Report: Global green finance levels insufficient to underpin SDGs

Despite strong growth in the green finance market in recent times, the current global economic system will not be able to underpin the level of public and private financing needed to meet the United Nations' (UN) Sustainable Development Goals (SDGs).

That is the conclusion of a new report from think tank T20, which calls on governments to integrate the agenda of the 17 Global Goals into their nation’s financial systems in order to spur the low-carbon transition.

Published on Wednesday (22 August), the report notes that despite strong growth in the green bonds market, which grew by a staggering 78% between 2016 and 2017, such bonds still account for less than 1% of all bonds issued globally.

It also emphasises the continuing gap between clean worldwide energy investments and fossil fuel investments, which stood at $324bn and $800bn respectively in 2016. The report attributes this slow progress to poor governance and the fact that the architecture of the world’s existing financial systems has not been altered since the Paris Agreement.

“Finance is a keystone to the successful implementation of the 2030 Agenda, but significant barriers exist to securing adequate public and private financing to achieve the SDGs,” the report states.

“The urgency to act indicates the need for a broader strategy that aligns the systemic features of finance and its relationship with the universally-embraced 2030 Agenda.”

UN Secretary-General António Guterres has claimed that $3-5trn of annual investment will be needed to finance the SDG agenda. Speaking at the most recent annual UN Private Sector Forum, Guterres said that finance could “make or break” the UN’s “carefully laid plans” for 2030.

Since then, the UN has increased this annual estimate to $5-7trn, and concluded that there is currently is a $2.5trn annual investment gap. 

Alignment drive

The report sets out a string of recommendations which could enable global governments to overcome the largest challenges faced within the private and public finance sectors of their nations.

It urges ministers to reform how financial systems are governed, altering guidelines to “ensure strong, sustainable, balanced and inclusive” growth on a long-term basis. While noting that some regulators such as the Dutch central bank have embraced sustainable development as an overarching framework, the report concludes that a more systemic approach, underpinned by an agreed set of principles, is needed.

The report also recommends that better policy coherence should be driven between development finance institutions (DFIs), arguing that such a move would enable DFIs to increase their impact and mobilise private financing for the SDG agenda “on an unprecedented scale”.

The third recommendation is for nations to change the architecture of their internal financial systems to embed all of the SDGs within their structures, and to collaborate internationally to spur the uptake of such alignment globally. T20 suggests that financial market standards could be subjected to publicly available assessments of their potential climate impacts to achieve this change.

Lastly, the report suggests that the aims of the Global Goals should be “embedded as a normative principle” in the digitisation of finance, stating that the current approach is “fragmented” and “ad hoc”.

Each of the recommendations will be discussed at the upcoming G20 summit, which will take place in Buenos Aires in November.

Earlier this month, edie published a brand new edie insight report which provides clear, practical steps that can be taken by sustainability and CSR professionals to embed the SDGs within their organisation’s business strategy. You can read that report here.

Sarah George

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