The UN-convened Financial Centres for Sustainability Network (FC4S) has published its third Annual Assessment survey, which 24 of its 30 members in 2020 (80%) responded to. The survey helps FC4S to assess the global development of sustainable finance. It provides members with a baseline alignment to the Paris Agreement and the SDGs, and an update on progress in different centres. It also helps identify areas where more support is required to underpin progress, and further drive progress through strategic roadmap development.
According to the report, the relatively poor quality of data and its limited availability is the major challenge facing the world’s financial centres as they try to embrace climate-friendly investment and sustainability practices.
The report also acknowledges that despite the challenges, including the huge impact of the COVID-19 pandemic, global financial centres have made significant progress in developing sustainable finance ecosystems. At the same time, they have doubled or in some cases even tripled capital outflows toward low-carbon transition or the achievement of the Sustainable Development Goals (SDGs).
Other key trends include:
- Financial centres across all continents are mobilizing their resources, connectivity, expertise and capital to align with the objectives of a sustainable financial system.
- They are working with other institutions and private actors to build high-level approaches and initiatives to make significant progress at a national level.
- The study shows that the number and the diversity of the stakeholders involved in member FC4S sustainable finance initiatives nearly doubled between 2018 and 2020.
- The share of centres reporting having implemented fiscal incentives or public-backed funds and institutions to support green and sustainable finance activities doubled between 2018 and 2020.
Additionally, as financial centres strive to deliver capital to support the low-carbon transition and the achievement of the Sustainable Development Goals, they report several key challenges. These include:
- Thirst for data: Data quality and availability is the primary challenge faced by two-thirds of financial centres. Leading centres are facing issues on comparability and market sizing, while private actors are struggling to identify which capital flows can be considered as green and sustainable.
- Going beyond climate: Climate Change continues to be a major focus for any private and public institution, and it remains a point of entry into sustainable activities. Social and biodiversity themes are emerging.
- Public authorities are key for take-off: Public authorities can play an important role in encouraging the implementation of Paris alignment commitments, and the SDGs, addressing shared challenges and promoting the use and harmonization of assessment tools and methods.
- Policy and regulations remain a critical driver: Four out of five financial centres consider that new policy initiatives can act as a “positive enabler” or even be a “major driver” of sustainable finance.
- Increasing international collaboration: Nearly half of centres have identified “building connectivity” in their top 3 priorities, the continuous expansion of the FC4S network illustrates such a trend.
- Professional development and education: Skill shortage may prevent public and private institutions alike in going beyond commitments and scaling up sustainable financial activities, but centres are reporting a growing number of sustainable finance programmes and training that are available both to students and workers.
Access the full report here.