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UNEP Inquiry Examining Design Options for a Sustainable Financial System

financialinquiry28 May 2014: The UN Environment Programme (UNEP) launched an 'Inquiry into the Design of a Sustainable Financial System: Policy Innovations for a Green Economy' to explore how the financial system might better meet the needs of, and mobilize capital for, a green economy in January 2014. The Inquiry Co-Directors, Nick Robins and Simon Zadek, presented the background, approach and goals of this 18-month initiative at an event on 28 May, at the Johns Hopkins University's School of Advanced International Studies (SAIS), in Washington DC, US. The Energy, Resources and Environment (ERE) Program's Global Leaders Forum hosted the event, which was titled 'UNEP Inquiry on Financing the Green Economy: Changing the Rules of the Game.'

Robins highlighted three points of departure for the Inquiry's work. First, progress towards a green and inclusive economy is limited. For example, the world is on a trajectory to see average temperatures rise by 4°C by the end of the century and premature deaths from indoor and outdoor air pollution are estimated at seven million annually. Second, green finance has progressed in carbon markets and clean energy development but more thinking is needed on overall rules that drive capital allocation, such as rules governing insurance, banking, pension funds and investment. Third, financial reforms introduced after the 2008 financial crisis have too often neglected to address sustainability.

Robins then explained three reasons to intervene in the financial system. First, biases in the financial system may encourage the allocation of capital without concern for sustainability, such as when market prices fail to capture the effects of climate change. Second, rethinking rules and regulations for a green economy is important for policy coherence. Such an approach, for example, can ensure financial policy is not at odds with energy policy. Third, there may be a more effective way to simultaneously achieve economic growth and environmental goals.

The Inquiry includes three tracks of work: creation of a framework for assessing new financial design, facilitating system learning and creating scenarios for and principles of a sustainable financial system; engagement in a sample of countries at different development stages; and cross-cutting issues, such as the design of incentives, credit ratings and accounting standards. Robins noted that many recent financial innovations have come from emerging economies.

In a question and answer period, participants discussed, inter alia: the implications for stranded assets; country implementation; and the nature of change. Zadek, Global Green Growth Institute (GGGI) and IISD, emphasized that, if countries and companies can be convinced of the why (it should be done), what (should be done) and how (to go about it), and if the Zeitgeist (historical moment), method (a unique approach) and agency (the actor) are right, needed change will come. [UNEP Inquiry Website] [UNEP Press Release] [Green Growth Knowledge Platform Press Release] [Inquiry into the Design of a Sustainable Financial System][Video of Presentation]