2022年G20可持续金融报告（英文版）---二十国集团VIP专享VIP免费

下载本文档

阅读 437
格式 pdf
大小 2.52 MB
约123页
2023-04-18
收藏
点赞(0)
海报
举报

2 0 2 2 G 2 0 S U S T A I N A B L E

F I N A N C E R E P O R T

Sustainable Finance

Working Group

G 2 0 S U S T A I N A B L E

F I N A N C E

W O R K I N G G R O U P

2 0 2 2 G 2 0 S U S T A I N A B L E

F I N A N C E R E P O R T

2 0 2 2 G 2 0 S U S T A I N A B L E

F I N A N C E R E P O R T

Sustainable Finance

Working Group

TABLE OF CONTENT

Executive Summary ---------------------------------------------------------------------- 4

Developing a Framework for Transition Finance......................................... 4

Improving the Credibility of Private Sector Financial Institution

Commitments .............................................................................................. 9

Scaling up Sustainable Finance Instruments with a Focus on Improving

Accessibility and Affordability ................................................................... 15

Reporting on progress on the G20 Sustainable Finance Roadmap & 2021

recommendations ...................................................................................... 23

Discussing policy levers that incentivize financing and investment to

support the transition ................................................................................ 25

Chapter I - Developing a Framework for Transition Finance ------------------ 26

Pillar 1. Identification of Transitional Activities and Investments ............. 28

Pillar 2. Reporting of Information on Transition Activities and Investments

Pillar 3. Transition-Related Financial Instruments ..................................... 33

Pillar 4. Designing Policy Measures ........................................................... 34

Pillar 5. Assessing and Mitigating Negative Social and Economic Impact of

Transition activities and Investments ........................................................ 37

Chapter II - Improving the Credibility of Private Sector Financial Institution

Commitments --------------------------------------------------------------------------- 41

1. Background ............................................................................................ 41

2. Review of market practices on climate commitments .......................... 43

3. Capacity constraints and challenges ...................................................... 45

4. Recommendations to enhance commitment credibility ....................... 47

5. Recommendations to progressively enhance accountability of financial

institutions that have made voluntary commitments ............................... 50

2 0 2 2 G 2 0 S U S T A I N A B L E

F I N A N C E R E P O R T

Sustainable Finance

Working Group

Chapter III - Scaling up Sustainable Finance Instruments with a Focus on

Improving Accessibility and Affordability ----------------------------------------- 54

1. Background ............................................................................................ 54

2. Barriers and Challenges ......................................................................... 55

3. Emerging options for enhancing affordability and accessibility of

sustainable finance .................................................................................... 57

4. Recommendations ................................................................................. 63

Chapter IV – Reporting on progress on the G20 Sustainable Finance

Roadmap --------------------------------------------------------------------------------- 68

Section 1: Reporting Progress on the SFWG’s 2021 Priority Areas ........... 69

Section 2: Reporting Progress on the SFWG G20 Roadmap...................... 72

Annex for Chapter I -------------------------------------------------------------------- 85

Annex for Chapter II ------------------------------------------------------------------ 104

Annex for Chapter III ----------------------------------------------------------------- 106

Annex: Discussing policy levers that incentivize financing and investment

that support the transition ---------------------------------------------------------- 121

