Climate change represents one of the largest risks to sustainable development. While the G20 agenda extends far beyond climate change, it has become an important platform to promote the implementation of the Paris Agreement, in particular after China as G20 presidency launched a Green Finance Study Group in 2016.
The 2018 G20 Summit in Argentina is just ahead of the COP24 in Katowice, Poland in December. One of the key insights from the G20 Argentina's priorities is promoting adaptation to climate change and extreme weather events with a focus on infrastructure, education, capacity building and job creation, as well as developing a long-term pathway of low green house gas emission.
Four climate-related topics have been continually discussed and are expected to make important progress.
First is climate and sustained infrastructure investment. Addressing climate change requires significant investment in infrastructure for development. The G20’s influence on multilateral financial institutions, development banks, and the private sector — all key players in this process — is essential to achieving these goals. Thus discussion in this regard at G20 should aim to establish appropriate political frameworks, financing instruments and economic incentives to boost investment in climate-resilient infrastructure, to promote technological innovation, and to mobilize the resources needed to implement these projects.
Second is green and sustainable finance. Green finance concerns the financing of investments that generate environmental benefits as part of the broader strategy to achieve inclusive, resilient and sustainable development.
In 2016, leaders of G20 states for the first time recognized the need to “scale up green finance" setting out a series of steps to make this happen. Key countries issued strategies for greening their financial systems, with China in the vanguard launching a 35-point program. Importantly, these policy moves were closely connected with the rapid growth of green finance in the marketplace. The green bond market went from strength to strength, with an over $162 billion issuance during 2017, and estimated volume of $210 billion in 2018.
In 2018, Argentina renamed the G20 Green Finance Study Group, and identified three topics: promoting sustainable asset securitization, developing sustainable private equity and venture capital, and using fintech to develop sustainable finance.
Further progress on Green finance has also been made in other platforms. In 2017, Germany's G20 presidency advanced a “GreenInvest” dialogue platform to engage developing countries building national green finance systems to mobilize private investments towards a sustainable future. By the end of 2017, a Central Banks and Supervisors Network on Greening the Financial System was established by eight central banks including China, France and Germany to strengthen the global response and to enhance the role of the financial system to manage risks and to mobilize capital for green and low-carbon investments.
Third, climate-related finance risk and disclosing. The expected transition to a lower-carbon economy is estimated to require around an investment of $3.5 trillion, on average, in energy sector a year for the foreseeable future, generating new investment opportunities. However companies that invest in activities that are susceptible to climate-related risks may be less resilient to the transition and investors may experience lower returns.
To help organizations identify and disclose the relevant information, and help investors, lenders, and insurance underwriters assess climate-related risks and opportunities, the Financial Stability Board (FSB) established a Task Force on Climate-related Financial Disclosures (TCFD) in 2015 to developed voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to stakeholders.
In 2017, TCFD provided a framework for companies to develop more effective climate-related financial disclosures through their existing reporting processes. While, as a TCFD 2018 review report showed, the climate-related financial disclosures are still in early stages, limited disclosure of environmental information has prevented many assets from going green.
The Task Force will continue to promote and monitor adoption of its recommendations in future, and develop methods and tools for green investing.
Fourth, transitioning towards more flexible and cleaner energy systems. A secure, economically efficient, green house gas neutral energy supply is a fundamental prerequisite for economic growth and prosperity.
The G20 is expected to formulate a G20 energy action plan to better manage climate risks and ensure a reliable investment environment to promote de-carbonization initiatives. Building on the Energy Efficiency Leading Program agreed in 2016 G20 Hangzhou Summit and the Toolkit on Renewable Energies created under the Turkish presidency of 2015, Argentina presidency tries to give an action-oriented approach to assess the accessibility and affordability of energy in Latin America and the Caribbean.
A timetable for ending fossil fuel subsidies is also high on the agenda. Argentina will push forward the issue to encourage wasteful consumption, and energy data transparency.
In general, limiting temperature rise within 1.5ºC requires coordinated solutions and international cooperation, including enabling ambitious adaptation and mitigation action, developing fair transparency and compliance arrangements and mobilizing means of implementation, especially with respect to finance, to support country and global action.
Although the decision of the US government to withdraw the Paris Agreement could add considerable uncertainties on global climate governance in future, one thing is clear -- the shift to climate-consistent, green and, ultimately, more sustainable finance is unstoppable. From G20 agenda setting and progress, we can find that momentum is building to align the financial system with sustainable development goals, including climate imperatives.
