We need to reboot the financial system and rethink old structures. This is what the OECD, the World Bank Group and the UN Environment Programme are calling for in their new joint report. Sustainable finance should become mainstream, but the market is still lagging far behind. EURACTIV Germany reports.
“We need sustainable listing criteria for DAX companies,” said Kristina Jeromin, head of the Sustainability Department at Deutsche Börse during a side-event at the Petersberg Climate Dialogue in Berlin, about the 30 major German companies trading on the Frankfurt Stock Exchange.
Since she took over the post three years ago, she has become one of Germany’s leading voices calling for a more sustainable financial sector.
The market for sustainable products has an annual growth rate of more than 8%, but so far it is relatively niche.
The attempt to introduce sustainability criteria for DAX companies will trigger fierce debates in the economy, suspected Jeromin. “But it is essential to make it clear to the mainstream that times are changing,” she said.
Greenwashing was yesterday, today we need real transparency, according to her.
The idea is that investors need to be clear on which long-term strategy a company is pursuing with regard to climate protection. To achieve this at an EU level, for example, the current European directive on non-financial reporting could be widened.
The involvement of investors will become increasingly important in the coming years, as they will have to be more closely involved in the transformation of companies. Shareholders should not stand in the way of new approaches and sustainable innovation but should take responsibility and support the process, according to Jeromin.
“Financing is not only about money but also about responsibility. And companies need to be fully transparent about how the transformation process is going, whether the results are positive or not,” she said.
At EU level, she would like to see a strong network to implement the “Action Plan: Financing Sustainable Growth,” which was presented by the European Commission in March 2018.
But Jeromin observed how activities have been slowing down. “Life goes on, even after the elections. Germany should play a pioneering role in this matter and promote the development of a sustainable financial system,” Jeromin said.
Only 10% of sustainable technologies to be market-ready
According to an OECD estimate, $6.9 trillion will be needed annually until 2030 to reach the climate and development goals. Not even half of that sum is currently being invested.
So how will the transition to a low-emission economy succeed?
Against this background, the OECD, the World Bank Group and the UN Environment Programme (UNEP) are currently working together on an agenda for governments across the globe to align financial flows with global climate and development goals, which is what signatories to the Paris Agreement agreed to.
To achieve this, the three organisations jointly launched the “Financing Climate Futures: Rethinking Infrastructure” initiative.
One of the main demands of the initiative is to strongly promote innovation in the field of green technology. At present, only around 10% of the technologies currently being developed are on their way to being market-ready.
“Above all, we must work to make these technologies affordable,” OECD’s Deputy Secretary-General Masamichi Kono said in his opening speech at the conference.
The most difficult challenge is probably being able to create a fair transition.
Another proposal was made by Costa Rica, which has become something of a flagship for sustainable change in recent years, despite having persistent problems, including extensive corruption.
Costa Rica’s Sustainability and Energy Minister Carlos Manuel Rodríguez considers this to be no less than his country’s recipe for success.
“I have witnessed ministries dealing with sustainability and energy issues often compete with each other, and Energy Ministries seem mainly interested in agricultural and mining issues,” Rodríguez said. There is, therefore, a need to restructure the state machinery so that it focuses more on sustainability.
According to Kono, all states need to develop detailed strategies to ensure decarbonisation is successful.
Other cornerstones of the initiative launched by the OECD, the World Bank and the UN, includes planning a low-emission infrastructure, decoupling the public budget from fossil fuels, re-booting the financial system, including climate risks and opportunities, rethinking development financing for climate protection, and urban planning for resilient and low-emission societies.
[Editing by Zoran Radosavljevic]