As part of Germany’s G20 Presidency, the Federal Ministry for Economic Cooperation and Development (Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung, abbreviated to ‘BMZ’) is advancing the ‘GreenInvest’ dialogue platform in order to engage developing countries in the mainstreaming and mobilisation of green finance.
A first consultation of developing countries under the GreenInvest platform was held in Singapore on 9 and 10 January with participants from some 25 developing countries.
BMZ’ Parliamentary State Secretary, Thomas Silberhorn said: “Within the German development cooperation, we are placing a strong emphasis on supporting our partners in building local financial systems and framework conditions to mobilize and shift private investments towards a sustainable future. GreenInvest is an excellent vehicle to advance our joint understanding and setting the stage for scaled-up action on green finance.”
UN Environment has been selected to develop and manage GreenInvest, building on its extended experience in advancing sustainable finance. UN Environment’s co-Director of the Inquiry into Design Options for a Sustainable Financial System, Simon Zadek said, “UN Environment welcomes the opportunity through its involvement in GreenInvest to highlight the innovations by, and accelerate the flow of green finance in developing countries”.
GreenInvest During Germany’s G20 Presidency
GreenInvest seeks to ensure that developing countries will have a voice in the evolution of green finance initiatives and practices across the global financial system. It is based on an initiative launched during Mexico’s G20 Presidency in 2012 and will feed-into the newly established Sustainability Working Group under Germany’s G20 Presidency. It complements other green finance work streams under Germany’s G20 Presidency including the Green Finance Study Group in the Finance Track.
During Germany’s G20 Presidency, GreenInvest will focus on three major themes, greening foreign direct investment (FDI), the role of financial technology (‘fintech’) in advancing green finance, and enabling developing countries to effectively participate in international cooperation to accelerate green finance.
GreenInvest’s Launch Event
GreenInvest’s launch under the German G20 Presidency took place in Singapore, co-hosted by the Singapore Management University. Subsequent meetings in 2017 will take place in Berlin, Frankfurt and Washington. Attended by senior executives and officials from central banks, stock exchanges, banking and other business associations, and finance ministries, key outcomes from the meeting included:
- GreenInvest confirmed the importance of an organized interface between the concerns and aspirations of developing countries and G20 process and the value of the GreenInvest platform in providing such an interface on issues related to green finance reform. The interface is equally important in respect of other international processes where green finance is at issue.
- Further, the consultation urged the GreenInvest platform to facilitate the development of domestic green finance reform strategies and roadmaps and to gather and make available best practice from around the world on the development and implementation of such strategies. This includes providing an integrative envelope through which the many international networks on different aspects of green finance might optimally contribute to national green finance reform processes.
- Finally, the consultation identified a number of current or potential issues for developing countries in respect of the unintended consequences of green finance sector development, including the risk that climate action might increase the cost of capital or the need to make optimal use of digital financial technology to accelerate green and inclusive development without opening developing country economies to new risks.
Background on Green Finance
US$90 trillion is needed to finance the transition of the global economy along a low-carbon, climate resilient, non-polluting pathway. Much of this finance will be needed in developing countries, and the majority will need to be funded using private capital given fiscal limits.
Momentum is building to align the financial system with sustainable development goals, including climate imperatives, noting that:
- Some of this momentum is being driven by developing countries, including G20 members such as Brazil, China and Indonesia, and non-G20 countries including Kenya and Colombia.
- International cooperation is also growing, including the G20 Green Finance Study Group and the Financial Stability Board’s task force on climate-related risk disclosure.
Background on GreenInvest
GreenInvest builds on the Green Growth Action Alliance established at the G20 Leaders Summit in Los Cabos, Mexico, in 2013 to accelerate investment in green priorities in developing countries. Subsequent developments of the platform have involved the Global Green Growth Institute, the International Finance Corporation, UN Environment, and the World Economic Forum.
Since then, green finance has risen up the agenda of both policy-makers and markets. China has championed this development as part of its G20 Presidency through the newly-established Green Finance Study Group, which will continue in 2017 under the German Presidency. Similarly elsewhere, international organisations and initiatives and increasing numbers of countries are advancing green finance through market, policy and regulatory innovations.
GreenInvest will be relaunched under the German G20 Presidency to strengthen the connection between green finance momentum and the insights, innovations and needs of developing countries. It will engage developing country actors in dialogue and action as a contribution to key international developments, and to seek to ensure that such developments take account of the specific needs of developing countries. Specifically, during the German G20 Presidency, GreenInvest will seek to facilitate the following:
- Raising awareness amongst developing countries of current international developments and opportunities, enabling learning and contributions of experience and perspectives, such as on-going green finance work across the G20 and the Financial Stability Board.
- Encouraging a coordinated approach amongst sustainable finance initiatives to improve their effectiveness on the ground in developing countries, such as the Principles for Responsible Investment, the Principle for Sustainable Insurance, the Sustainable Banking Network, the Sustainable Insurance Forum and the Sustainable Stock Exchange initiative.
In addition to this approach to enhancing the role of developing countries in international cooperation on green finance, GreenInvest will focus on two specific themes:
- Building understanding or how to green foreign direct investment flows to and among developing countries as well as the impacts of these compared to traditional investment.
- Understanding how to maximize the positive impact of financial technology on green finance (and how to minimize the negative impacts).
Background on BMZ and UN Environment
The Federal Ministry for Economic Cooperation and Development (Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung, abbreviated BMZ) is leading the relaunch of GreenInvest as part of Germany’s G20 Presidency.
The UN Environment has been advancing sustainable finance since 1992, through its Finance Initiative and more recently the Inquiry into Design Options for a Sustainable Financial System. The Inquiry was established in early 2014 to advance the alignment of the financial system with sustainable development. Its global report, “The Financial System We Need: Momentum to Transformation”, as well as other technical and country papers, can be accessed at www.unepinquiry.org.