SOAS Research Online

Abstract

To enable sustainable recoveries from Covid-19 and meet the goals set out in the Paris agreement and in the Agenda 2030 for Sustainable Development, the global financial system needs to be rewired. Finance needs to properly account for sustainability risks and impacts, and it needs to be aligned with internationally agreed sustainability goals. To scale up sustainable finance and align all financial flows with climate and sustainability goals, this policy brief makes ten recommendations for the G7: (1) Intensify efforts to develop, align and implement science-based sustainable finance taxonomies across the G7. (2) Make disclosures of climate-related risks and opportunities mandatory for all publicly quoted companies, large private companies, and supervised financial institutions and introduce a harmonised standard across the G7. (3) Make the publication of net-zero transition plans mandatory for all publicly quoted companies, large private companies, and supervised financial institutions. (4) Introduce and advance mandatory climate stress testing. (5) Adjust prudential frameworks to account for climate-related and other environmental risks. (6) Decarbonise the portfolios and operations of all public financial institutions and central banks. (7) Enhance the role of national development banks (NDBs) and explore options for creating new NDBs to scale up financing for the SDGs. (8) Harness the potential of digital finance to scale up sustainable finance and investment and strengthen citizen-centric finance. (9) Promote the issuance of sustainability-linked and just transition bonds. (10) Scale-up sustainable and climate finance for developing countries.