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Financing the world’s green transition

16 1 0
15.10.2019

PARIS – Four years after world leaders signed the Paris climate agreement and adopted the United Nations’ 2030 Agenda with its 17 Sustainable Development Goals (SDGs), the global environmental crisis shows every sign of worsening. Polar ice and glaciers are melting at an accelerating rate. Greenhouse-gas emissions are increasing. The Amazon and Indonesian rain forests are burning, and climate catastrophes such as typhoons, tornadoes and floods are intensifying, with dire consequences for entire populations.

Why has the world strayed so far from its collective road map toward sustainable growth? Over the past decade, climate action has mainly involved praising businesses and governments that adopt “green” practices while naming and shaming those that maintain “brown” policies. But this is not enough. We must fundamentally rethink how to create a more sustainable world.

The financial sector will need to play a leading role in scaling up green initiatives, de-risking projects for investors, and optimizing funding costs. And, given the integrated nature of sustainable growth, financial institutions must work more closely with national and local governments, regulators, businesses, NGOs, and citizens.

To that end, the banking sector, including central banks, recently established the Principles for Responsible Banking and the Network for Greening the Financial System. These platforms, along with the Principles for Responsible Investment that were adopted in 2006, can be the basis for financial initiatives that make all economic actors more sustainable.

Many financial institutions have already committed to the energy transition by shifting capital allocation away from fossil fuels and investing more in low-carbon and more resource-efficient businesses and infrastructure projects. The volume of sustainability-linked loans,........

© The Japan Times