The document discusses aligning the global financial system with sustainable development. It notes that annual global investment needs for sustainable development goals are around $16 trillion, but current annual investment and flows within the financial system are misaligned with sustainability. The document proposes a framework for action with policy packages and tools to upgrade governance, direct finance, and encourage cultural transformation to better align the financial system. It highlights emerging examples of practice in countries and calls for further national and international cooperation to systematically shape more sustainable financial systems.

1. 1
THE FINANCIAL SYSTEM WE WANT
Aligning the Financial System with
Sustainable Development

2. 2
[Source Inquiry, 2015]
THE PROBLEM
Annual global investment
All needs to be green and
resilient
US$16
trillion
Annual investment needed
for sustainable development
goals e.g. in infrastructure,
energy, agriculture
US$5-7
trillion
US$7
trillion
Annual environmental
externalities – need to be
costed into decision making
US$6
trillion
Reduction in fossil fuel and
power investment need (2015-
2030)
FINANCING CHALLENGES (ILLUSTRATIVE)
TOO MUCH OF THIS
NOT ENOUGH OF THIS
“Finance overwhelms the real economy. The lessons of the global financial crisis have not been assimilated,
and we are learning all too slowly the lessons of environmental deterioration.”
Pope Francis

3. 3
[Source Inquiry, 2015]
FINANCING CHALLENGE: aligning the system to sustainable development
[Source Inquiry, 2015 drawing on BIS. City UK.]
Banking
US$135 tn
Bonds
US$100 tn
Equities
US$60 tn
Investors
US$100 tn
Insurance
US$29 tn
FINANCIAL ASSETS
& ACTORS
Promoting innovation
Strengthening resilience
Ensuring policy coherence
RATIONALES FOR ACTION IN
FINANCIAL SYSTEM
Managing risk
Weak real economy
regulation & pricing
Inadequate/ inefficient
public spending
Misalignments within
financial system?
REASONS WHY MISALIGNED
WITH SUSTAINABILITY?
“What is needed is not just money. What is really needed is the political will to correct market failure by
rethinking parts of the financial system.” Mark Burrows, Managing Director, Credit Suisse, Asia Pacific
Market failures in the financial
system can aggravate externalities:
short-termism, misaligned incentives
Upgrading the standards and
regulations required to catalyze
investment, for example, in bond
markets
Environmental factors can pose risks
to assets and system stability
Ensuring coherence between
financial regulation and wider goals,
such as long-term investment, access
to finance, environmental security.

4. 4
[Source Inquiry, 2015]
INQUIRY: Advancing policy options to improve the financial system’s
effectiveness in mobilizing capital towards a green and inclusive economy
Identify policy options for
aligning financial system
with sustainable
development
Focused on
environment
Levers for change
Initial assessment of
potential for impact and
ease, cost and risk
Diverse starting points
 clusters of
approaches emerging
Recommendations for
national action and
international
collaboration
Packages of policy proposals 38 approaches in four clusters
Upgraded governance
MANDATE ANALYSIS FRAMEWORK
FRAMEWORK FOR ACTIONNEXT STEPS
FINDINGS
TOOLKIT

5. 5
[Source Inquiry, 2015]
Rachel
Kyte
Group Vice
President,
World Bank
David
Pitt-Watson
Co-Chair
UNEPFI
Atiur
Rahman
Governor,
Central Bank of
Bangladesh
Murilo
Portugal
President,
Brazilian Bankers
Federation
Neeraj
Sahaj
Former
President, S&P
Rating Services
Rick
Samans
Managing
Director
WEF
Maria
Kiwanuka
Minister of
Finance,
Government of
Uganda
Andrew
Sheng
Distinguished
Fellow,
Fung Global
Institute
Naina
Kidwai
Group General
Manager &
Country Head,
HSBC India
Lord Adair
Turner
Former Chair,
Financial
Services
Authority, UK
Jean-Pierre
Landau
Former Deputy
Governor,
Banque de
France
John
Lipsky
Former Deputy
Managing
Director, IMF
Anne
Stausboll
CEO, CalPERS
Nicky
Newton-King
Chief Executive,
Johannesburg
Stock Exchange
Bruno
Oberle
State Secretary &
Director of Swiss
Federal Office for
the Environment
ADVISORY COUNCIL
RECEIVING WISE COUNCIL
Kathy
Bardswick
CEO, The
Cooperators,
Canada

