The United Nations Environment Programme (UN Environment) and the World Bank have launched a summary of their Roadmap For A Sustainable Financial System. The aim is to have a final roadmap agreed by October this year.
This latest publication forms part of the UN Environment inquiry into the design of a sustainable finance system that has been running since 2014 and has a mandate to continue until the end of 2017.
The authors said that this roadmap is a contribution to international efforts by UN Environment and the World Bank Group to meet the urgent financing imperatives underpinning the sustainable development goals and climate considerations reflected in the Paris Agreement. The roadmap is focused on how best to scale sustainable and ‘green’ finance experimentation, through identifying key characteristics and objectives, and exploring possible action plans to achieve these goals.
The summary outlines the main requirements needed for a sustainable finance system such as public financing being used to catalyse green finance. In respect of the private financial market, the report identifies the need for rewards for environmental stewardship; the importance of ensuring financing decisions take longer-term risks and opportunities associated with the environment into account and ensuring the effective flow and use of market-relevant environmental information.
The summary states that the UN Environment and the World Bank Group’s Roadmap initiative intends to design an action plan that moves towards a sustainable financial system, including its elements, sequencing and principal actors, and a basis for measuring progress.
The roadmap summary identifies six core pillars on which this action plan will be based. These include the increasing policy alignment between national and international bodies such as the development of national and international environment, social and governance (ESG) standards; the development of national sustainable finance roadmaps, the launch of greener capital markets and green finance products and improving flows of public money into sustainable finance.
The final Roadmap for a Sustainable Financial System will be launched at the World Bank-IMF Annual Meetings in October of 2017.
This consultation follows the publication of a global survey by State Street Global Advisors (SSGA), which found that 68% of respondents say the integration of an ESG strategy has significantly improved returns, showing, asset manager said, that the adoption of ESG driven investment strategies has a future in institutional portfolios.
The survey also found that 77 percent of respondents said they invested in ESG strategies because such factors play a role in a public company’s broader financial performance.
When comparing regions 40% of investors in Europe and 38% of investors in the US have 25–49% of their investments with ESG allocations. In Asia-Pacific, half of investors have less than 25% of investments with ESG allocations.
Rakhi Kumar, head of ESG Investments and Asset Stewardship at SSGA, said: “In the last four or five years, we’ve seen a marked increase in the level of awareness and interest in ESG at the institutional level, which is extraordinarily promising. There’s a broader appreciation of the notion that good governance translates into better management of areas such as a company’s carbon footprint, as well as how management engages with the workforce. The companies that operate this way, we believe, are better quality investments that yield better performance long term.”
Last Updated: 3 May 2017