/123

下载本文档

文本预览下载提示常见问题

12022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupG20SUSTAINABLEFINANCEWORKINGGROUP2022G20SUSTAINABLEFINANCEREPORT22022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupTABLEOFCONTENTExecutiveSummary----------------------------------------------------------------------4DevelopingaFrameworkforTransitionFinance.........................................4ImprovingtheCredibilityofPrivateSectorFinancialInstitutionCommitments..............................................................................................9ScalingupSustainableFinanceInstrumentswithaFocusonImprovingAccessibilityandAffordability...................................................................15ReportingonprogressontheG20SustainableFinanceRoadmap&2021recommendations......................................................................................23Discussingpolicyleversthatincentivizefinancingandinvestmenttosupportthetransition................................................................................25ChapterI-DevelopingaFrameworkforTransitionFinance------------------26Pillar1.IdentificationofTransitionalActivitiesandInvestments.............28Pillar2.ReportingofInformationonTransitionActivitiesandInvestments31Pillar3.Transition-RelatedFinancialInstruments.....................................33Pillar4.DesigningPolicyMeasures...........................................................34Pillar5.AssessingandMitigatingNegativeSocialandEconomicImpactofTransitionactivitiesandInvestments........................................................37ChapterII-ImprovingtheCredibilityofPrivateSectorFinancialInstitutionCommitments---------------------------------------------------------------------------411.Background............................................................................................412.Reviewofmarketpracticesonclimatecommitments..........................433.Capacityconstraintsandchallenges......................................................454.Recommendationstoenhancecommitmentcredibility.......................475.Recommendationstoprogressivelyenhanceaccountabilityoffinancialinstitutionsthathavemadevoluntarycommitments...............................5032022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupChapterIII-ScalingupSustainableFinanceInstrumentswithaFocusonImprovingAccessibilityandAffordability-----------------------------------------541.Background............................................................................................542.BarriersandChallenges.........................................................................553.Emergingoptionsforenhancingaffordabilityandaccessibilityofsustainablefinance....................................................................................574.Recommendations.................................................................................63ChapterIV–ReportingonprogressontheG20SustainableFinanceRoadmap---------------------------------------------------------------------------------68Section1:ReportingProgressontheSFWG’s2021PriorityAreas...........69Section2:ReportingProgressontheSFWGG20Roadmap......................72AnnexforChapterI--------------------------------------------------------------------85AnnexforChapterII------------------------------------------------------------------104AnnexforChapterIII-----------------------------------------------------------------106Annex:Discussingpolicyleversthatincentivizefinancingandinvestmentthatsupportthetransition----------------------------------------------------------12142022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupExecutiveSummaryThisreportsummarizestheworkoftheSustainableFinanceWorkingGroup(SFWG)in2022.SFWGworkhasbeenanchoredintheG20SustainableFinanceRoadmap(the“Roadmap”)actions,endorsedasvoluntarybyG20Leadersatthe2021RomeSummit,andrecognizedearlierthisyearbytheG20FMCBGsascriticaltotheachievementofthe2030AgendaforSustainableDevelopmentinlinewiththeUNFCCCandtheParisAgreement.Specifically,thereport:•tracksprogressontherecommendedactionsintheRoadmap;•describestheoutcomeofSFWGactivitiesacrossthreeworkstreams–DevelopingaFrameworkforTransitionFinance,ImprovingtheCredibilityofPrivateSectorFinancialInstitutionCommitments;ScalingupSustainableFinanceInstruments–whichincludeshigh-levelprinciplesandvoluntaryrecommendations;•reportskeytakeawaysfromtheforumoninternationalpolicyleversforsustainableinvestmentheldinJune20221DevelopingaFrameworkforTransitionFinanceDespitetherapidgrowththegreenandsustainablefinancemarketsinthepastyears,effortstosupportclimate-alignedfinancinghavemostlyfocusedon“puregreen”andnear“puregreen”activities,whilesupporttothebroaderrangeofinvestmentsneededforthewhole-of-economyclimatetransition,includingtransitionactivitiesandinvestmentsundertakenbyGHG-intensivesectorsandfirms,hasbeenlimited,withsomesectorsfindingitincreasinglydifficulttoaccessbankloansandcapitalmarkets.Aneffectiveframeworkfortransitionfinancecansupportthiswhole-of-economytransition,andcanimprovetheabilityofsectorsorfirmstogainaccesstofinancingtosupporttheirtransitiontonet-zeroemissions.This,inturncouldhelpthemmitigatethepotentialnegativeeffectsofadisorderlytransition,suchasclimate-relatedtransitionrisks,restrictedaccesstoaffordableand1https://g20sfwg.org/wp-content/uploads/2022/07/Presidency-Summary-%E2%80%93-Forum-on-International-Policy-Levers-for-Sustainable-Investment-%E2%80%93-13-June-2022.pdf52022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupreliableenergy,unemployment,andpotentialbroadersocialimpacts.Aneffectiveframeworkcanalsoreducetherisksfrom“greenandSDGwashing”.Transitionfinance,asdiscussedinthisreport,referstofinancialservicessupportingthewhole-of-economytransition,inthecontextoftheSustainableDevelopmentGoals(SDGs),towardslowerandnet-zeroemissionsandclimateresilience,inawayalignedwiththegoalsoftheParisAgreement.Againstthisbackground,theSFWGhasdevelopedasetofhigh-levelprinciplesontransitionfinance.Thisincludesspecificprinciplesonthetransitionfinanceframeworkaroundthefivepillarsbelow,whichareinterrelated.1.IdentificationoftransitionalactivitiesandinvestmentsPrinciple1Putinplaceeitherataxonomyorasetofprinciples,orotherapproachtoguideFIsandrealeconomyfirmstoidentifyandunderstandwhatatransitionactivityorinvestmentopportunityisandreducetheidentificationbarriers,costsandtransition-washingrisk,especiallywithrespecttothepotentialoflong-termGHGintensivelock-in.Principle2Helpensurethatidentificationoftransitionactivitiesorinvestmentopportunitiesarebasedontransparent,credible,comparable,accountable,andtimeboundclimateobjectives,asappropriate,suchasthoseforclimateresilienceand/orGHGreduction(e.g.,carbonintensity,energyefficiency),andinlinewiththegoalsoftheParisAgreement.Principle3Beapplicabletopotentialusecasesattheproject,entity,industryandaggregate(e.g.,portfolio,fundsandindices)levels.Principle4Includeclearrecommendationsaroundverifiabilityoftransitionactivitiesorinvestments(e.g.,byprovidingguidancefortransparency,benchmarking,orindependent62022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupverification),includingtheiralignmentwithGHGpathwaysconsistentwiththegoalsoftheParisAgreement.Principle5Bedynamicreflectingandsupportingevolvingscientific,marketandtechnologicaldevelopments,policyenvironment,abatementcostcurves,aswellasdevelopmentalneedsandpriorities.Principle6Considerandincludemeasurestofacilitateanorderly,justandaffordabletransition,whileavoidingormitigatingpossiblenegativeimpactsonemploymentandaffectedhouseholds,communities,andotherSDGs(includingenvironmentprotectionandbiodiversity),orriskstoenergysecurityandpricestability.Principle7Facilitatecross-borderuses,asapplicable,byensuringcomparabilityandinteroperabilityofalignmentapproachesacrossjurisdictionsconsideringtheG20high-levelprinciplesfordevelopingalignmentapproachesoftheG20SustainableFinanceRoadmap(action1).2.ReportingofinformationontransitionactivitiesandinvestmentsPrinciple8Discloseup-to-datetransitionplans,withcredibleandideallyverifiable,comparable,science-basedinterimandlong-termgoals,andtimelinesforachievement(forexample,technicalpathways,fundraisingandinvestmentplansetc.).Principle9Reportonprogressatregularandappropriatelyspacedtimeintervals,includingoverallmitigationandadaptationobjectives,suchasnet-zeroandinterimtargetsthataresupportedbyup-to-dateandscientificmethodologies,consistentwiththegoalsoftheParisAgreement.Principle10DiscloseclimatedataincludingScope1andScope2GHGemissionsdata,andmaterialScope3dataasitbecomespossible.ThedisclosureofScope3emissionsdatacan72022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupprogressusingaphasedapproach,asitbecomespossible,reflectingprogressondataavailabilityandcapacity.Firmsshouldreportonrelevantapproachesandpoliciesfordisclosure,suchastheinternalcarbonpriceused,andthecharacteristicsofcarboncreditsorcarbonoffsetsusedtomeetthetransitiontargets.Principle11Disclosecorporategovernancearrangementsthatensuresuchtransitionactivitiesorplanswillbeimplementedproperly,includingwithrespecttoriskmanagementsystemsandduediligenceprocesses.Principle12Disclosemethodologiesusedtomeasuretransitionprogressandachievements,including,butnotlimitedto,themetricsandmethodsusedtoassessprogressonclimateobjectives,suchasemissionsreductions,removals,recyclingandreuse,and/oranybenchmarksusedtherein(e.g.,carbonintensity)andtheextenttowhichsuchmethodologiesalignwithinternationallyrecognizedscenarios.Principle13Disclosetheuseofproceedsraisedfromtransitionfinanceinstruments(foruseofproceedsinstruments)ortheperformanceofKPIs/SPTsthatarematerialtothefundraisers’businesses(forgeneralcorporatepurposeinstrumentssuchassustainability-linkedloansorbonds).3.Transition-relatedfinanceinstrumentsPrinciple14thefundraisershouldpresentadetailedandtransparent,science-basedtransitionplanthatisalignedwiththegoalsoftheParisAgreementandconsistentwithacrediblealignmentapproach(ataxonomy-basedapproach,aprinciples-basedapproach,otheralignmentapproachoracombinationofthem)toinformmarketparticipantsontheambitionandfocusoftheirtransitionefforts.82022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupPrinciple15thefundraisershouldadheretothetransition-relateddisclosureguidanceorrequirements,asoutlinedintheprevioussectionandtoallotherapplicablerequirementsintheirjurisdiction(s),tohelpensurethetransparencyofthetransitionactivities,targets,metricsandKPIs,aswellasimplementationofanysafeguardandcorrectionmeasures,asappropriate.Principle16transitionfinanceinstrumentscouldincorporatebuilt-inincentives/penalties,ofsufficientmagnitude,toencouragestrongperformanceagainstGHGemissionreductiontargetsandotherclimate-orsustainability-relatedperformancetargets(SPTs).4.DesigningpolicymeasuresPrinciple17Policymakerscoulddesignappropriatepolicies,incentivesandregulatoryenvironmentsandworktoensuretheyareeffectiveinimprovingthebankabilityoftransitionactivitiesandcrowdinginmoreprivatesectorinvestment,takingintoaccountnationalcircumstancesandinthecontextofsustainabledevelopmentandeffortstoeradicatepoverty.Authoritiesshouldalsoconsiderprovidingforwardguidanceontheimplementationofsuchpoliciestoprovideregulatorycertaintytoinvestors.Principle18IOsandMDBscouldplayakeyroleinprovidingtechnicalassistanceandlong-termfinancingtocountries,especiallydevelopingcountries,indesigningandimplementingsuitablepolicymeasurestosupporttransitionprojects.Principle19Internationalcooperationshouldbepromotedtoensuretransparencyandunderstandingacrossapproaches,aswellastoexchangegoodpracticesandexpertise.92022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroup5.AssessingandmitigatingnegativesocialandeconomicimpactsPrinciple20Encouragefundraiserstoassessandmitigatepotentialimpactsoftheirtransitionplansorotherstrategies.Insettingeligibilitycriteriaandreportingframeworkfortransitionactivities,authoritiesorFIs,whereconsistentwithdomesticmandatesandlocallawsandregulations,shouldencouragethefundraiser(thecompany)toassessthepotentialsocioeconomicalimplicationsofitstransitionplan,tobetransparentabouttheseimplicationsandmeasurestakentomitigatenegativeimpactsorhighlightpotentialnetpositiveimpacts.Principle21Developdemonstrationcasesofjusttransition.AppropriateIOs,includingtheILO,OECD,UNDPandMDBs,shouldworkwiththeprivatesectorindevelopingmoreconcretetransitionfinancecasesthatexplicitlyincorporate“just”elementsoftransition,includingriskandimpactmeasurementandreporting,andKPIdesign,andupdatetheSFWGinfuturemeetings.Principle22Strengthenthedialogueandcooperationbetweengovernmentalagencies,employersandworkers’representatives,marketsregulators,academia,civilsocietyandprivatesectorstakeholderstodefineacomprehensivestrategytomitigatenegativeeconomicandsocialimplications.ImprovingtheCredibilityofPrivateSectorFinancialInstitutionCommitmentsFinancialinstitutionshaveanimportantcomplementaryroletoplayinacceleratingthewhole-of-economyclimatetransitionthroughtheirfunctionofcapitalallocation,clientadvisoryservicesandmarketinfrastructureservices.Therehasbeenagrowingnumberofvoluntarynet-zeroor102022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupsustainabilitycommitmentsbyfinancialinstitutions,althoughmanyfinancialinstitutionsindevelopingcountriesstillneedtobuildcapacitybeforetakingfurthercommitments.TheSFWGhasbegunworktostrengthenthetransparencyandcredibilityofthesevoluntarycommitmentsbyfinancialinstitutions,byidentifyingrecommendedelementsofacrediblenet-zerocommitment,andvoluntaryactionsthatfinancialinstitutions,internationalorganizations,andjurisdictionscantaketosupportthesecommitments,asconsistentwithexistinglegalframeworks.TheSFWG’sworkisanimportantstepforwardtoenhancecomparabilityacrossinstitutions’commitments,toprovideclarityonrecommendedelementsofacrediblenet-zerocommitments,andtoadvanceeffortsthatwillsupportcrediblevoluntarynet-zerocommitments.TheSFWGrecognizesthatvoluntarycommitmentshavebeenmademostlybyFIsindevelopedcountries,andthatthatemergingmarketsanddevelopingeconomies(EMDEs)mayrequireadditionaltechnicalassistancetofurtherdevelopthecapabilitiestoidentify,setandtracknet-zeroandothersustainabilitycommitmentsfromfinancialinstitutions.TheSFWGmakesthefollowingvoluntaryrecommendationstograduallyenhanceaccountabilityofthesecommitments.RecommendationstoEnhanceCommitmentCredibilityRecommendationsforprivatesectorfinancialinstitutionsRecommendation1Applycommitments,wherepossible,toalloperations,financing,products,services,andbusinesslines,andbein-linewithholdingtheincreaseintheglobalaveragetemperaturetowellbelow2degreesCelsiusabovepre-industriallevels,andpursuingeffortstolimitthetemperatureincreaseto1.5degreesCelsiusabovepre-industriallevels.Wherepossible,FIsshouldconsiderintegratingvoluntarynet-zerocommitmentsintotheirbusinessstrategy,engagement,policies,corporategovernance,riskmanagement,skills,andculture.Institutionsshouldestablish,discloseand112022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupapplyrelevantstrategies,policiesandconditions,includingpoliciestodisclose,transitionandphaseoutfinancingofunabatedGHG-intensiveactivities/assets,orpoliciesontheuseofcarboncredits.Institutionscanworkwithappropriateactorstofacilitateanorderly,just,andaffordabletransitionFIsthathavemadevoluntarynet-zerocommitmentsshouldalsoidentifyactualorpotentialadverseimpactsoftransitionandsetpoliciestopreventandmitigatesuchimpacts.FIsshallalsocoverscope1and2emissions,and,wheredatapermits,materialscope3.Recommendation2Engagewithclientstoalignpracticeswithappropriatesectoralpathwaysandengagewithclientandportfoliocompaniestoencourageand,iffeasible,enablethemtomakevoluntarynet-zerocommitmentsandimplementthem.Recommendation3Accompanyend-datetargetstoachievenet-zerowithscience-based,time-boundinterimtargets,benchmarkedagainstcredibletools,pathwaysandframeworks,thatdemonstrateafeasiblepathtowardsnet-zero.Institutionsshouldconsiderincluding,(1)athoroughbaselineanalysisofcurrentportfolioemissions,ideallyperformedatthetimethecommitmentismade(withintwoyearsofmakinganet-zerocommitment)and(2)adoptanemissionstargettobeachievedwithinacertaintimeframe–e.g.,amid-termfive-yeartarget.Commitmentsandtargetsshouldalsobescience-basedandideallyverifiedbyathirdparty.Recommendation4Useindependentthird-partyverification/assurance(e.g.,byauditors,consultancies,NGOsorassurancecompanies),keepinginmindthedomesticcircumstances.Third-partyverificationbodies122022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupshouldbetransparentinthemethodologytheyusetoverifyinformationintransitionplans.Recommendationsforrelevantauthorities,internationalorganizationsandnetworksRecommendation5Relevantauthoritiesandregulatorsinindividualjurisdictions,andinaccordancewithcountrycapacity,theirownnet-zerocommitments,anddomesticlaws,couldconsiderencouragingvoluntaryFInet-zerocommitments,articulatinghowtheywillsupportand/orengagewithvoluntaryFInet-zerocommitmentsandcorporatenet-zerotransitionplansinamannerconsistentwiththeirmandatesandobjectives,inadditiontodomesticsustainabilityreportingrequirements.RelevantauthoritiescanhelptherealeconomytransitionbyprovidingclarityonhowtheyplantoachievethegoalsoftheParisAgreement,aswellasmeetingtheirNationallyDeterminedContributions.Thiscouldincludeimplementingmitigationpoliciescoherentwithclimategoalsandestablishingpolicyframeworksthataddressexistingmarketfailuresandenableprivatesectorfinancialflows.Recommendation6Relevantinternationalorganizations,MDBs,initiativesandnetworksshouldcoordinatetheireffortstosupportambitiousvoluntaryfinancialsectorcommitments,includingbyprovidingcapacity-buildingservices;supportingeffortstoimprovecomparability,transparency,andbroad-basedaccesstotools,technologiesandmethodologies(alsosuitablefordevelopingcountries);andofferingplatformsforknowledgeanddatasharing.Internationalnetworks,NGOsandthinktanksspecializedincarbonaccounting,science-basedtargetsetting,andscenario132022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupdevelopmentshoulddevoteresourcestofacilitateuptakeanduseoftools.MDBsandotherIOscouldpromoteknowledgesharingandtechnicalassistanceprogramstocountriesthatrequestthem.RecommendationstoprogressivelyEnhanceCommitmentAccountabilityoffinancialinstitutionsthathavemadevoluntarycommitmentsRecommendation7Providepubliclyavailable,consistentandcomparableinformationonmetrics,scenarios,methods,andbenchmarksusedtosettargets.FIsthathavecommittedtoanet-zerotargetshouldmonitoranddiscloseaconsistent,comparable,andreasonablerangeofmetricsinaconsistentandcomparablewaytoassessprogressinimplementingnet-zerostrategyandpriorities(e.g.,targetsforGHGemissionsorintensityreductions;supportandscalingofclimatesolutionsandsustainablefinance;transparencyonengagementstrategies;portfolioalignmentmetricssuchasimpliedtemperaturerise,internalimplementation,andwhererelevant,retirementofGHG-intensiveassets).Informationshouldbeinterpretableandsupportedbyup-to-datescience,withtransparencyonthemethodologyusedandconsistentwithdataavailabilityovertime.Recommendation8Reportannuallyoninstitutionalprogressandprovideinformationonanygapsorchallengestomeetingtargets.Institutionsthathavevoluntarilycommittedtoanet-zerotargetshouldestablishefficientprocessesforinternalmonitoringandforexternalreportingonprogressandanypossiblecorrections.FIsthathavevoluntarilycommittedto142022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupanet-zerotargetshouldalsocommittorevisitingand,ifappropriate,revisinginterimtargetsandpathwaysbasedonevolvingmarketdynamics,technologicaldevelopments,currentpolicyenvironment,andshiftingabatementcostcurves.TheseFIsshouldprovidepubliclyavailableinformationthatclearlyexplainsanyadjustmentstointerimtargetsandpathways.TheseFIsareencouragedtoshareimplementationexperiencesandlessonslearned,toencourageclear-eyedassessmentofprogressagainsttargets.FIscansupporteffortstotrackprogressbyengagingwithrelevantinitiativesandprovidingtransparent,credible,andcomparableinformationattheFIlevel.Recommendation9Worktogethertoencourageaccountability,sharelessonslearnt,andaddresscommonchallenges,includingthroughjointinitiativesofFIsthathavemadenetzerocommitments.FIsthathavevoluntarilycommittedtoanet-zerotargetshouldlearnfromoneanotherthroughdiscussionandsharedetailoftools,data,andmethodologiesused,asappropriate,toenhancecomparabilityacrossFIsandsuitabilitytolocalcontextsandconsiderations,andtoenableandacceleratedeliveryonnet-zerocommitments.Theseinitiativesshouldsupportcomparability,whichwilladvanceeffortstotrackprogressintheaggregateanddrivefurthermomentumandaccountability.Recommendation10Governmentsandinternationalorganizationsandnetworkscould,asappropriateandapplicable,considermeasurestoenhancetheaccountabilityandcomparabilityoffinancialsectornet-zerocommitmentsinamannerconsistentwiththeir152022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupmandatesandobjectivesaswellaslocallawsandregulations,recognizingthevoluntarynatureofsuchcommitments.Nationalauthoritiesandregulatorscouldconsider,withintheirmandates,someformofprogressmonitoringonregulatedFIs,encouragetheuseofcomparableparameterstoreportonandmonitor,supportdomesticorcross-borderdataplatformstoservebothregulatorsandfinancialmarketparticipants.Internationalorganizationsandnetworkscouldcontinuetoworktowardsmorecomparabletechnicalapproaches,methodologies,andmetricsfornet-zerotarget-setting,progresstracking(includinginaggregate)andimplementationthatconsiderinternational/regionalregulatorydevelopmentsandnationalcontexts.Jurisdictions,internationalorganizationsand/ornetworksengagedineffortstotrackprogressoffirmswhohavevoluntarilycommittedtonet-zeroareencouragedtoprovideprogressupdatetotheG20SustainableFinanceWorkingGroup.ScalingupSustainableFinanceInstrumentswithaFocusonImprovingAccessibilityandAffordabilityAchievingthegoalsoftheParisAgreementandthe2030Agendawillrequireunprecedentedmobilizationofcapital2andglobalcollaborativeeffortstoscaleupsustainablefinancemarkets,includingbyimprovingaccessibilityandaffordabilityofsustainablefinance,especiallyfordevelopingeconomiesandSmallandMediumEnterprises(SMEs).TheSFWGhasdevelopedasetofvoluntaryrecommendationstargetedatMultilateralDevelopmentBanks2OECD(2020),GlobalOutlookonFinancingforSustainableDevelopment2021:ANewWaytoInvestforPeopleandPlanet,OECDPublishing,Paris,https://doi.org/10.1787/e3c30a9a-en162022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroup(MDBs),InternationalOrganizations(IOs),financialinstitutions,andcountryauthorities,tohelpacceleratethegrowthofsustainablefinanceinstruments,especiallyfordevelopingeconomiesandSMEs,inthecontextofnationaldevelopmentobjectivesandpriorities.I.RecommendationsforMDBs,technicalassistanceproviders,andotherinternationalorganizationsRecommendation11Devotemoreresourcesandexpertisetode-riskfinanceoperationsforsustainableactivitiesindevelopingcountries.MDBsshoulddevotemoreresources,withintheirmandateandcapitalconstraints,tosupportblendedfinanceoperationsandtechnicalassistanceprogramstohelpclientspreparebankableandsustainableprojectsandprogramsfordevelopingcountries.Theyshouldalsoencouragestafftoworkonblendedfinanceprojectsandprogramsthroughtheirinternalincentivestructureandmobilizeresourcesacrosstheorganizationthroughtheuseofbothconcessionalandnon-concessionalfinance.Itwouldbedesirabletodevelopacompletesolutionforblendedfinance,fromidentificationandpreparationofbankableprojectstoblendedfinancialclosure,takingintoaccounttheG20DWGworkonPrinciplestoscaleupBlendedFinance.MDBsandDFIsshouldcollaboratefurthertobuildrelevantknowledgeandunderstandingwithrespecttomarketstructure,regulations,institutionsandthelocalpoliticaleconomydynamicswithindevelopingcountries.Smartandinnovativeblendingoperationsshouldalsoavoidcrowdingoutprivatecapital.Furthermore,theuseofclimate-relatedrisk172022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupinsurancehaspotentialtoincreasethesupplyofblendedfinancingmechanisms(seeBox3.2).Recommendation12Enhanceandexpandcapacity-buildingservices,includingviatrainingofofficials,regulatorsandfinancialsectorprofessionals,tosupportthedesignofsustainablefinancepoliciesandroadmapsindevelopingcountries,andenhancecapacitiesoflocalFIs.MDB,technicalassistanceproviders,andinternationalorganizationscanfocusoncapacitybuildingprogramsthataddressthedevelopmentofsustainabilityalignmentapproaches,sustainablefinancepoliciesandregulation(incl.disclosurerequirements),verificationservices,ESGratingmethodologies,policyincentives,greenfinanceproductdevelopment,andapplicationoffintechtoolstosustainablefinance.Theformsofcapacitybuildingcanincludetrainingactivitiesaswellastailoredtechnicalassistanceprograms.Thisshouldalsoincludesupporttolocalbanksandinsurancecompaniesthathaveinplaceorwanttodevelopsustainablefinancestrategiesandcrediblenet-zerotransitionplans.Recommendation13Explorealternativesustainablefinancemechanisms,suchasbyservingascorner-stoneinvestorsforsustainableortransitionprojectsororganizingdemonstrationprojectsindevelopingcountriestosupportthegenerationofaninvestibleSDG-orParis-alignedpipeline.MDBsandotherIFIscanhelplaunchdemonstrationprojectsinvestingintypicalsustainableandtransitionactivitiesindevelopingcountrieswithaclearpurposeoflearningaboutwaystoreducepolitical,business,andoperationalriskswhenimplementingsimilarprojects.Theselearningsshouldhelpimprovefundingaccessand182022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupreducefundingcostsofsimilarprojects.MDBparticipationcouldincludeactingasprovidersoffundsoroftechnicalassistanceforprojectdesignandoperations.Recommendation14Promoteinternationalcollaborationtoimprovethecomparabilityandinteroperabilityofsustainableinvestmentalignmentapproachesasappropriateandapplicable,onvoluntarybasis,inordertofacilitatecross-bordersustainableinvestmentflows.CooperationbetweenMDBsbilateraldevelopmentfinanceinstitutions,technicalassistanceproviders,countryauthoritiesandinternationalorganizationstodevelopinternationallycomparableindicatorsortoolsmayfacilitatecross-borderandcross-marketsustainablecapitalflows.Thiscouldbeachievedthroughthecomparisonofalignmentapproaches,suchastaxonomiesandstandards,andtheidentificationofareasofcommonalityanddifferences(e.g.,CommonGroundTaxonomybytheInternationalPlatformonSustainableFinance).MDBscouldpromoteregionalcollaborationonalignmentapproachestofacilitatethedevelopmentofregionalsustainablefinancemarkets.II.RecommendationsforcountryauthoritiesanddomesticFIsRecommendation15Developapproachestoaligninvestmentwithsustainabilitygoals.Aligningonhowmarketparticipantsshouldidentifysustainableandtransitionalactivitiesisfoundationaltothedevelopmentofawell-functioningsustainablefinancemarket,asithelpstoprotectmarketintegrityandprovidesthebasisfordevelopingproductsandallocatingpolicyincentives.192022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupGovernmentsandregulatorscouldusetheirconveningpowertodevelop,adopt,orencouragesystemstoaligninvestmentwiththeSDGsandtheParisAgreement,including,butnotlimitedto,principle-ortaxonomy-basedidentificationschemesandguidanceonlabellingofsustainablefinancialproducts.Jurisdictionsarealsoencouragedtocoordinateandlearnfromoneanothertoadoptbestpracticesandpromoteinteroperabilityamongapproaches.Recommendation16HelptheISSBtobettersupportdevelopingcountriesandSMEs.Therefore,allcountriesandrelevantnationalcorporatereportingstandardsettersbasedontheirspecificdomesticcircumstances,shouldactivelyparticipateintheISSB’sworkandbeinnovativeindevelopingbestpracticestolowerthecostofdisclosingandaccessingsustainabilitydata.Forexample,nationalorlocalgovernmentscouldconsiderdeveloping,orencouragetheprivatesectortodevelop,sustainabilitydataplatformstoservefinancialmarketparticipants.Recommendation17Developthenecessaryinfrastructurefordomesticsustainableloanandbondmarkets.Experiencesfromjurisdictionswithmoredevelopedsustainablefinancemarketssuggestthatgreenloanandgreenbondmarketscanbescaledupquicklywhenjurisdictionsareequippedwiththebasicmarketinfrastructureforbankingservicesandbondmarkets.Indevelopingthesemarkets,governmentsandregulatorsshouldhaveaclearstrategytowardstheidentificationandlabellingofgreenloansandbonds,themethodologiesforvalidatingtheenvironmentalbenefitsofunderlyingactivities,andnecessarysustainabilitydisclosurerequirementsor202022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupstandards.Forinstance,thebenefitsofthestandardizationoftargetsandkeyperformanceindicatorswithinasectorfortransitioninstrumentssuchassustainability-linkedbondscouldbepursued.Governmentscouldalsoleadbyexamplebyissuingsovereignsustainablefinancialinstrumentswhich,throughademonstrationeffect,canhavepositivespilloversonthemethodologiesandstandardsofverificationanddisclosureforcorporatesustainableissuance.Recommendation18Introducepolicyincentivestoscale-upsustainablefinanceinstruments.Manypolicyincentivescouldbeconsideredbycountryauthoritiestoencourageparticipationofprivatecapitalinsustainableinvestment.Thiscouldincludegovernmentsubsidiesforgreenloanandgreenbondverification,correctingmarketsignalsthroughenvironmentally-relatedtaxesandotherprice-basedinstruments,interestsubsidiesforgreenprojects,fiscalincentivesforgreenbondsandcentralbankactions–withintheirmandates-thatcouldincreasethedemandforsustainablefinancialassets.Otherpolicies,suchasemissionstradingschemesorotherpricingmechanismsandregulatoryaction,canhelpcreateanenablingenvironmenttoboostthedemandforandreducethecostsofsustainableproducts,services,andtechnologies.Jurisdictionscanselectanoptimalmixofthesepolicyincentivesbasedontheirlocalcircumstances.Recommendation19Deploydigitaltechnologiestoreducethecostsofsustainablefinanceoperations.Digitaltechnologieshavethepotentialtoincreasetheefficiencyandreducethecostsofsustainablefinanceoperations.MDBs,technicalassistanceproviders,andrelevant212022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupinternationalorganizationsandnetworksshoulddevotemoreresourcesinassistingandprovidingcapacitybuildingfordevelopingcountriestoadoptanddeploysuchtechnologies.Examplesofusecasesofdigitaltechnologiesincludeidentificationandlabellingofsustainableactivitiesandassets,trackinganddisclosureofgranularESGinformation,tradingandmanagementofsustainableassets.Recommendation20DevelopsustainablefinancialproductssuitableforusebySMEs,andincentivizetheiruptake,suchasinthecaseofSSCF.SMEsoftenlackaccesstosustainablefinancecapitalmarketinstrumentsduetohighcostsforthemtoaccesscapitalmarketsandlackofsustainabilityratingoraccreditation.AdoptingSSCFinaphasedmannerwhileconsideringcountrycircumstances,forexample,isonewaytohelpsolvebothissues.GovernmentsshouldencourageorprovideincentivestofirmstoadoptSSCFandotherinnovativesustainablefinanceproductsandservicesforSMEs.MDBscouldsupportthiseffortbyofferingtechnicalassistancetodevelopingcountries.Recommendation21SupportSMEsandlocalFIstodeveloptheirawarenessandcapacityinaddressingclimatechangetoreducetheirimpact.SMEsoftenhavemorelimitedinformationandcapacitytotackleclimatechange.LargerlocalFIs’connectionwithwide-rangingSMEscouldbeanimportantchanneltoovercomethisissue,astheycouldprovidevaluableadvicebasedonrichinformationonSMEs’businessstrategiesandchallengestheyface.Thisshouldincludeworktosupportlocalbanks,pensionandsovereignwealthfunds,andinsurancecompaniestodevelopandimplementsustainablefinance222022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupstrategiesandcrediblenet-zerotransitionplans.Thischannelisparticularlyimportantforjurisdictionswithabank-centricfinancialsystem,includingdevelopingcountries,wheregreeningsupplychainscanhaveasignificantimpactinachievingthecountry’sclimatechangecommitments.232022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupReportingonprogressontheG20SustainableFinanceRoadmap&2021recommendationsDespitethestrongfinancialandeconomicheadwindsarisingfrommultiplecrises(theeffectsofwhichontheglobaleconomyandsustainablefinancewerebroadlyaddressedintheJulyFMCBGChair’sSummaryandwillbeagainintheupcomingOctoberstatement),G20members,IOs,MDBs,marketparticipants,andothernetworksandinitiativesremaincommittedtoadvanceglobalsustainablefinancemarkets.Inrelationtothisyear’swork,thefirstG20FMCBGCommuniquéstatesthatthe2022G20SustainableFinanceReportwillreportandassessonprogressinaddressingprioritiesintheG20SustainableFinanceRoadmap.Sincethen,G20members,IOs,MDBs,networks,otherinitiativesandG20workinggroupshavereportedtotheSFWGonprogressmadetowardsthe5FocusAreas3andthe19recommendedActionsoftheRoadmap.Themostmarkedprogresswasinareasrelatedtothedevelopmentandadoptionofstandards,taxonomies,net-zerocommitments,andotheralignmentapproachesforidentifyingsustainableactivitiesandrelevantinvestments,andprinciplesandframeworksfordisclosureofsustainabilityinformationforassessingsustainability-relatedrisks,opportunities,andimpacts,aswellasnet-zerocommitmentsmadebycorporatesandfinancialinstitutions.Whilesomeprogresswasmadetobuildcapacityonsustainablefinanceissues-especiallyforemergingmarketsanddevelopingcountries,toraiseMDBs’ambitiononclimateactionandbroadlymobilizeprivatefinance,andtoadvancedigitalsolutionssupportingthemobilizationandtrackingofsustainableinvestment-theSFWGnotestheneedtoaccelerateeffortstoaddressthesepriorityactionsidentifiedintheRoadmap.AtSFWGmeetings,somemembersnotedthatadditionalworkonothersustainabilityrelated3TheRoadmapcounts5Focusareas:(1)Marketdevelopmentandapproachestoaligninvestmentstosustainabilitygoals;(2)Consistent,comparable,anddecision-usefulinformationonsustainabilityrisks,opportunities,andimpacts;(3)Assessmentandmanagementofclimateandsustainabilityrisks;(4)RoleofIFIs,publicfinanceandpolicyincentives;and(5)Cross-cuttingissues.242022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupobjectives,suchasconservationofnatureandbiodiversity,pollutioncontrol,andthedevelopmentofthecircularcarboneconomy,isneeded.ThefulldetailsoftheprogressreportedbybothIOsandG20membersisavailableonanonlinedashboardontheSFWG’swebsite.Inparticular,IOsreporteddeployingeffortstosetframeworksandguidelinestoovercomeobstaclesinthefinancialsystemandfacilitatetheachievementoftheSustainableDevelopmentGoals(SDGs)andtheParisAgreement.Moreover,IOshavebeenworkingonprovidingconsistentguidancetomaximizepositiveimpactsforthefinancialsector,improvingcorporatedisclosureonsustainabledevelopment-relatedmatters,andaddressinginformationgapsonsustainabilitydataandregulatorymeasures.Someofthemhavealsobeenworkingonperformingstudiesonliabilityrisk,andonachievingacoherentsystemofnormsforimpact.Theforumoninternationalpolicyleversforsustainableinvestment,hostedbytheIndonesiaG20PresidencyinJune2022,discussedarangeofpolicyleversthatcanincentivizeorcreateanenablingenvironmentforsustainablefinance.Additionally,theSFWGtooknoteofsomeoftheprogressontheSFWG’s2021PriorityAreas4.TheInternationalFinancialReportingStandards(IFRS)FoundationestablishedthenewInternationalSustainabilityStandardsBoard(ISSB),todevelopacomprehensiveglobalbaselineofhigh-qualitysustainabilitydisclosurestandardstomeetinvestors’informationneeds.Jurisdictionsandrelevantnational/regionalstandardsettersandtheISSBareencouragedtocooperatewiththegoalofensuringinteroperabilityofnational/regionalstandardsandtheglobalbaselineinordertominimizefragmentationofsustainabilitydisclosurerequirements,reducereportingburdens,andenabletheavailabilityofconsistentsustainabilityinformationforusers.Additionally,theMDBClimateWorkingGroupisworkingundera4In2021,priorityareaswere:(1)Improvingcomparabilityandinteroperabilityofapproachestoaligninvestmentstosustainabilitygoals;(2)Overcominginformationchallengesbyimprovingsustainabilityreportinganddisclosure;and(3)EnhancingtheRoleofInternationalFinancialInstitutionsinsupportingthegoalsoftheParisAgreementand2030Agenda.252022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupjointapproachwithsixcoreareasforaligningwiththeParisAgreementandcoversallfinanceflowsandaimstohavethisworkcompletedandoperationalby2023–24.However,whileMDBshavemadegoodprogress,thereremainsasignificantgapbetweenthescopeoftheirclimateworkprogramsandthescaleandspeedrequiredtoachievethegoalsoftheParisAgreementand2030Agenda.DiscussingpolicyleversthatincentivizefinancingandinvestmenttosupportthetransitionItwashighlightedonmultipleoccasionstheinterdependencebetweensustainablefinanceandclimatemitigationpolicies.AsdescribedingreaterdetailintheaccompanyingannextotheReport,onJune13,2022,theG20IndonesiaG20Presidencyconvenedaninternationalforumonpolicyleversforsustainableinvestment.Memberssharedexperiencesanddiscussedarangeofpolicyleversthatcanincentivizesustainablefinancingandinvestmentthatsupportsanorderly,justandaffordabletransitionstowardsalow-greenhousegasemissionsandclimate-resilienteconomy,withdueconsiderationsofnationalcircumstancesandinlinewiththeParisAgreement.Thefocusofthediscussionwasonnationalpolicylevers;however,internationalcooperation,coordinationandimpactwasdiscussedaswell.Membersacknowledgedthisworkisinitsnascentstage,butgenerallyexpressedthatgreaterclarityonpolicypathscouldreduceuncertaintyandcatalyzeactionthatallowsfinancialfirmstoallocatecapital.Theyalsorecognizedthecomplementarynaturebetweeneffectivepolicyleversandfinancing,theneedtobetterunderstandadvantagesanddisadvantages,aswellastheeffectivenessofthefullrangeofclimatemitigationandadaptationpolicylevers,atbothnationalandinternationallevels,andtheneedtomitigatepotentialunintendedeconomicspilloversordistributionalimpactsasmuchaspossible.ThistechnicaldiscussionwasfoundationaltotheHigh-LevelBreakfastDiscussiononClimateMitigation5.5ThisinitiativewasorganizedbytheIndonesianG20Presidency,withintheThirdSeriesofG20FMCBGMeetingActivities,heldinJuly2022inBali.262022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupThisinitiativegaveFMCBGstheopportunitytosharetheirnationalexperiencesaboutpoliciestoaddressclimatechangeandpreservefinancialstabilityandeconomicgrowthinthelong-term.ChapterI-DevelopingaFrameworkforTransitionFinanceTheG20recognizestheimportantroleofgovernmentsinsupportinganorderly,just,andaffordabletransitionaswellasthecriticalroleofaresilientfinancialsectorinmobilizingprivatesectorfinancetofacilitatesuchatransition.IntheG20SustainableFinanceRoadmap,G20leadersacknowledgedthattheexistingsustainablefinancelandscapehasgapsintermsofenablingtheclimatetransitionandidentifiedspecificactionstofillthesegaps.Indeed,despitetherapidgrowthofclimatefinancinginrecentyears,itsproportiontototalglobalfinancingremainslow,and–accordingtotheIPCC–itssizeissignificantlysmallerthanthefinancingneededtoachievetheobjectivesoftheParisAgreement.Thisispartlyduetothefactthatcurrentgreenandsustainablefinancealignmentapproachesgenerallyaimtosupportactivitiesthatarealreadygreenandsustainable.However,amuchlargerpartoftheglobaleconomy,includingsectorsthatarecurrentlyGHGintensivebutinitsprocessoftransitioningtolowornet-zeroemissions,alsorequirefinancing.Anexcessivelynarrowinterpretationof“green”or“sustainable”financecouldlimittheflowofcapitaltowardsactivitiesandinvestmentsthatareneededtosupporttheclimatetransition.Forexample,itmayentailtheriskthatsomeGHG-intensivefirmsbepenalizeddespitehavingcredibletransitionplans,thusincreasingthecostofcapitaltofirmsinneedofinvestmenttorealizetheirgreentransitiongoals.Recognizingthischallenge,manyG20membersareexploringmeasurestointegratetransitionconsiderationsintotheirbroaderapproachtosustainablefinance.Transitionfinance,asdiscussedinthisreport,referstofinancialservicessupportingthewhole-of-economytransition,inthecontextoftheSustainableDevelopmentGoals(SDGs),towardslowerandnet-zero272022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupemissionsandclimateresilience,inawayalignedwiththegoalsoftheParisAgreement.TheG20SustainableFinanceRoadmap,endorsedasvoluntarybyG20LeadersinOctober2021inRome,includesvariousactionstobetterintegratetransitionconsiderationsinsustainablefinanceapproachesandexplicitlyaskedtheG20SFWGto“workwithappropriateIOstodevelophigh-levelprinciplesforacredibleandconsistentframeworkforfinancingajustclimatetransition”.Drawinginputsfromvariousinternationalorganizationsandanalysesofcurrentmarketpractices,theSFWGhasdevelopedhigh-levelprinciplesforjurisdictions,totheextentpermittedunderajurisdictions’domesticauthorities,andfinancialinstitutionstoconsideronavoluntarybasistakingintoconsiderationthelocaluniquecontextofdifferentjurisdictions,relatedtothefollowingfivepillars:1)identificationoftransitionalactivitiesandinvestments,2)reportingofinformationontransitionactivitiesandinvestments,3)developingtransition-relatedfinanceinstruments,4)designingpolicymeasures,and5)assessingandmitigatingnegativesocialandeconomicimpactoftransitionactivitiesandinvestments.Theinitialfocusofourrecommendedprinciplesfortransitionfinanceframeworkistoguidethedevelopmentofpoliciesandfinancialservicestosupporttheclimate-relatedtransition.Overtime,thefocusoftransitionfinancecanbebroadenedtocoverothersustainabilityrelatedobjectives,suchasconservationofnatureandbiodiversity,pollutioncontrol,anddevelopmentofthecirculareconomy.Weacknowledgethatjurisdictionscouldconsideradoptionoftheseprinciplesonavoluntarybasis,andimplementtheminaphasedmanner,andcapacitybuildingservicesofferedbytheinternationalcommunitywillbeimportantforacceleratingtheiradoptionespeciallyindevelopingcountries.Anexampleoftheapplicationofthetransitionfinanceframework’sfivepillarsistheIndonesia’sEnergyTransitionMechanism(Box1.8).282022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupPillar1.IdentificationofTransitionalActivitiesandInvestmentsAnimportantfoundationforscalinguptransitionfinanceistocoordinateinternationallyonhowthefinancialsectorshouldidentifytransitionalactivitiesandinvestments(e.g.,byusingaprinciple-basedapproach,ataxonomy-basedapproach,oracombinationofboth)andengagewithrelevantfirmstoraiseawarenessandprovidetheappropriatefinancingneededandhelppromotethecredibilityoftheseactivitiesandinvestmentsincontributingtoclimategoals.Theseapproacheswillenablemarketparticipantstoassessandmitigate“transition-washing”risksandthusprotectmarketintegrity,andwillfacilitatetheflowofcapitaltowardsinvestmentsthatsupportclimategoals.Drawingoninputsfrommembersandknowledgepartners,countrycaseexperiences,financialinstitutions(FIs)andsectorspecialists,theSFWGreviewedarangeofapproaches,including:Principle-basedapproachesprovidehigh-levelguidanceforidentificationoftoolsthatcanhelpsupportclimatetransitionalactivitiesandrelevantinvestmentsandcanbeappliedattheactivitylevel,companylevel,financialinstrumentlevel,portfoliolevelaswellasindustrylevel.Principle-basedapproachescanprovideguidanceontransitionplans,strategies,emissionreductiontargets,pathways,timeframes,transparencyandverifiability.AnexamplecanbefoundinannexBox1.1(TransitionFinanceinJapan).Taxonomy-basedapproachestakestheformofalistofspecificactivitiesthatsupporttheclimatetransition,typicallyclassifiedbysector.Taxonomieshavevaryinglevelsofspecificityintermsoftechnicalpathwaysandemissionreductiontargets,sometimereflectinglocalornationalcircumstancesandavailabilityofresources.Ingeneral,taxonomiescanbeusedbyinvestorsandcompaniestoidentify,label,andreportontransitionactivitiesaswellasenablethemeasurement/monitoringoftransitionperformance.SomecasescanbefoundinannexBoxes1.2(EUtaxonomy)and1.3(China’sHuzhouCityTransitionFinanceCatalog).292022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupCombinationofapproaches,wheresomesectors/activitiesareasaredefinedusingataxonomy-basedapproach,andothersectors/activitiesareidentifiedbyaprinciples-basedapproach.Thelistaboveisnotexhaustive,andtherearealsootherapproachesandtoolsthatcansupportidentificationoftransition-alignedactivitiesandinvestments.Forexample,somejurisdictionssupportregulatoryorvoluntarybestpracticekeyperformanceindicators(KPIs)thathelpmarketparticipantstoassessafinancialproduct’stransitionstrategyandencouragetheuseoftransitionfinanceinstruments.Eachapproachhasdifferentadvantagesandchallengesandentertainwidevariations.Jurisdictionsshouldconsiderthemostappropriateapproachesgiventheirspecificpolicypriorities,capacities,marketsophistication,regulatoryframework,andusecases.Ajurisdictioncouldchoosetodifferentiatetheminactivity-based,entitybased,andportfolio-basedapplications.Thefactorsforjurisdictionstoconsiderwhendevelopingtheirownapproachcouldincludebutnotlimitedto:-theamountoftechnicalexpertiserequired(especiallyasitrelatestoeachsector/activity),-thedegreetowhichcredibleforward-lookingmid-andlong-termtransitionplanscanbecapturedbytheapproaches;-theamountandeaseofcoordinationrequiredacrossgovernmentagencies;-thecostsofsupportingessentialverificationandotherconsultativeservices(particularlyforsmallerfirms);-thedesiredflexibilitytoadjustandadapttotransitionpathwaysastechnologyandsupportingpolicyevolves;-thedegreeof(legal)clarityonwhatisatransitionalactivityandcorrespondingcontributiontoreducinggreenwashingrisks;-theabilitytoprovideasharedreferenceencouragingandsupportingengagementbetweenpolicymakers,investorsandcompanies,and-theabilitytosupportotherinvestmentdecisions,publicpoliciesorothersustainablefinancetools.302022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupRegardlessofthespecificapproaches,theyshouldallservetheobjectivesofhelpingFIsandprojectownerstoidentifytransitionactivitiesorrelevanttransitionalinvestmentopportunities,understandtheircontributionstotheclimatetransition,reducemarketfrictionsandassociatedcosts,andenhancetransparencyandcredibilitybyreducingtransition-washingriskforFIs,projectowners,andothermarketparticipants.Accordingly,thisyear,theSFWGhasdevelopedthefollowingsetofvoluntary,high-levelprinciplesforjurisdictionsthatintendtodeveloporadoptapproachestoidentifytransitionactivitiesorinvestmentopportunities.TheybuildonandcomplementtheG20voluntaryprinciplesforalignmentapproaches(Action1)intheG20SustainableFinanceRoadmap.Theapproachesshould:•Principle1:Putinplaceeitherataxonomyorasetofprinciples,orotherapproachtoguideFIsandrealeconomyfirmstoidentifyandunderstandwhatatransitionactivityorinvestmentopportunityisandreducetheidentificationbarriers,costsandtransition-washingrisk,especiallywithrespecttothepotentialoflong-termGHGintensivelock-in;•Principle2:Helpensurethatidentificationoftransitionactivitiesorinvestmentopportunitiesarebasedontransparent,credible,comparable,accountable,andtimeboundclimateobjectives,asappropriate,suchasthoseforclimateresilienceand/orGHGreduction(e.g.,carbonintensity,energyefficiency),andinlinewiththegoalsoftheParisAgreement.•Principle3:Beapplicabletopotentialusecasesattheproject,entity,industryandaggregate(e.g.,portfolio,fundsandindices)levels;•Principle4:Includeclearrecommendationsaroundverifiabilityoftransitionactivitiesorinvestments(e.g.,byprovidingguidancefortransparency,benchmarking,orindependentverification),includingtheiralignmentwithGHGpathwaysconsistentwiththegoalsoftheParisAgreement;•Principle5:Bedynamicreflectingandsupportingevolvingscientific,marketandtechnologicaldevelopments,policyenvironment,abatementcostcurves,aswellasdevelopmentalneedsandpriorities;•Principle6:Considerandincludemeasurestofacilitateanorderly,justandaffordabletransition,whileavoidingormitigatingpossible312022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupnegativeimpactsonemploymentandaffectedhouseholds,communities,andotherSDGs(includingenvironmentprotectionandbiodiversity),orriskstoenergysecurityandpricestability;•Principle7:Facilitatecross-borderuses,asapplicable,byensuringcomparabilityandinteroperabilityofalignmentapproachesacrossjurisdictionsconsideringtheG20high-levelprinciplesfordevelopingalignmentapproachesoftheG20SustainableFinanceRoadmap(action1)Pillar2.ReportingofInformationonTransitionActivitiesandInvestmentsReliable,consistent,verifiable,andcomparableinformationontransitionfinancingcouldhelpinterestedinvestorsandotherstakeholdersevaluatewhethertransitionalactivitiesandrelevantinvestmentsarealignedwiththeParisAgreement.High-qualityreportingwillalsoenablethesestakeholdersandinvestorstoassessthecredibilityoftransitionclaims,forexample,whethertheuseofproceedsfromfinancialinstrumentsisappropriate,whethertheassessmentoftransitionoutcomesisbasedonscientificmethodologies,andwhethertheimplementationprocessistransparent.TransitionplansarealsokeytoensuringthatFIsandrealeconomyfirmsareactivelyandstrategicallythinkingaboutandsettingouthowtoaligntheirbusinessmodelswiththenetzerotransitionandsettingoutstepstoaccomplishthisinatimelyandorderlymanner.Indoingsotheycontributetothewidereconomytransition,andincentivizeothersaroundthem(e.g.,clients,customers,etc.)todothesameinawaythatlooksahead,beyondsimplythepoint-in-timeprovisionofgreenactivitiesorinvestments.Existingpublicorprivatepracticesoftransition-alignedreportingcanbefoundatthecorporate,portfolioandprojectlevels.ManyfundraisershavefollowedguidelinesforreportingontransitionalactivitiesorrelevantinvestmentsdevelopedbytheInternationalCapitalMarketsAssociation(ICMA),e.g.,theClimateTransitionFinanceHandbookorthewell-establishedGreenBondPrinciples,theGuidanceonMetrics,Targets,andTransitionPlansofFSB’sTaskForceonClimate-RelatedFinancialDisclosures(TCFD),andsomejurisdictions,countries,stockexchangesandFIshaveissuedmandatory322022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGrouprequirements,bestpracticesorguidelinesforreporting.TheSFWGwelcomestheInternationalSustainabilityStandardsBoard’sworkplantodevelopacomprehensiveglobalbaselineofsustainabilitydisclosuresstandardsandhighlightstheimportanceofcooperationbetweentheISSBandnationalandregionalstandard-settersaswellasotherreportinginitiativeswithaviewtoensureinteroperabilitybetweentheglobalbaselineanddomesticlegalframeworks.Basedonareviewofcurrentmarketpractices,theSFWGrecommendsthatthereportingframeworkfortransitionactivitiesandinvestmentopportunities,whichcanbeconsideredbyjurisdictionsandbyFIsonavoluntarybasis,includeatleastthefollowingelements:•Principle8:Discloseup-to-datetransitionplans,withcredibleandideallyverifiable,comparable,science-basedinterimandlong-termgoals,andtimelinesforachievement(forexample,technicalpathways,fundraisingandinvestmentplansetc.);•Principle9:Reportonprogressatregularandappropriatelyspacedtimeintervals,includingoverallmitigationandadaptationobjectives,suchasnet-zeroandinterimtargetsthataresupportedbyup-to-dateandscientificmethodologies,consistentwiththegoalsoftheParisAgreement;•Principle10:DiscloseclimatedataincludingScope1andScope2GHGemissionsdata,andmaterialScope3dataasitbecomespossible.ThedisclosureofScope3emissionsdatacanprogressusingaphasedapproach,asitbecomespossible,reflectingprogressondataavailabilityandcapacity.Firmsshouldreportonrelevantapproachesandpoliciesfordisclosure,suchastheinternalcarbonpriceused,andthecharacteristicsofcarboncreditsorcarbonoffsetsusedtomeetthetransitiontargets;•Principle11:Disclosecorporategovernancearrangementsthatensuresuchtransitionactivitiesorplanswillbeimplementedproperly,includingwithrespecttoriskmanagementsystemsandduediligenceprocesses;•Principle12:Disclosemethodologiesusedtomeasuretransitionprogressandachievements,including,butnotlimitedto,themetricsandmethodsusedtoassessprogressonclimateobjectives,suchasemissionsreductions,removals,recyclingandreuse,and/orany332022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupbenchmarksusedtherein(e.g.,carbonintensity)andtheextenttowhichsuchmethodologiesalignwithinternationallyrecognizedscenarios;and•Principle13:Disclosetheuseofproceedsraisedfromtransitionfinanceinstruments(foruseofproceedsinstruments)ortheperformanceofKPIs/SPTsthatarematerialtothefundraisers’businesses(forgeneralcorporatepurposeinstrumentssuchassustainability-linkedloansorbonds).Pillar3.Transition-RelatedFinancialInstrumentsToimprovetheresilienceofthefinancialsectorandfullysupporttheinvestmentneededtofacilitatethewhole-of-economyjustandaffordableclimatetransition,itwillbecriticalthatawiderangeofrelevantfinancialinstrumentsbedevelopedandutilizedtoprovidethenecessaryfinanceforthetransitionofthewholeeconomy.Basedoncurrentmarketpractices(SeeBoxes1.5-1.8),inputfromknowledgepartners,andengagementwiththeprivatesectorandotherstakeholders,theSFWGidentifiedasuiteoffinancialproductsandtoolboxthatcanbeincludedastransitionfinanceinstruments,suchas:•Debtinstruments:Instrumentscanincludeuse-of-proceedsgreen/transitionbonds/loans,sustainability-linkedloansorbonds,orfixed/termdeposits,reimbursableloansandotherdebtfinanceinstrumentstosupportsuitabletransitionactivities.