The Financial System We Need

The Financial System We Need

Aligning the Financial System with Sustainable Development You do not have access to this content

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27 Jan 2016
9789210602426 (PDF)

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The Financial System We Need argues that there is now a historic opportunity to shape a financial system that can more effectively finance the development of an inclusive, green economy. This opportunity is based on a growing trend in policy innovation from central banks, financial regulators and standard setters, who are incorporating sustainability factors into the rules that govern the financial system. The report draws together practical examples of policy changes in banking, capital markets, insurance and institutional investment, drawing on detailed work in countries such as Bangladesh, Brazil, China, Colombia, France, India, Indonesia, Kenya, South Africa, the UK and the USA. It offers a Framework for Action that shows how a systematic approach can now be taken at both the national and international levels. - See more at:

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  • Foreword

    The financial system underpins growth and development. In 2008 we witnessed some of the world’s most sophisticated financial systems spawn the worst global financial crisis seen in decades. As markets in some developed countries collapsed, others in both developed and developing nations were inevitably dragged down. In the wake of this global financial crisis, recognition has grown that the financial system must be not only sound and stable, but also sustainable in the way it enables the transition to a low-carbon, green economy. Therefore to achieve the sustainable development we want will require a realignment of the financial system with the goals of sustainable development.

  • Advisory council commentary

    Recognition is growing of the pressing challenge of financing sustainable development, and the opportunity it offers for channeling financial capital to productive, profitable and more broadly beneficial uses. Making this happen needs financial and capital markets to be aligned to sustainable development outcomes, the topic taken on by the United Nations Environment Programme’s Inquiry into the Design of a Sustainable Financial System.

  • Inquiry in brief
  • The Financial System We Need

    Reforming the financial system remains unfinished business – we have stabilized the system, but have a long way to go in designing a financial system that meets the needs of sustainable development.

  • Framework for analysis

    Financing sustainable development will require capital flows to be redirected towards critical priorities and away from polluting and unsustainable, natural resource intensive activities. However, there is currently no commonly agreed basis for assessing financing needs for sustainable development. Many efforts have been made to estimate specific financing needs, most recently in the context of the UN Financing for Development conference. A range of estimates exist for different aspects of the financing challenge, notably access to energy, biodiversity, climate change, food security, water and sanitation.

  • A quiet revolution

    The Inquiry’s core finding is that a “quiet revolution” is underway, seeking to increase the internalization of sustainable development factors into financial decision-making. The Inquiry found over 100 examples of policy measures across 40 countries encompassing new policies, institutions, regulations and collaborative initiatives targeting each of the main asset pools and actors, as well as the underlying governance of the financial system.

  • A framework for action

    The Framework for Action is intended to support both a more systematic and a systemic approach. It provides suggested pathways to assess, plan and execute financial system innovation in a more systematic manner to deliver more effective outcomes. Such innovations will be particularly effective if the appropriate collaborative platforms are in place, along with the necessary feedback loops to enable a quick determination of success or failure and the need for any adjustments.

  • Next steps

    This final section outlines the next steps to build on the innovations and opportunities identified by the Inquiry.

  • References
  • Acknowledgements
  • Abbreviations
  • Collaborating institutions
  • Inquiry full list of reports and papers
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