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Financial sector must drive sustainable growth

Publish date: 22 October 2019
Issue Number: 628
Diary: Legalbrief Environmental
Category: Climate Change

The world’s financial sector has an important role to play in promoting sustainable growth, write Bertrand Badré, a former MD of the World Bank, and CEO of Blue like an Orange Sustainable Capital, and Antoine Sire, a member of the executive committee and head of company engagement at BNP Paribas, in a Mail & Guardian analysis. ‘Four years after world leaders signed the Paris climate agreement and adopted the United Nations’ 2030 Agenda with its 17 Sustainable Development Goals (SDGs), the global environmental crisis shows every sign of worsening. Polar ice and glaciers are melting at an accelerating rate. Greenhouse-gas emissions are increasing,’ they warn. ‘Why has the world strayed so far from its collective road map toward sustainable growth?’ they ask. ‘The financial sector will need to play a leading role in scaling up green initiatives, de-risking projects for investors, and optimising funding costs. And, given the integrated nature of sustainable growth, financial institutions must work more closely with national and local governments, regulators, businesses, non governmental organisations, and citizens,’ state Badré and Sire. ‘To that end, the banking sector, including central banks, recently established the Principles for Responsible Banking and the Network for Greening the Financial System,’ they explain. ‘In order to meet the SDGs and the aims of the Paris accord, we need to encourage everyone to become greener – whether they are large polluting businesses, smallholder farmers, or consumers. That means providing concrete financial support for green transitions, rather than shunning and alienating less environmentally friendly actors,’ they argue. ‘But changing banks’ energy-financing models, or developing sustainability-linked loans and green bonds, will simply not be enough to facilitate such “transition journeys.” It is therefore time for a new approach that is effective and scalable, and takes investors’ expectations fully into account,’ they note. ‘The world is facing a deepening climate crisis, and financial institutions must help to lead and guide the global response. By adopting innovative new approaches, the financial sector can undergo a positive green transition of its own – and help others with theirs,’ they conclude.

Full Mail & Guardian analysis