THE FINANCIAL SECTOR: A LINCHPIN TO ADVANCE SUSTAINABLE DEVELOPMENT
Amplifying and diffusing best practices
Many innovative financial initiatives are emerging. The Portfolio Decarbonization Coalition has engaged 25 institutions in decarbonizing the US$600 billion worth of assets in their portfolios by redirecting investments from carbon-intensive to carbon-efficient companies. Such developments have led to the rapid expansion of a new asset class, green bonds. Green bonds are financial instruments to raise capital to tackle climate change and protect the world’s natural capital. In 2015, the total value of climate-aligned bonds stood at US$598 billion, a 20 per cent increase from the previous year.[20]
Most
current green bonds focus on financing low-carbon assets in the transport and energy sectors; however, pioneering efforts targeting the agriculture and forestry sectors are also rising.
On the banking side, a promising development has been the call for a business-driven approach to finance by the Positive Impact Manifesto. Despite existing policy and regulatory misalignments, the Manifesto encourages banks, the broader finance sector, and stakeholders to go beyond risk-based approaches to sustainability and to focus on positive impacts
Green bonds on the rise
Buildings & Industry $19.6 bn
Energy $118.4 bn
$65.9bn Labelled Green bond universe
Multi-Sector $28.2 bn
$531.8bn Unlabelled Climate-aligned Bond Universe
Agriculture & Forestry $2.3 bn
Waste & Pollution $7.1 bn
Water $3.2 bn
on the economy, society, and the environment.21 Another
business-driven development is the proposal from the Financial Stability Board to establish an industry-led disclosure task force to develop voluntary climate-related disclosures necessary for lenders, insurers and investors in assessing material financial risks.22
2015 may be the year financial markets started their transition towards solutions for sustainability challenges. Many leading individuals and initiatives are guiding financial markets down this path. All of this necessary preparatory work produced widespread recognition that sustainable investing is an essential mechanism, not only to accomplish sustainability solutions, but also to stabilize and maximize financial value.
This is manifesting itself in many ways, with a ‘race to the top’ of commitments emerging–from Goldman Sachs committing to US$150 billion of clean energy investment through 2025 to the Bank of America Merrill Lynch US$125 billion commitment to invest in environmental sustainability. A bottom-up race
Transport $418.8 bn
Source: Climate Bonds Initiative (2015)20 14
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77