UNEP Discusses Financing Green Economy at UNEA
25 June 2014: Environment leaders, policy makers and financial experts convened for the Symposium on Financing the Green Economy on the sidelines of the first meeting of the UN Environment Assembly (UNEA). The Symposium examined how private financial capital can be mobilized to deliver long-term sustainable prosperity, as a necessary complement to public expenditure. It was organized by the UN Environment Programme's Finance Initiative (UNEP FI) and the UNEP Inquiry on The Design of a Sustainable Financial System (UNEP Inquiry), and took place on 25 June 2014, in Nairobi, Kenya.
According to highlights from the Co-Chairs - Oyun Sanjaasuren, Mongolia, and Bruno Oberle, Switzerland - at least US$6 trillion is required each year to finance a green and inclusive economy, with more than half of it needed in the developing world. This represents a small fraction of the total stock of assets in the global financial system, estimated at over US$225 trillion. As a result, the experts recommended that policy makers focus on the rules that govern the deployment of capital within the global financial system. As many signals in the current financial system are not aligned with sustainable development – which they say is reflected in short-termism, insufficient transparency, ill-defined responsibilities and inadequate flows to key countries and sectors – there is a continuing mis-allocation of capital to high carbon and resource-intensive assets, with potential risks of stranded assets, they note.
In this regard, Janez Potocnik, EU Commissioner for Environment, noted that loans for resource efficiency are not easily available, even though such a shift could save companies 3 to 8% per annum. Mukhisa Kituyi, UN Conference on Trade and Development (UNCTAD), said US$20 trillion in pension funds and US$5.5 to 7 trillion in sovereign funds could be unlocked and mobilized to deliver long-term sustainable prosperity as a necessary complement to public expenditure.
Participants identified a set of emerging issues that could address the challenges: a regulatory framework for capital makers; financial intermediation between small and micro-sized enterprises and large pools of capital; and creating pools of blended capital to offset risks associated with long-term investments. “Green bond principles,” country-level “green credit guidelines,” and sustainability disclosure requirements on stock exchanges around the world were also singled out as innovative market practices and policy measures that integrate environmental and social factors within the financial system.
The Co-Chairs emphasized the need to place sustainable development at the heart of the financial system, with a special focus on strengthening the capacities of developing countries to integrate sustainable development into financial policy and regulation. Oberle highlighted the potential role of the UNEP Finance Initiative (FI), the UNEP Inquiry and the Partnership for Action on Green Economy (PAGE) as platforms for ongoing dialogue and targeted country advisory services. [UNEP Press Release] [Symposium Brochure] [Symposium Website] [UNEP FI Press Release]