By Will Martindale (@WillJMartindale), Director of Policy and Research, the PRI
Monday, the PRI hosted its first Sustainable Finance Policy Conference. Attended by over 200 policymakers and investors, there were five key themes.
The first theme is that sustainable finance policy matters. This may seem self-evident, but it hasn’t always been the case. The PRI identifies over 730 hard and soft-law policies, across some 500 policy instruments. Sustainable finance policy is a 21st century phenomenon: 97% of which were introduced after the year 2000. Policymakers are responding to the growing urgency of sustainability issues.
Second, we are moving from sporadic adoption to comprehensive national sustainable finance strategies. There are national strategies in France, the UK, EU, Canada and China. Work is underway in Germany, Hong Kong, Australia and elsewhere. Natasha Cazenave of the French regulator AMF, said, “Moving to a more sustainable financial system is not an ambition, it is an imperative.”
These strategies are significant because they contain substantive policy reforms. But they also require policymakers to set out, often for the first time, how they understand the relationship between sustainability and finance. This can help to break down the misconception that sustainability is a niche issue and give clear direction to investors.
Third, investors are increasingly involved in public policy. UK pensions minister, Guy Opperman, said, “Policymakers are looking for solutions to what are highly complex problems.” SEC Commissioner Rob Jackson said, “bring the evidence”. Investors are responding positively. Over the past three years, the proportion of PRI signatories engaging policymakers on sustainability topics increased from 44 percent of 1,500 signatories to 61 percent of 2,500 signatories.
Fourth, we are getting more technical and implementation focused – at least in part because the regulators have got involved. We are seeing governments moving away from “comply or explain” to “comply and explain”, from voluntary to mandatory, and from high-level principles to regulatory implementation. Increasing numbers of regulators now explicitly incorporate sustainability in their mandate.
Finally, real economy outcomes are the new focus. The new generation of government strategies have begun to articulate a clear vision for sustainable finance which encompasses not just risks to the financial system, but the role the financial system has to play in financing the real economy.
Because as Generation IM’s David Blood said, “We are running out of time and we need to accelerate the rate of change. We need to move from incremental to radical change, to move beyond the conventional business case and fundamentally revisit the way we think about risks and opportunities.” The PRI agrees.
Further discussion on these themes is set out in the PRI’s white paper, “Taking stock: Sustainable finance policy engagement and policy influence”.
The PRI would like to thank BNP Paribas Asset Management for hosting our policy conference.
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