a minimum proportion of their loans to green projects such as renewable energy and energy efficiency. Bangladesh Bank, represented by its former Governor on the Inquiry’s Advisory Council, worked with the Inquiry to commission an assessment of its work linking monetary policy and sustainability.

The Inquiry’s engagement in Bangladesh has been carried out through a strong partnership with Bangladesh Bank, led by the Bank's former Governor and Advisory Council member, Dr Atiur Rahman. The Inquiry has also worked with research partners including the Bangladesh Institute of Bank Management,the International Institute for Sustainable Development (IISD), the Swiss-based Council on Economic Policies.

Brazil has taken several steps to develop a green financial system. The BOVESPA Stock Exchange first set up its Corporate Sustainability Index (ISE) in 2005. The Banco Central do Brasil (BACEN) has put in place requirements for banks to monitor environmental risks, building on a voluntary Green Protocol from the banking sector. Brazil's banking association, FEBRABAN, working with the Inquiry has begun to develop a standardized assessment methodology and automated data collection system to monitor flows of finance green economy sectors. A further area of potential are steps to remove legal uncertainty for environmental damage in terms of lender liability.

The Federação Brasileira das Associações de Bancos (FEBRABAN), represented by its President on the Inquiry’s Advisory Council, Murilo Portugal has drawn on the Inquiry’s international network and knowledge in advancing Brazil’s domestic dialogue on sustainable finance. The Center for Studies in Sustainability of the Getúlio Vargas Foundation (GVces) has also been a key research partner.  

In the face of urgent environmental challenges, policy and regulatory weaknesses in the real economy and longer term economic opportunities, China has seen the potential for embedding environmental considerations in its financial market development.  Initial developments focused on improving the environmental impact of bank lending through the Green Credit Guidelines of the China Banking Regulatory Commission. In 2014 The People’s Bank of China established a Green Finance Task Force co-convened with the Inquiry, to develop recommendations for a comprehensive program of reforms to enhance market information, strengthen legal frameworks, strengthen fiscal incentives and institutional design. Some of these proposals are now being further developed under an expanded Green Finance Committee.

China's central bank, the People’s Bank of China (PBoC), has co-convened with the Inquiry a Green Finance Task Force involving dozens of officials and market actors to draw up proposals for a green financial system. The Inquiry has also worked with the International Institute for Sustainable Development and the Development Research Centre of the State Council in research workshops and a study tour to bring Chinese and international experts together.

India’s focus is on harnessing the financial system to provide the capital required to bring clean, affordable and reliable supplies of water and energy to all of its 1.3 billion citizens. A core financial policy in India is the Priority Sector Lending  requirement for banks to allocate 40% of lending to key sectors such as agriculture and small and medium-sized enterprises. In 2015, the Reserve Bank of India (RBI) included lending to small renewable energy projects within the targets. The RBI has a vision of introducing market for trading priority sector lending obligations, incentivizing lower cost delivery. Efforts to strengthen business responsibility in the financial sector have also been stepped up, with the Indian Banking Association introducing the National Voluntary Guidelines for Responsible Finance in 2015.

India's Federation of Indian Chambers of Commerce and Industry (FICCI) has catalysed a high-level dialogue between the industry, government and regulators as to how to best align India’s developing financial system with the country’s massive investment needs. The Inquiry's work in India has also been stewarded by Naina Lal Kidwai, Chairman of HSBC India and member of the Advisory Committee.

Indonesia has taken steps to embed environmental considerations into banking regulations date since 1998, but had only modest effects. In late 2014, the new financial regulator OJK launched its Roadmap for Sustainable Finance, the country’s first attempt to map out the developments needed to advance sustainable finance through 2019. The Roadmap covers banking, capital markets and non-bank financial services sector, and includes measures to: Increase the supply of sustainable financing through regulatory support and incentives, targeted loans and guarantee schemes, green lending models, green bonds, and a green index.

The Inquiry has worked with the International Finance Corporation (IFC) and the Asia Responsible Investors Association (AsRIA) in developing its report on Indonesia's approach and potential for developing a sustainable financial system. The report was launched in an event hosted in Jakarta by the financial services authority Otoritas Jasa Keuangan (OJK).

Kenya is a dynamic emerging economy which serves as a hub for the East and Central African region. However its economic growth is highly natural resource dependent with agriculture and tourism representing nearly half of GDP, making the country highly vulnerable to climate change and other environmental and social impacts. For the financial sector, these risks also present potential investment opportunities. Kenya has a historic opportunity to create a competitive advantage based on an inclusive green growth strategy. It is also home to world renowned fintech innovations, such as MPesa, Mshware and Mkopa that have successfully demonstrated how the private sector, with support from an engaged and pragmatic regulator, can profitably provide solutions to pressing societal needs. Investment in the green and inclusive economy is at an early stage for banks, pension and insurance funds in Kenya, but with pockets of innovation and leadership, asset diversification and product innovation.

The Inquiry worked with the International Financial Corporation to develop an initial scoping study on green finance in Kenya.

Discussions are underway with ETB on collaboration with PAGE countries (Mauritius, Mongolia, and Peru). Initial work in South Africa has already begun, with the Inquiry teaming with the Global Green Growth Institute. Initial engagement will begin in early September for Uganda, which has requested assistance with its Green Growth strategy. Work has also begun with Colombia, who will work with the IFC. Additional countries (Morocco, Singapore, Malaysia) will be included contingent on budget.

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Blog

Why Developing Nations are the Unlikely Leaders of Green Finance (16 January 2017)

Developing countries are the unlikely drivers of green finance innovation and they are also leading the way in the use of fintech such as mobile payments. But collaboration is key to making green finance work at scale, said panellists at the Singapore, Green Finance and the Collaborative Challenge event last week.

2017: What Next for Green Finance? (16 January 2017)

2016 is on course to be not just the hottest on record, but also probably the dirtiest and most hazardous too. “The climate has broken records in 2016“ says World Meteorological Organization chief Petteri Taalas. Smog once again returned to haunt many of the world’s cities notably in China, Europe and India - with the primary cause the same as climate change: the burning of fossil fuels. Worldwide, around 18,000 people now die every day as a result of air pollution. Some 26 million people are also forced into poverty each year by the impact of natural disasters, with climate shocks reversing hard-won development gains.

Greening Digital Finance (10 January 2017)

Digital finance is the unexpected revolutionary – but which side will it take? With the help of digital finance, urbane consumers can glide gracefully and seamlessly through their shopping experiences, migrants far from home can move hard-earned money cheaply to their families, small businesses can access credit lines in minutes through big data-driven profiling, and savers can navigate their investment opportunities with pinpoint accuracy. Will digital finance, then, deliver an all-purpose public good, or do we first need to manage possible constraints or even downsides?

Moving the Money in Marrakech (10 November 2016)

Governments meet in Marrakech this year for the annual climate negotiations with a spring in their step. Last year’s Paris Agreement has come into effect in record time and been reinforced by a domino of measures to cut greenhouse gas emissions from chemicals, aviation and shipping. Yet beneath the smiles, there remains the hard reality that current measures in place are simply inadequate to hold global warming to below 2°C and ideally to just 1.5°C above pre-industrial levels. According to UN Environment, today’s commitments will reduce emissions by no more than a third of the levels required by 2030, risking warming of up to 3.4°C.

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