A toolkit for sustainable investment policy and regulation (part 1)

The PRI and the World Bank’s Financial Stability and Integrity Team are working to support government policy makers and regulators in implementing reforms to build a sustainable financial system. Such reforms must align capital markets with the goals of the Paris Agreement on climate change and the Sustainable Development Goals (SDGs). 

This toolkit provides a high-level overview of five foundational sustainable investment policies, listed in Box 1, explaining why each is important, setting out their key features and presenting some examples of such policies in action.

BOX 1: PRIORITY ELEMENTS OF SUSTAINABLE INVESTMENT POLICY AND REGULATION

Sustainable investment policy and regulation need to cover the following five areas:

  • Corporate ESG disclosures, including alignment with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)
  • Stewardship (engagement and voting)
  • Investors’ duties to incorporate ESG-related considerations in their investment decision making, to provide sustainability-related disclosures and to report on their ESG incorporation policies and performance targets
  • Taxonomies of sustainable economic activities, defining common and clear criteria to classify projects or investments as green or sustainable
  • National/regional sustainable finance strategies, that encourage and enable the low-carbon transition and the delivery of the SDGs

National sustainable finance strategy

The toolkit builds on the World Bank’s Global Program on Sustainability, the PRI’s policy programme, particularly the recommendations of the Fiduciary duty in the 21st century country roadmaps, and both organisations’ experience of national policy reform. It will:

  • provide the basis for a regulatory dialogue, involving the World Bank, the PRI and regulators and policy makers from emerging markets, on the best path forward in aligning finance with sustainability;
  • contribute to the creation of a common language on sustainable finance and investment policy design, implementation and monitoring;
  • facilitate the uptake and promotion of such policy standards by multilateral organisations such as the OECD, IOSCO and IOPS.

Further publications are planned for 2021:

  • Part 2 – a second toolkit for policy makers, focused on the banking and insurance sectors;
  • Part 3 – detailed implementation guides, which will help governments to put these toolkits into practice.