Tian Huifang is a senior research fellow and deputy director of World Energy Department at Institute of World Economics and Politics, Chinese Academy of Social Sciences. The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
Tian Huifang
Climate change represents one of the largest risks to sustainable development. While the G20 agenda extends far beyond climate change, it has become an important platform to promote the implementation of the Paris Agreement, in particular after China as G20 presidency launched a Green Finance Study Group in 2016.
The 2018 G20 Summit in Argentina is just ahead of the COP24 in Katowice, Poland in December. One of the key insights from the G20 Argentina's priorities is promoting adaptation to climate change and extreme weather events with a focus on infrastructure, education, capacity building and job creation, as well as developing a long-term pathway of low green house gas emission.
Four climate-related topics have been continually discussed and are expected to make important progress.
First is climate and sustained infrastructure investment. Addressing climate change requires significant investment in infrastructure for development. The G20’s influence on multilateral financial institutions, development banks, and the private sector — all key players in this process — is essential to achieving these goals. Thus discussion in this regard at G20 should aim to establish appropriate political frameworks, financing instruments and economic incentives to boost investment in climate-resilient infrastructure, to promote technological innovation, and to mobilize the resources needed to implement these projects.
Second is green and sustainable finance. Green finance concerns the financing of investments that generate environmental benefits as part of the broader strategy to achieve inclusive, resilient and sustainable development.
In 2016, leaders of G20 states for the first time recognized the need to “scale up green finance" setting out a series of steps to make this happen. Key countries issued strategies for greening their financial systems, with China in the vanguard launching a 35-point program. Importantly, these policy moves were closely connected with the rapid growth of green finance in the marketplace. The green bond market went from strength to strength, with an over $162 billion issuance during 2017, and estimated volume of $210 billion in 2018.
In 2018, Argentina renamed the G20 Green Finance Study Group, and identified three topics: promoting sustainable asset securitization, developing sustainable private equity and venture capital, and using fintech to develop sustainable finance.
Further progress on Green finance has also been made in other platforms. In 2017, Germany's G20 presidency advanced a “GreenInvest” dialogue platform to engage developing countries building national green finance systems to mobilize private investments towards a sustainable future. By the end of 2017, a Central Banks and Supervisors Network on Greening the Financial System was established by eight central banks including China, France and Germany to strengthen the global response and to enhance the role of the financial system to manage risks and to mobilize capital for green and low-carbon investments.
Third, climate-related finance risk and disclosing. The expected transition to a lower-carbon economy is estimated to require around an investment of $3.5 trillion, on average, in energy sector a year for the foreseeable future, generating new investment opportunities. However companies that invest in activities that are susceptible to climate-related risks may be less resilient to the transition and investors may experience lower returns.
To help organizations identify and disclose the relevant information, and help investors, lenders, and insurance underwriters assess climate-related risks and opportunities, the Financial Stability Board (FSB) established a Task Force on Climate-related Financial Disclosures (TCFD) in 2015 to developed voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to stakeholders.
In 2017, TCFD provided a framework for companies to develop more effective climate-related financial disclosures through their existing reporting processes. While, as a TCFD 2018 review report showed, the climate-related financial disclosures are still in early stages, limited disclosure of environmental information has prevented many assets from going green.
The Task Force will continue to promote and monitor adoption of its recommendations in future, and develop methods and tools for green investing.
Fourth, transitioning towards more flexible and cleaner energy systems. A secure, economically efficient, green house gas neutral energy supply is a fundamental prerequisite for economic growth and prosperity.
The G20 is expected to formulate a G20 energy action plan to better manage climate risks and ensure a reliable investment environment to promote de-carbonization initiatives. Building on the Energy Efficiency Leading Program agreed in 2016 G20 Hangzhou Summit and the Toolkit on Renewable Energies created under the Turkish presidency of 2015, Argentina presidency tries to give an action-oriented approach to assess the accessibility and affordability of energy in Latin America and the Caribbean.
A timetable for ending fossil fuel subsidies is also high on the agenda. Argentina will push forward the issue to encourage wasteful consumption, and energy data transparency.
In general, limiting temperature rise within 1.5ºC requires coordinated solutions and international cooperation, including enabling ambitious adaptation and mitigation action, developing fair transparency and compliance arrangements and mobilizing means of implementation, especially with respect to finance, to support country and global action.
Although the decision of the US government to withdraw the Paris Agreement could add considerable uncertainties on global climate governance in future, one thing is clear -- the shift to climate-consistent, green and, ultimately, more sustainable finance is unstoppable. From G20 agenda setting and progress, we can find that momentum is building to align the financial system with sustainable development goals, including climate imperatives.
Tian Huifang is a senior research fellow and deputy director of World Energy Department at Institute of World Economics and Politics, Chinese Academy of Social Sciences. The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
