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Climate change and green finance<br />
KEY TAKEAWAYS<br />
Green growth strategies are now<br />
central to forward planning<br />
Green finance systems are being<br />
implemented internationally<br />
Sustainable<br />
development needs<br />
the financial system<br />
Policymakers, central bankers and regulators are among<br />
those working together to implement green finance,<br />
write Erik Solheim and Achim Steiner<br />
The <strong>G20</strong> is the world’s premier<br />
platform for international<br />
cooperation in economic<br />
and financial policy. Its core<br />
mission to advance balanced<br />
and sustained growth must reflect<br />
the ambitions embodied in landmark<br />
agreements reached elsewhere in 2015,<br />
most significantly, the Sustainable<br />
Development Goals (SDGs) and the Paris<br />
Agreement on climate change.<br />
Recent significant developments in<br />
economic policy commitments have<br />
aligned them with sustainable<br />
development. Green growth<br />
strategies have moved from the<br />
margin to the centre of many<br />
countries’ forward planning.<br />
Fossil fuel subsidies are now<br />
widely accepted as unhealthy<br />
for both the economy and the<br />
environment. Clean energy has become<br />
a driving force for technology and<br />
business innovation.<br />
Unless the world can summon<br />
the many trillions of dollars<br />
of commercial investment<br />
required to make the transition<br />
to a sustainable planet, we will<br />
fall short of eradicating extreme<br />
poverty and reducing fossil fuel<br />
emissions at the speed recommended by<br />
climate scientists. Such a spectre disturbs<br />
investors. A future characterised by climate<br />
shocks, failing ecosystems and widespread<br />
instability signals the clear need for a<br />
renewal of the global financial system.<br />
This has long been understood by leading<br />
market players. Lone, innovative initiatives<br />
have collectively failed to overcome<br />
entrenched interests and incumbent policy<br />
frameworks. They have been unable to<br />
deliver the new financial products and<br />
tools capable of aligning investment with<br />
sustainable outcomes – until now.<br />
Quiet revolution<br />
Away from the limelight of the SDGs<br />
and Paris, a quiet financial revolution is<br />
underway, led by policymakers, central<br />
bankers and regulators, often working with<br />
financial institutions. They recognise the<br />
imperative of fully aligning capital markets<br />
with mounting risks, including climate<br />
change, water scarcity and degraded<br />
environments, around the world.<br />
In capital cities such as Nairobi, Beijing,<br />
London, Paris and Jakarta, there is a flurry<br />
of activity. Zhou Xiaochuan, Governor of the<br />
People’s Bank of China, has made it clear<br />
that “establishing a green finance system<br />
has become a national strategy”. It is a<br />
reality institutionalised in the 13th Five Year<br />
Plan. Mark Carney, Governor of the Bank of<br />
England, has advanced prudential analysis<br />
to ensure that the financial system is fit<br />
for purpose in a world buffeted by<br />
climate change.<br />
This quiet revolution is chronicled in the<br />
United Nations Environment Programme<br />
202 <strong>G20</strong> China: The Hangzhou Summit • September 2016 G7<strong>G20</strong>.com
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