Time for bold leadership with our finances

With the European Parliament’s approval this week, and ratification imminent, the Paris Agreement is now poised to enter into force within a month. The climate pact and the Sustainable Development Goals have both set ambitious targets. Now the financial world needs to do its part to achieve them.

As World Bank President Jim Yong Kim put it this weekend, the finance sector needs to be “fit for purpose to assess climate risks and opportunities”. As countries move to green their infrastructure, he said, “we can and should all help to find renewable energy and energy efficiency solutions”.

Kim set the right tone when he presented a five-point plan at the World Bank and International Monetary Fund annual meetings to turn the Paris goals into action. The G20 has also taken steps, agreeing, at the behest of the Chinese presidency, to establish a Green Finance Study Group.

Now we need bold, decisive action to back up the rhetoric. A low-carbon economy is the only viable path for the future, and investors and financial institutions have a crucial role to play in building it. To achieve this transformation, we need to reboot the financial system to focus on “green” investments.

Yet green finance is still in its infancy. Though progress has been made in recent years, with several signs of green financial innovation, less than 1% of global bonds are green, and less than 1% of the holdings by global institutional investors are green infrastructure assets.

Source: Thomson Reuters Sustainability, UK