22/03/2019 | EIFR
The world’s financial centres are the locations where supply and demand for green and sustainable finance will be matched. This report presents the first findings from an in-depth assessment of actions in 13 of these hubs, all members of the Inter national Network of Financial Centres for Sustainability (FC4S) across Africa, the Americas, Asia and Europe. The assessment reveals 10 key insights on how financial centres are mobilizing their expertise, connectivity and capital to help solve some of the world’s toughest financing challenges:
1. A New Form of Public Private Partnership: Nearly two thirds of financial centre initiatives on green and sustainable finance are partnerships between the private and public sectors, giving them unique ability to link policy and practice.
2. Overcoming Barriers to Growth: The top three barriers faced by financial centres are i) a lack of green financial products, ii) inconsistent standards and iii) insufficient market demand. Lack of a shared language for green and sustainable finance is a key constraint, highlighting the need for continued dialogue between public and private stakeholders on taxonomies.
3. Going Beyond Climate: Climate change continues to be a major focus for activities branded as “sustainable” but FC4S members recognize need to broaden their offering to include other environmental priorities (e.g. circular economy, natural capital, and conservation finance) as well as social themes, such as financial inclusion and impact investing
4. Policy innovation is a Key Driver: New policy initiatives and action by financial regulators are a key driver in half the financial centres, with system-wide initiatives and debt capital markets the most cited examples. In a quarter of centres, policy and regulation are touching upon equity and debt capital markets, insurance, investment, banking and system-wide action.
5. A Diversity of Financial Instruments: Over 75% of respondents noted the presence of different debt instruments related to green and/or sustainable finance – primarily green bonds. Equity instruments are on the rise, with 25 % of respondents noting the presence of structured products, closed-ended funds, and discretionary mandates.
6. Sector Evolution Varies: Investment and asset management is the most mature sector with respect to green and sustainable finance in most centres, while green banking is evolving and insurance has the furthest to go.
7. Professional services are growing rapidly: Over 75% of respondents acknowledged the presence of sustainability rating services and consulting firms; other services (sustainability research, labelling, legal, clean techs and carbon trading) are present in some financial centres.
8. Priorities for Future Action: Leading financial centres have identified further product development, improved data collection and better market standards as top priorities for further development.
9. Focus on Innovation: Applying financial technology (fintech) solutions to sustainable finance challenges is a major focus for financial centres, with several FC4S members establishing specific projects aimed at fostering innovation – including accelerator programmes.
10. Increasing International Collaboration: FC4S member centres are working more closely together on sustainable finance, including through bilateral projects. More and more centres are seeking to join the FC4S Network to benefit from collaboration opportunities.