6. 6
FOCUS ON PRACTICE
China
People’s Bank of China
Development Research
Centre
IISD
South Africa
Bankers Association
Global Green Growth Institute
Johannesburg Stock Exchange
Brazil
Bankers Federation
Fundação Getulio Vargas
Bangladesh
Bangladesh Bank, Council
on Economic Policies
US
CalPERS
Colombia
Ministry of Finance
IFC
Indonesia
Financial Services Authority (OJK)
IFC
Asia Responsible Investment
Association
Kenya
Bankers Association
Central Bank
IFC
India
Federation of Indian
Chambers of Commerce &
Industry, National Institute
of Public Policy and
Finance
Switzerland
Federal Office for the Environment
Netherlands
Ministry of Environment
Utrecht Sustainable Finance
Lab
France
2 Degrees Initiative, France
Stratégie, I4CE
Canada
The Cooperators
CIGI
[Source Inquiry, 2015]
UK Bank of England,
Oxford University, PRI

7. 7
[Source Inquiry, 2015]
PARTNERING FOR CHANGE
The People’s Bank of China (PBC) has co-convened with the Inquiry a
Green Finance Task Force to draw up proposals for a green financial
system.
The Federation of Indian Chambers of Commerce and Industry (FICCI)
has catalysed a high-level dialogue between the industry, government
and regulators.
The Swiss Federal Office for the Environment launched a national
consultation with the Swiss Sustainable Finance Initiative.
The Bank of England is working with the People’s Bank of China to
identify high potential areas for international cooperation in advancing
green finance.

8. 8
[Source Inquiry, 2015]
THE INQUIRY’S FRAMEWORKS
FRAMEWORK FOR ACTION
• Principles
• Policy and legal frameworks
• Governance mandates
• Performance measurement
SUPPORTING ARCHITECTURE
POLICY PACKAGES
Focused on
key financial
assets and
actors
TOOLBOX
38 tools
across four
levers
FRAMEWORK FOR ANALYSIS

9. 9
QUIET REVOLUTION: 120+ measures globally
DIVERSE STARTING POINTS APPROACHES IN PRACTICE CLUSTERS OF COMMON PRACTICE
Financial inclusion,
greening industry
Air pollution
Rural development
Post-crisis rebuilding of
trust in financial system
Black Economic
Empowerment
Climate change Act
Environmental risk in
banking regulation
New carbon reporting
requirements
Coordinated roadmap of
policies led by financial
regulator
Financial sector compact
Green Investment Bank,
BoE Insurance climate
review
Clean energy bonds
Enhancing market practice
Harnessing the public
balance sheet
Directing finance through
policy
Encouraging cultural
transformation
Upgrading governance
“The sustainable finance program is not only intended to increase financing but also to improve resilience
and competitiveness of financial institutions….. sustainable finance is a new challenge as well as an
opportunity in which financial institutions may gain benefits of growing and developing more stably”
Muliaman D. Hadad, Chairman of Indonesia Financial Services Authority (OJK) Board of Commissioners

10. 10
[Source Inquiry, 2015]
KEY FINDINGS

11. 11
[Source Inquiry, 2015]
FRAMEWORK FOR ACTION: tools, policy packages and architecture
“Sustainable and responsible investing is fast becoming one of the most important investment criteria
globally…Moreover, sustainability is now also an important economic driver for investment performance. The
challenge is the establishment and enforcement of consistent standards for sustainability disclosure in order to
properly reflect true corporate performance.” David Li, Fund Manager, Impax

12. 12
[Source Inquiry, 2015]
MAKING CHOICES: Pathways of evolving impact

13. 13
[Source Inquiry, 2015]
NEXT STEPS: Acting alone, acting together

14. 14
[Source Inquiry, 2015]
INSIGHTS
Financing for sustainable development can be delivered through
measures focused on the financial system, as well as the real
economy.
A growing number of policy innovations have been introduced by
both developing and developed countries, demonstrating how the
financial system can be better aligned with sustainable
development.
Systematic national action can now be taken to shape a
sustainable financial system, informed by current trends and
complemented by international cooperation.

15. 15
[Source Inquiry, 2015]
www.unepinquiry.org
info@unepinquiry.org@fininquiry