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Executive Perspectives

EXECUTIVE PERSPECTIVE: Year of Green Finance – 2016

Simon Zadek

22 Jan 2016

Source: zadek.net

It is the Year of Green Finance, as my co-Director Nick Robins points out in a recent Huffington Post piece – The Year of Green Finance – a View from London. Nick was writing on the occasion of a high profile launch of the UNEP Inquiry report, The Financial System We Need, hosted by the Corporation of London, with many CEO’s and ministerial level folks from the UK Government in attendance. London’s financial community has now read and absorbed the memo that the moment has come, and so has launched a green finance initiative to explore the potential for London becoming a global hub for green finance. Hong Kong and Singapore are already part way along this track – wake up New York!

And across the pond, in Washington DC, the UNEP Inquiry’s report was also being launched this week, just one day later, at a well attended meeting hosted by the Carnegie Endowment for International Peace entitledGreen Finance and the G20 – the Quiet Revolution (link also to video of event). The panel line-up tells the story – representatives from the US Treasury, the State Department, a former senior advisor to President Obama, and John Lipsky, former first deputy managing director of the IMF and active member of the Inquiry’s Advisory Council.

The signs that this is the year of green finance are widespread. The IMF, long of the view that green finance was solely a fiscal matter (more subsidies), has without fanfare shifted its position, broadening its lens. Its recent report, After Paris: Fiscal, Macroeconomic and Financial Implications of Climate Change spells this out in its summary:

“In financial markets, increased disclosure of firms’ carbon footprints, prudential requirements for the insurance sector, and appropriate stress testing for climate risks will help ensure financial stability during the transition to a low-carbon economy. Analyses of how firms’ asset values could be impacted by de-carbonization are needed to efficiently allocate investments across carbon-intensive and other sectors. Strengthening countries’ regulatory oversight is also needed to ensure sound and resilient institutions and well-functioning financial markets for providing instruments to manage climate risks. Besides promoting green financial instruments, catastrophe bonds and similar hedging instruments can transfer climate-damage risks to those who are better able to bear them”.

And then there is the G20 Green Finance Study Group, first announced at the launch of the UNEP Inquiry’s global report at the IMF Annual Meetings, is now established under the Chinese G20 Presidency in the G20′s finance track. Widely welcomed at a key meeting in Sanya in the middle of December, the work stream kicks off on the 25th January at a launch event in Beijing. Co-Chaired by the People’s Bank of China and the Bank of England, with the UNEP Inquiry team providing the third pillar, the Secretariat, this work stream has engaged all G20 members, many international organizations, and many other think tanks and governments that use G20 developments as signals of things to come.

The die is cast, but now is the need to ensure that “green finance is not a niche“, as Mark Carney points out. The scene is set but we have to make it happen, at scale and sooner rather than later, rather than allowing inertia and push back to lead to an undershoot of the potential of this, the Year of Green Finance.

Simon Zadek is Senior Fellow at the Global Green Growth Institute and the International Institute of Sustainable Development, and Visiting Scholar at Tsinghua School of Economics and Management in Beijing. He is on the Advisory Board of Generation Investment Management, and was until recently Senior Visiting Fellow at Harvard’s JK Kennedy School of Government and a Senior Fellow at the Centre for International Governance Innovation . He founded and was until 2009 Chief Executive of the international think tank, AccountAbility.

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