Speech prepared for delivery at the Global Roundtable 2020 hosted by the UNEP Finance Initiative
It is my pleasure to address you today on the importance of making the finance sector a force for positive change. In the last two days, we have heard important insights into the challenges facing the finance sector. But we have also heard about the very real opportunities for shifts to both long term sustainability and profitability.
In this context, I commend my UN colleagues including Amina Mohammed, UN Deputy-Secretary-General, Christine Lagarde of the European Central Bank and Kristalina Georgieva of the International Monetary Fund, for their inspirational leadership and commitment. We need the finance sector to fully utilize the knowledge and leadership skills the full spectrum of talent. And that includes — obviously —women. But women are generally poorly represented in senior positions across the industry. So in this context let me be unequivocally clear: Balanced boardrooms, in terms of both gender and diversity, perform better. Leadership is needed to help us get there. Let’s just get this done already.
The COVID-19 pandemic has shown us, in stark detail, how exposed to shocks and risks our economies and societies are. Risks that those of us working in the environmental field have been calling out for some time now. In UNEP we speak of the three planetary crises: the climate crisis, the biodiversity and nature crisis, and the pollution and waste crisis. Driven by decades of unsustainable consumption and production, these crises are destroying the natural systems upon which our economies and societies are built.
We, humans, have altered 75 per cent of the terrestrial surface of our planet. We risk losing one million species on the earth. Climate change continues unabated. The science is clear. And yet we remain unprepared when shocks associated with these crises occur.
So, what do we need to do? We need to refresh our memories of the commitments we have already made. To stabilize the climate. To protect our natural world. To stem pollution. And thereafter we need to take real and meaningful action to meet the goals we have agreed.
Such meaningful action also means shifting gear in the finance sector. Altering investment flows away from unsustainable consumption and production patterns. No more financing of coal. Deforestation-free food, feed and fibre. A regulatory framework that limits pollution and protects our climate and nature. All of this requires investment.
The initial stimulus packages in response to COVID-19 rightly prioritized health and keeping companies and people afloat. That was the right thing to do. Now we must look to the future. Over the next 6 to 18 months, a further USD 20 trillion in stimulus is likely. Let us remember that most of these stimulus packages are based on government borrowing. Are we really going to saddle the next generation with a pandemic debt and a destroyed planet? The answer must be no.
So, this is the moment. Stimulus funds must go towards creating zero-carbon, nature-positive and pollution-free societies and economies, in which finance fuels the energy transition, a healthy planet and green jobs. This golden opportunity to change track may not come back in our lifetime.
The good news is that some finance industry leaders have started to acknowledge the need to realign capital with sustainability. With climate stability. With regenerating our natural world. With a pollution-free planet. I would like to offer four essential actions needed to make sure these investments count.
Financial institutions need to start measuring and accounting for the impacts of their financing.
Simply put, the finance sector needs to get much better at measuring and communicating holistic measures of impact – both the positive outcomes of financing, like emissions reductions and the negatives, like biodiversity loss or human rights violations.
Financiers need to set real and comprehensive sustainability targets.
Investors need to treat sustainability as a key indicator of portfolio performance, not as a CSR effort. Entire portfolios and organizations need to be consistent with the SDGs, the Paris Agreement, and other international agreements. Bits of green investments on the fringes of an otherwise dirty and toxic portfolio is not the way to go. Two target frameworks that UNEP is pleased to be involved in are the Net-Zero Asset Owner Alliance and the Principles for Responsible Banking.
Financial institutions need to follow the science.
In this context, I commend the Net-Zero Asset Owner Alliance for relying heavily on scientific inputs, to set a timetable for net-zero emissions in their portfolios with clear intermediate targets to realign the portfolio on the way to 2050. This alliance is working closely with the scientific community to convert targets into credible sectoral pathways. I welcome yesterday’s announcement from the Asset Owners Alliance that members will implement greenhouse gas emissions reductions in the 16-29 per cent range by 2025.
Transparency and accountability are essential.
Here, allow me to highlight UNEP’s initiative, the Principles for Responsible Banking. The Principles require third-party review on signatories’ annual reporting, providing credibility. Also, the signatories are establishing a civil society advisory body, which points to openness to receiving important inputs from a stakeholder that holds them to account.
Following these tenets will go a long way to moving the finance industry in the right direction. But we need every cent to be spent on shifting the needle to sustainability. This is not just because Earth’s beleaguered natural systems need the finance industry. It is because the finance industry – and its future profitability – need these natural systems even more.
Thank you.
Executive Director
