Global initiative aims to transform financial system with ESG focus
The OECD, World Bank and the UN Environment Program have united to call for an overhaul of the financial system, revising and rethinking global financial structures, placing sustainable finance at the center and calling for global coordinated technology and digitization.
The three bodies are working together on an agenda for governments across the globe to align financial flows with global climate and development goals, which is what signatories to the Paris Agreement signed up to.
A joint report states: ‘A deep transformation of existing infrastructure systems is needed for both climate and development, one that includes systemic conceptual and behavioral changes in the ways in which we manage and govern our societies and economies.’
In so doing, the reports states there is a need to: ‘Reset the financial system in line with long-term climate risks and opportunities, by fixing biased incentives, capability gaps and inadequate climate risk disclosure and pricing that are hindering the allocation of finance to low-emission, resilient infrastructure.’
In addition, it also states, there is a need to: ‘Rethink development finance for climate, by ensuring that development finance institutions have the resources, mandates and incentives to deliver transformative climate action, attract new investors and sources of finance by using concessional finance strategically, and help countries advance their climate agendas and build enabling environments and climate markets.’
One of the main demands of the initiative is to promote innovation in the field of green technology. Yet the challenge here is that at present only around 10 percent of technologies currently being developed are on their way to being market-ready.
‘We must work to make these technologies affordable,’ Masamichi Kono, the OECD’s deputy secretary general, said in a speech.
But the sums needed to achieve the goals are huge. According to an OECD estimate, $6.9 tn will be needed annually until 2030 to reach the climate and development goals. Recent levels are falling short, with not even half of that sum currently being invested.
Here, Peter Pellegrini, prime minister of the Slovak Republic and OECD ministerial council meeting (MCM) chair, said at the recent MCM: ‘The global nature of the digital transition involves a need for effective international cooperation, and that members can better work together to address the challenges and ensure that the benefits of digitalization are more widely accessible, and contribute to the realization of the 2030 Agenda for Sustainable Development.’
International co-operation is also seen as a necessary building block, notes the report, which adds that ‘the international community has increasingly recognized the need for such transformation: almost all G20 countries confirmed their willingness to embark on a global energy transition in line with climate and development goals in the 2017 G20 Hamburg Climate and Energy Action Plan for Growth. There is also growing awareness that the push for greater climate action must be accompanied by a just and inclusive transition to address inequalities and provide equal opportunities for all parts of society.’
Pellegrini highlights what benefits this would bring in a wider societal sense: ‘Quality infrastructure with open and fair access and closing the gap in skills in particular for women and girls, older individuals, and other vulnerable groups remain key in harnessing existing technologies and the digital transition for sustainable development.’