Speech by UNEP Executive Director Achim Steiner at the UNEP Inquiry Year of Green Finance Inauguration, London Fri, Jan 15, 2016

2015 was the year of building a new set of foundations for the global economy, and signaling new directions for the financial system. It's our task in 2016 to take the practical steps in delivering the shift - and nowhere is this agenda more exciting than in the field of finance.

My Lord Mayor, Ministers, Ladies and Gentlemen

It's a great pleasure for UNEP to co-organize this significant event with the City of London - to set out how we make 2016 the 'year of green finance' not just in the UK but worldwide.

I'd first like to thank the City Corporation for their partnership - and also acknowledge the leadership of the UK financial institutions who have pioneered so many of the innovations in green finance that we now need to take mainstream. My only regret is having to join you by video link from UNEP's headquarters in Nairobi.

As we look forward to the year ahead, we face many pressing political, economic and environmental threats and uncertainties.

But one thing is clear: 2015 was the year of building a new set of foundations for the global economy, and signaling new directions for the financial system

- first, we have the Global Goals for Sustainable Development, the so-called SDGs, which, in essence, plot out an annual investment pipeline measured in the trillions to end poverty and also marry increased prosperity with social inclusion and environmental regeneration.

- and second, we have the Paris Agreement on Climate Change, which signaled the shift to a net zero economy, stressed the urgency of improving resilience to climate shocks and mobilized financial regulators and institutions in novel ways.

So, if 2015 designed the foundations, it's our task in 2016 to take the practical steps in delivering the shift - and nowhere is this agenda more exciting than in the field of finance.

Finance has been a key focus of UNEP's for more than 20 years when we launched the UNEP Finance Initiative, many of whose founding partner institutions were from the UK and are in this magnificent hall. More recently, we initiated the Inquiry into the Design of a Sustainable Financial System to examine how the rules that govern the more than US$300 trillion in assets across the globe can support the sustainability transition.

Nick Robins one of the Inquiry's co-directors will be chairing the panel in a few minutes - and I'd like to acknowledge the major contributions of two of the Inquiry's Advisory Council members from the UK, Adair Turner and David Pitt-Watson.

What I'd like to do in the short time I have available is highlight three key strategic elements:

- first, the financial system is on the move, and the centre of gravity is shifting, what UNEP's Inquiry called the 'quiet revolution' in its global report, The Financial System We Need.

- second, sustainability is becoming a key strategic dimension for financial development, with financial centres, North, South, East and West, engaging in a new 'race to the top'. Here I'd like to turn to the UK - and highlight the key findings of the Inquiry's UK country report launched today, which concludes that the UK is one of the global hubs for sustainable finance - but with more to do.

- and third, new forms of international cooperation are critical to drive this forward - and the G20's focus on green finance this year is a major opportunity. I'll leave Ma Jun to detail the G20, and touch on other areas where we can make a difference.

The Quiet Revolution

So, what is this 'quiet revolution' that the UNEP has found?

It's the recognition that sustainability is now moving from being a marginal, optional factor in financial decision-making to something that is increasingly strategic for both private institutions and for central banks and regulatory bodies charged with governing the health of the financial system as a whole.

Just a few signs of the shift:

- The number of stock exchanges committed to incorporating sustainability into their markets doubled in 2015 to nearly 50 around the world

- 16 banking regulators in developing countries are incorporating social and environmental factors into risk management requirements, including G20 giants such as China, Brazil and Indonesia.

The burden of proof for investors has changed - with the recent The Fiduciary Duty in the 21st Century report from the PRI, UNEP and the Global Compact concluding that "a failure to consider long-term drivers of investment value including ESG issues is a failure of fiduciary duty"

These and other steps are significant - but we also need to recognise that many of these signs of commitment need to be translated into actual changes in behaviour. This is the reason that UNEP has decided to extend the mandate of the UNEP Inquiry for two years to the end of 2017, with a shift in focus from identifying policy options to working with leaders to make the changes required.

The Race to the Top

One of the really exciting things about the Inquiry has been seeing the growing number of countries who are starting to incorporate sustainability into their strategies for financial system development

One example is Indonesia which has launched a 10 Year Roadmap for Sustainable Finance - with the ambition not just to improve environmental and social outcomes, but also to improve the resilience and competititiveness of financial institutions themselves.

Another case is Switzerland where sustainability is increasingly being seen as a key feature of the country's post-crisis financial positioning - an area of strength that could underpin the future competitiveness of the Swiss banking, investment and insurance sectors.

In this burgeoning Race to the Top, the UK has a special profile - London is not just a global financial centre, but also a hub for green and sustainable finance. It is striking just how many key global initiatives are clustered in London - whether on responsible investment, green bonds, unburnable carbon, sustainable banking, climate disclosure or insurance risk. In addition, UK financial institutions are often at the forefront of seizing the new business opportunities that these trends are presenting.

The Inquiry's country report on the UK launched here today concludes that sustainability can, however, be seen as a 'sleeping giant of the financial system' with leadership in innovation sometimes being overtaken by fast followers in other financial centres.

That's why I applaud the leadership of the City of London in launching its Green Financial Initiative today.

The new agenda for international cooperation

National leadership is essential to make tangible progress with green and sustainable finance - but this needs to be complemented with deeper international cooperation to exchange experience and develop common approaches to shared sustainability challenges in the global financial system.

Here again efforts to build a sustainable international financial architecture are moving ahead rapidly

- The UK has once more essential to the launch of the new Task Force on Climate-Related Financial Disclosures by the Financial Stability Board, not least through the vision of Bank of England Governor Mark Carney

- China has decided to establish a new green finance track as part its presidency of this year's G20, co-chaired with the UK. UNEP is honoured to have been asked to be the secretariat for this work.

- Insurance is another area where regulators and supervisors are recognizing the value of international cooperation to better address environmental challenges, and discussions are underway for the launch of a new Sustainable Insurance Policy Forum.

Much is happening - but let me conclude

- Sustainability is becoming recognized as a key feature of healthy financial systems - and there's the beginnings of a race to the top among financial centres.

- 2016 is set to be the year of green finance in both policy and markets, not least through China's leadership of the G20.

- The UK is a key global hub for green finance - and the City's Green Financial Initiative can help to realise London's full potential.

So let's work together to make the decisive steps this year.

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