Features | April 18, 2018

Three signs that new ‘rules of the game’ are making global finance more sustainable

Dennis Price
ImpactAlpha Editor

Dennis Price

ImpactAlpha, April 18 – A steady stream of policies, regulations and commitments pushing global markets to align with sustainable development goals is starting to show signs of progress. A new report from the United Nations’ Inquiry into the Design of a Sustainable Financial System, a group charged with exploring policy options to guide global financial markets to invest in the transition to a green economy, takes stock of the markers.

  • Cookie-cutter bonds… Green bond issuance has jumped 14-fold to $155 billion since 2013. That’s partly because of the market-creating role of public institutions including the European Investment Bank and the International Financial Corp, and sovereign bond issuances from Indonesia, Fiji, France, Nigeria and Poland. Keeping it real: The total bond market is $100 trillion.
  • Flight from carbon… Investors have pulled an estimated $5 trillion from carbon-intensive assets (through 2016). The formation of the Climate Action 100+ of institutional investors to push carbon-intensive listed companies to decarbonize was key to building the momentum. Signers of the Principles for Responsible Investment now number more than 1,900, with $70 trillion in combined assets. Keeping it real:Investors still pumped $710 billion into coal, oil and gas over the same period.
  • China and the European Union… China’s “Guidelines for Establishing a Green Financial System” cover banking, capital markets and insurance and are among the strongest national commitments to sustainable finance. The European Union’s High-Level Expert Group on Sustainable Finance has mapped out member state-wide actions and expects to present legislative proposals in May 2018.

Next up, according to the UN, “shifting focus towards pivotal areas such as the potential of digital finance, the roles of rating agencies, China’s Belt and Road Initiative and engagement of key policy platforms such as the G20 all point to further action.”