Implications of the Covid-19 Pandemic for Global Sustainable Finance

In the context of the COVID-19 pandemic, this paper was developed to support thinking on how to respond to the pandemic from a sustainable finance perspective. Specifically, it has two objectives:

  • The first is to set out what we know about the ways in which the many different components of our sustainable financial system – market actors, policymakers, regulators, and international institutions – are thinking, planning and reacting to the pandemic, with a focus on implications for sustainable finance markets. As such, it is a work in progress, and will be updated and refined over time as new information and new ideas come to our attention.
  • The second objective is to set out a framework for assessing what levers may exist to strengthen the role of the financial system in supporting a low-carbon recovery, and the prospective roles for different communities of actors.

This paper is not intended to be comprehensive across the wide range of sustainability-related implications of the pandemic and is focused on developments within the financial system. For instance, it does not attempt to forecast how macroeconomic trends may impact the trajectory of the low-carbon transition. Rather, this paper is a preparatory effort to inspire thinking by different communities of actors on response strategies over the coming months and help identify where collaboration will be required.

Nudging the Financial System: A Network Analysis Approach

This paper is a first attempt to improve the understanding of the sustainable finance ecosystem, its partnerships, actors and emerging network characteristics related to the implementation of the 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals (SDGs).

Network analyses of these diverse arrays of sustainable finance partnerships are deemed relevant for the alignment and cascading of sustainable finance into the wider financial system. The current sustainable finance network is composed of 115 different “partnerships”,

5,181 constituent members and more than 10,000 connections. Based on network analytics, this paper shows that 74.6% of the network is connected to only one partnership and only 13.3% of the network constituents are connected to three or more other partnerships. This means that a small number of constituents have a high number of connections to the different partnerships and a high number of constituents have a low number of connections.

The analysis also shows that the network is rather small, as the length of the path from any two different network participants is 3.67 on average, any constituent in the network is at less than four degrees of separation from anyone else. This just highlights the role that international organizations with a broad geographic presence such as UNDP or multilateral development banks can play to convene and connect, facilitate and scale up the reach and impact of the current sustainable finance network.

Swiss Sustainable Finance – E-Learning

Capacity building in sustainable finance is one of the key drivers to advance investments in more sustainable products. Therefore, in 2018, the SSF education workgroup, in collaboration with the Edmond de Rothschild Group, created an online education tool on sustainable investments tailored specifically to the needs of finance professionals. As of April 2020, the e-learning tool is available to the broad public.

The e-learning consists of four online modules, which each take approximately two hours to complete. Integrated case studies as well as sustainability profiling of clients offer an interactive learning experience of practical value. The e-learning is available in English, German and French.

Green and Sustainable Finance Cluster Germany – TCFD Think Tank Short Briefs

The Task Force on Climate-related Financial Disclosures (TCFD), led by industry, has drawn up recommendations for voluntary and consistent disclosure of climate-related information. Globally, the TCFD recommendations are now regarded as key guidelines. Numerous companies have committed themselves to their implementation. However, questions remain on their practical implementation.

In its TCFD think tank, the GSFCG seeks to answer those questions in cooperation with Frankfurt School of Finance & Management, PwC Germany, d-fine and right. based on science. Four workshops with selected practitioners from the financial sector helped to develop an in-depth understanding of the implementation of the TCFD recommendations.

The knowledge gained is now available to the interested public, in particular financial institutions, in the form of short briefs. They are tailored to practical needs show that new structures are needed, that a multi-level approach should be pursued and that expertise needs to be built up in specialist fields such as physical effects of the climate crisis.

Luxembourg Finance – Sustainable Finance

In recent years, financial markets have developed instruments that are specifically designed to raise money for sustainable development goals.Luxembourg has been at the forefront of this development, thanks to close cooperation between the public, private, and civil society sectors.The local sustainable finance ecosystem is furthermore stimulated by the presence of the European Investment Bank (EIB), the world’s largest lender, and an expert in public-private investment projects. The Luxembourg financial centre has built up an ecosystem that is uniquely suited to raising international capital for responsible investment.

Guernsey – Reporting Global Developments: Family Offices Financing Sustainability

High-profile protests and campaigns have not managed to significantly mobilise capital from the private wealth and family office sector into green and sustainable finance, according to research from Guernsey Finance.

The sector is increasingly important for attracting investment and although significantly more capital is finding a home in green investments, individuals and family offices appear to be looking for greater confidence in returns and in the green credentials of their investments.

The research, carried out with some 20 family offices and high net worth individuals, with a combined estimated worth of £25 billion, and 50 service providers, in 2019, showed more focus is needed in engagement with investment managers and investors on the aims of green and sustainable finance and the benefits of responsible investing.

Guernsey – Centre of Green and Sustainable Finance: A Jurisdictional Assessment

Using the framework developed by the UN Financial Centres for Sustainability (FC4S) Network, Guernsey Green Finance, Guernsey’s strategic initiative on green finance established by Guernsey Finance, has published a jurisdictional self-assessment of progress towards establishing itself as a leading global centre for green finance.

The report identifies that Guernsey has moved quickly, through the creation of Guernsey Green Finance, and has been able to exploit its connected institutional foundations to rapidly develop green and sustainable finance products and services, while working to promote and raise awareness of the cause among its finance sector community.

Guernsey – Green Private Equity Principles: A Guide to Best Practice for GPs

These principles provide a pragmatic and proportionate guide to best practice. They are structured as a two-pillar framework: firstly process, comprised of governance, culture and transparency; and secondly portfolio, covering risk assessment, assets, taxonomy, measurement, and reporting.

These principles are largely written from the perspective of the GP, primarily with a portfolio of majority owned direct investments, to help influence their investment process and policy as the stakeholder with the greatest degree of control over investments and the day-to-day operations. LPs and other relevant internal stakeholders may also identify with certain action points, and can also implement them into their everyday processes, where possible.

They are clearly voluntary – we have no desire to create more bureaucracy and burden. But they are created on the basis that firms and professionals will use them in good faith to guide and pivot their practices toward the goal of sustainability and fighting climate change.