•Equity-relatedinstruments:Instrumentscanincludetransition-focusedbuyoutfunds,venturecapitalfunds,andmezzaninefinancing,amongotherequityinvestments.Theseinstrumentsmaybeusefulforcompaniesadoptingnewtechnologies,highlyindebtedcompanies,orSMEs(SeeBox1.6foradiscussionoftheEU’stransitionfund).•Riskmitigationproducts:Examplesincludeinsuranceproductsthataredesignedtohedgetransition-relatedriskssuchastheuseofnewequipmentortechnologies,risk-mitigationtools,suchasguaranteeorothercreditenhancementproductsorblended-financeinstruments,thatcanalsohelpmitigatetransitionrisks.342022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroup•Otherinstruments:Productsinclude,butarenotlimitedto,asset-backedsecurities,realestateinvestmenttrusts,blendedfinance,andexchange-tradedfundsthatsupporttransitionactivitiesorthealigningofinvestmentportfolioswiththeclimatetransition.Thedesignoftheseproductsshouldincorporaterequirementsthattheunderlyingassetscrediblycontributetodecarbonizationandfinancialstabilityconsiderations.TheSFWGrecommendsFIs,onavoluntarybasis,todevelopandexpandtheirtoolboxtoincludetransitionfinanceinstruments,buildingonjurisdictionalframeworks.DrawingfromG20membersandKP’sinputs,theSFWGrecommendsthatthedesignanduseoftransitionfinanceinstrumentsfeaturethefollowingprinciples:•Principle14:thefundraisershouldpresentadetailedandtransparent,science-basedtransitionplanthatisalignedwiththegoalsoftheParisAgreementandconsistentwithacrediblealignmentapproach(ataxonomy-basedapproach,aprinciples-basedapproach,otheralignmentapproachoracombinationofthem)toinformmarketparticipantsontheambitionandfocusoftheirtransitionefforts;•Principle15:thefundraisershouldadheretothetransition-relateddisclosureguidanceorrequirements,asoutlinedintheprevioussectionandtoallotherapplicablerequirementsintheirjurisdiction(s),tohelpensurethetransparencyofthetransitionactivities,targets,metricsandKPIs,aswellasimplementationofanysafeguardandcorrectionmeasures,asappropriate,and•Principle16:transitionfinanceinstrumentscouldincorporatebuilt-inincentives/penalties,ofsufficientmagnitude,toencouragestrongperformanceagainstGHGemissionreductiontargetsandotherclimate-orsustainability-relatedperformancetargets(SPTs).Pillar4.DesigningPolicyMeasuresGHG-intensivecompaniesareincreasinglybeingconfrontedwithchallengestosecurelong-termfinancingasmarketparticipantsperceivethemtobe352022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGrouphigh-risk.Giventheimportanceoffacilitatinganeffective,rapid,whole-of-economyclimatetransition,andnotjustsupportingthelow-orzero-emissionsfirms/projectscurrentlyviewedas“puregreen”,policyactionisneededtosendcorrectmarketsignalstoincentivizeandacceleratethemobilizationofprivatecapitalflowstoenhancethesustainabilityorsupporttheorderlytransitionofhigh-emittingand/orhard-to-abatesectorsandtomitigatetherisksofcreatingstrandedassets.AccordingtoAction16oftheG20SustainableFinanceRoadmap,theSFWGwillworkwithotherG20groups,relevantinternationalorganizations,networks,andinitiativesasappropriate,toanalyzetheimplicationsofsuchpublicpolicylevers.Whiletheidentificationoftransitionactivitiesandinvestmentsaspartofpillar1isonekeyaspectofthis,theG20forumoninternationalpolicyleversforsustainableinvestmenthasalsoconfirmedthatthereisaneedtobetterunderstandtheimplicationsofcarbonpricingmechanismsvs.non-pricingmechanismsinlightofdevelopingappropriatecountryorsectorspecificpolicymixestoquicklyreduceGHGemissionsatlowcostwhileprovidingalevelplayingfieldforsectorsandindustries(seeBox3.1).Inordertoboosttheinternationalimpact,internationalcooperationandcoordinationshouldbeimproved.Policymeasuresgenerallyfallintotwocategories:1)theuseofpublicfinancing,de-risk,orotherwisesupport/incentivizetransitionalactivitiesbyimprovingtheavailabilityandaffordabilityoffinancingfortheclimatetransition;or2)priceandnon-price-basedpolicytools(suchascertainincentives,regulatorymeasures,sectoralstandards,etc.)6designedtoreduceemissionsandacceleratetheclimatetransitionsbyinternalizingthecostsoffirmsandprojectsinordertoinformthefinancialdecision-makingofmarketparticipants.Whereconsistentwiththemandateofrelevantauthorities,examplesofthesepolicyincentives,couldinclude:6Noels,J.andR.Jachnik(2022,forthcoming),“Assessingtheclimateconsistencyoffinance:takingstockofmethodologiesandtheirlinkstoclimatepolicyobjectives”,OECDEnvironmentWorkingPapers.362022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroup•de-riskingfacilities,suchasgovernment,multilateraldevelopmentbank(MDB)providedloanguaranteesorfirst-lossprovisions(seeBox1.6and1.8),•concessionalfinancingtowardstransitionfirmsand/orprojects,suchasinterestsubsidies(eitherdirectlyoron-lendingviacommercialbanks),•subsidiesfor[thirdparty]verificationoftransitionfinanceinstruments(e.g.,usedinHongKongSARofthePRC,Japan,andSingapore),•centralbankinstruments(e.g.,usedbythePeople’sBankofChina,BankIndonesiaandBankofJapan)wheremandatesallow,•emissiontradingschemes(ETS),carbontaxes,orotheremissionspricingmechanismsthatputapriceoncoveredemissions,revenuesfromemissionspricingmechanismscouldbeusedforavarietyofpurposes,includingforexampleforsupportingclimate-alignedinvestments,anddividend/rebateprogramsforimpactedcommunities;•investmentbygovernmentsponsored“transitionfunds”,•publicprocurement,asadriverforinnovationandforprovidingindustrywithincentivestodevelopenvironmentally-friendlyworks,productsandservices,governmentspendingforgreenresearchanddevelopmentoftechnologiesthatsupporttheclimatetransitionactivities,•preferentialtaxtreatmentorincentivesforcompaniesengagedwithtransitionactivities,e.g.,viaaccelerateddepreciationoffixedassetsorothertaxcredits(inordertointernalizeexternalbenefits),•sectoralregulationsthatcanboostdemandormarketsharesfortransitionactivities,e.g.,settingminimumenergyefficiencystandardsforpower,buildingandmanufacturingsectorsorenvironmentfriendlylabellingcertificationsforproducts,andenvironmentmanagementstandardslikeISO14000seriesetc.(e.g.,BankIndonesia’sLTVongreenpropertyloansand0%downpaymentforelectricvehiclepurchase).•introductionofregulatoryorvoluntarybestpracticekeyperformanceindicators(KPIs)thathelpmarketparticipantstoassessafinancialproduct’stransitionstrategyandencouragetheuseoftransitionfinanceinstruments.372022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupDrawingfrominputsfromG20members,knowledgepartners(KP),theSFWGrecommends:•Principle17:Policymakerscoulddesignappropriatepolicies,incentivesandregulatoryenvironmentsandworktoensuretheyareeffectiveinimprovingthebankabilityoftransitionactivitiesandcrowdinginmoreprivatesectorinvestment,takingintoaccountnationalcircumstancesandinthecontextofsustainabledevelopmentandeffortstoeradicatepoverty.Authoritiesshouldalsoconsiderprovidingforwardguidanceontheimplementationofsuchpoliciestoprovideregulatorycertaintytoinvestors.•Principle18:IOsandMDBscouldplayakeyroleinprovidingtechnicalassistanceandlong-termfinancingtocountries,especiallydevelopingcountries,indesigningandimplementingsuitablepolicymeasurestosupporttransitionprojects.•Principle19:Internationalcooperationshouldbepromotedtoensuretransparencyandunderstandingacrossapproaches,aswellastoexchangegoodpracticesandexpertise.Pillar5.AssessingandMitigatingNegativeSocialandEconomicImpactofTransitionactivitiesandInvestmentsWhileitisencouragingthatgovernments,FIs,andmanyotherstakeholdersaretakingactionstodrivetransitionactivitiesandinvestments,itisalsoimportanttonotethatthetransitionprocess(i)requiresimmediateaction,aslower-boundestimatesthateveryyearthetransitionisdelayedcouldcostanadditionalUSD150billion7;and(ii)maygeneratenegativesocialandeconomicimpactsondifferenthouseholds,workers,groups,communities,indigenouspeople,enterprises,sectorsandregionsespeciallythosein7MoritzBaer,JacobKastl,AlissaKleinnijenhuis,JakobThomae,BenCaldecott(2021)Thecostforthefinancialsectoriffirmsdelayclimateaction).ClimateStressTestingandScenariosProject(CSTS),OxfordSustainableFinanceGroup,UniversityofOxford&2°InvestingInitiative.https://2degrees-investing.org/wp-content/uploads/2021/11/The-Cost-for-the-Financial-Sector-if-Firms-Delay-Climate-Action.pdf382022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupdevelopingcountries.Therefore,tailoredtransitionprogramsshouldconsiderwaystoaddressnegativeimpactresultingfromthetransition.Forexample,theemissions-intensivepowersector,andsomehigh-emittingindustrialsectors(suchassteel,chemicals,andcement)willfacesignificanttransitionpressurebothintheshorttermandcontinuingthroughthenextfewdecades.Whileensuringthatemploymentandsocialgainsaremaximized,itwillbecriticalforpublicpolicyto(i)addressthepotentialnegativespilloversforcertaingroupsorhouseholdssuchasunemployment,deteriorationinlocalfiscalcapacityandcommunityservices,shortageofenergyandmaterials,andpriceincreasesincertainsectorsorproductsusedbythemostvulnerablesegmentsofthepopulation;andto(ii)reinforcethepositivespillovereffectssuchasnewemploymentopportunitiesinlow-orzero-emissionsectorsorbetterhealthoutcomes,whichcouldallhaveimplicationsforrelativeprices.TheSFWGrecognizesthatthepotentialnegativedistributionalimpactsoftheclimatetransitionaremostlikelytobebornebythemostvulnerablesegmentsofthepopulation,andthatpoorcommunitiesandregionstendtobeaffectedmoresignificantly.TheSFWGalsorecognizesthattheclimatetransition,nature,andbiodiversityareallinextricablylinked,andthatgovernmentsshouldalsoconsidertheassociatedimpactsoftheclimatetransitionontheenvironment,whichalsocanresultinnegativeeconomicandsocialimpactsonthemostvulnerable.Oneofthepossiblewaystomitigateanadverseimpactoftransitiononenergypricesandsecurityistouselow-emissiontypesofenergysourcesatthefirststage.ThisemergingconsensuswasunderscoredintheParisAgreementpreamble,theG20Leaders’RomeDeclaration,andatCOP26inGlasgow,wherethepartiesrecognized“theneedtoensurejusttransitionsthatpromotesustainabledevelopment.”TheGlasgowdecisionalsohighlightedtheneedtoaccelerate“thephasedownofunabatedcoalpower[…]whileprovidingtargetedsupporttothepoorestandmostvulnerableinlinewithnationalcircumstancesandrecognizingtheneedforsupporttowardsajusttransition.”Buildingonthismomentum,itisimportantthattheSFWGtransitionfinanceframeworkprovideguidancetojurisdictionstooperationalizeinatimelyfashionthe“just”elementofthetransitionprocess(SeeBox1.7and1.8)392022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupTakingimpactsonemploymentconsiderationsasanexample,ourinitialdialogueswithprivatesectorspecialistsandconsultationwithInternationalLabourOrganization(ILO),haveyieldedthefollowingideasonhowjurisdictionsorfirmsmightincorporatetheassessmentandmitigationofsocialandeconomicimpactsintotransitionfinanceframeworks.Forexample:•Insettingoutparametersoreligibilitycriteriafortransitionactivitiesandtransitionplansofcorporates,regulatorsorFIscouldencouragethefundraiser(thecompany)toconductduediligencetoidentify,avoidandaddressadverseimpactsonemploymentassociatedwiththetransitionalactivities;•Incaseswheretheimplementationofthecompany’stransitionplanisexpectedtoresultinsignificantunemploymentand/orothersocialimpacts,thecompanycouldincludecommensuratemitigationmeasures(e.g.,severancepackage,effectiveretrainingandreskillingprograms),whichcomplementtheroleofthesocialsecuritysystem,aspartofitstransitionplan;•Theemploymentimpactassessmentandmitigationmeasures(e.g.,severancepackage,effectiveretainingandreskillingprogram),aswellastheprogressoftheirimplementation,couldbedisclosedtothefinanciersandthemarket;•RegulatorsandfinancierscouldconsiderincludingsocialandemploymentrelatedperformancemeasuresalongsideemissionreductiontargetsaspartoftheKPIsthatarelinkedtothetermsofthetransitionfinanceproducts(e.g.,couponinterestrateofasustainability-linkedloanorbond)asincentives/penalties,inordertoencouragegreaterattentiontothesocialaspectofthetransition.Inadditiontoentity/instrumentlevelconsiderationstotheemploymentissue,theSFWGalsoacknowledgesthatjusttransitionistobeconsideredatamuchbroadercontext.TheSFWGwelcomesfurtheranalysistobetterunderstandandmeasurethemacroeconomicanddistributionalimpactsofclimatechangeandtheclimatetransitionand,inlinewiththeAction13oftheRoadmap,aswellasfurthercoordinationinthisareawiththeG20FrameworkWorkingGroup(FWG),andotherinternationalorganizationsandnetworkssuchastheNGFS,theWBG,theIMF,theILOandtheOECDto402022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupenhanceacommonunderstandingontheseissuesandtoidentifythemostappropriatepolicymixtomitigatenegativesocialandeconomicimpacts.Climatetransitionremainsanascentareaforthefinancialsectorandgovernments,however,itisimportanttoallowmoreinitiativesbycountryauthoritiesandtheprivatesectorbeforetheG20comestoamoreprescriptiveviewonhowtomeasurethemacroeconomic,localandsocialimpactsoftransition,ontheappropriaterolesthepublicandprivatesectorandhowtheyshouldcollaborateinmitigatingthenegativeimpactandmaximizingpositiveones,andhowtheseconsiderationscanoperationalizeinfinancialtransactions.TheSFWGmakesthefollowinghigh-levelrecommendations:•Principle20:Encouragefundraiserstoassessandmitigatepotentialimpactsoftheirtransitionplansorotherstrategies.Insettingeligibilitycriteriaandreportingframeworkfortransitionactivities,authoritiesorFIs,whereconsistentwithdomesticmandatesandlocallawsandregulations,shouldencouragethefundraiser(thecompany)toassessthepotentialsocioeconomicalimplicationsofitstransitionplan,tobetransparentabouttheseimplicationsandmeasurestakentomitigatenegativeimpactsorhighlightpotentialnetpositiveimpacts;•Principle21:Developdemonstrationcasesofjusttransition.AppropriateIOs,includingtheILO,OECD,UNDPandMDBs,shouldworkwiththeprivatesectorindevelopingmoreconcretetransitionfinancecasesthatexplicitlyincorporate“just”elementsoftransition,includingriskandimpactmeasurementandreporting,andKPIdesign,andupdatetheSFWGinfuturemeetings.•Principle22:Strengthenthedialogueandcooperationbetweengovernmentalagencies,employersandworkers’representatives,marketsregulators,academia,civilsocietyandprivatesectorstakeholderstodefineacomprehensivestrategytomitigatenegativeeconomicandsocialimplications.412022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupChapterII-ImprovingtheCredibilityofPrivateSectorFinancialInstitutionCommitments1.BackgroundPrivateFinancialInstitutions(FIs)haveanimportantcomplementaryroletoplayinacceleratingtheclimatetransitionandachievingtheAgenda2030byprovidingthecapitalneededtofinancetransitionactivitiesandinvestmentsassociatedwithlow-emissionsfirmsandtechnologiesandadaptationplansandmeasures.Theyareuniquelypositionedtohelptoprovidetheirclientsacrossallsectorsoftheeconomy,andinallthecountriesthattheyoperate,withtheresources,expertiseandadvicetoguidetheirtransitiontoaclimateresilientfuture.Overthepast18months,morethan4508privatesectorfinancialfirmsmostlyindevelopedcountrieshavemadevoluntarynet-zeroorotherclimate-relatedcommitments,representingapotentiallysignificantshiftininvestmentthatcansupporttheclimatetransitionacrosstheirportfolios.Thegrowthincommitmentshasbeenaccompaniedbyaproliferationofmethodologies,criteriaandbenchmarkstosetnet-zerocommitmentswithvaryinglevelsofrobustness.Thereisagrowingurgencyforallcommitmentstobetransparent,credible,backedbyrobustactionplans,effectivelyimplementedandconvertedintorealemissionscutsasrapidlyaspossibleinordertopreserveinvestorconfidenceandavoidgreenandSDGwashingrisks.TherearedifferentschemesandinitiativesthatFIsandfirmscanchoosefromtomakesuchcommitments,butoncecommitted,theyshouldbecredible.However,manychallengesremain,thathindermoreFIsfrommakingcrediblenet-zerocommitments.Forexample,thelackofcapacitytocollectandverifyemissionsdataorclimateadaptationneeds,makesitdifficultforsomeFIstotrackandreporttheemissionsoftheirclients,especiallyifincludingthoseoftheirsupplychains.Thereisalsoalackoftools,methodologies,andtechnicalcapabilitiessuchasthoserelatedtotransition8ClimatePolicyInitiative(2022).PrivateFinancialInstitutions’ParisAlignmentCommitments:2022Update422022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGrouppathwaysorscenarioanalysis,whichcandiscouragecertainFIsfromsettingcommitments.Thismayonlyfurthercomplicateforfirmswhooperateinajurisdiction(ormultiplejurisdictions)withdifferentnationalclimategoalsanddifferentnet-zerocommitmentstimelines,oradaptationneeds.Furthermore,FIs,likeothercorporations,havepre-existinglegalobligationstoclientsandstakeholders.Inourconsultations,wehaveheardfromfinancialinstitutionsaboutemergingconcerns,includingonhowtoassessandnavigatepotentiallegalimplicationsandevolvingguidancefrommemberalliances.Manyofthesechallengesareintheprocessofbeingaddressed,forexamplethroughtechnicalworkontransitionpathways,alignmenttools,sharingbestpracticeamonginstitutions,andprovidingclarityonbestpracticesfortargetsetting,transitionplanningandtransparencythereof.ThisunderscoresthetimelinessoftheSFWG’sworkasthegroup’searlyanalysiscanhelptobetteridentifyandaddresssomeofthesechallenges.Recognizingthevoluntarynatureofthesecommitments,whichreflectlocalcircumstances,nationalstrategies,andanyapplicableregulatoryrequirements9,theglobaloperationofsomeFIs,businessmodelsandotherelements,theSFWGhasreviewedinputsfrommembers,knowledgepartnersandorganizedengagementswithkeyprivatesectoractors.Thishashelpedtobetterunderstandthecurrentstateofvoluntaryfinancialsectornet-zeropledgesandothercommitmentsrelatedtofinancingtheclimatetransitioninordertodevelopasetofprinciplesto:1)enhancethecredibilityofthesecommitments;and2)progressivelyenhanceaccountabilityofFIsthathavemadethesevoluntarycommitments.9Aspreviouslystated,certainjurisdictionshavealegalframeworkthatwillframeatleastpartiallythenature/disclosureofsuchcommitments432022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroup2.ReviewofmarketpracticesonclimatecommitmentsSeveralmarket-ledalliances,voluntarystandard-setters,thinktanksandotherorganizations,including10,PCAF(PartnershipforCarbonAccountingFinancials),SBTi(Science-basedTargetsInitiative),TPI(TransitionPathwayInitiative),PACTA(ParisAgreementCapitalTransitionAssessment)manager,UNpartnershipprogrammes(PrinciplesforResponsibleBanking;PrinciplesforSustainablePrinciplesforSustainableInsurance;PrinciplesforResponsibleInvesting;SustainableStockExchanges,U.N.RacetoZero)andGFANZ(GlasgowFinancialAllianceforNet-Zero),provideoraredevelopingguidanceandrecommendations,toassistFIswithtoolsandmethodologiesforsettingandimplementingonavoluntarybasisnet-zerocommitments.CommitmentsmadebysomeFIsusuallyentailanet-zerotargetaswellasdifferentdegreesofinformationonunderlyingdata,methodologies,andcoverageofthecommitment,forexample:atargetforfinancedemissions(GHGemissionsofinvestmentportfolios)toachievenet-zerointhelongterm(suchas2050),atargetfortheFIs’ownoperationstoachievenet-zerointheshortertomedium-terms(suchas2030),aswellastransitionpathwaysandplansfortheFIs’exposurestoGHGemissionintensivesectors.Tosetandimplementnet-zerocommitments,someFIshaveleverageddedicatedtoolsandmethodologiesdevelopedand/orpromotedbyvariousinternationalinitiatives11.SeveralFIshavealsodevelopedinternaltoolstoanalyzetransitionalignmentandassistfinancialdecisions.Inordertoinstitutionalizetheircommitmentsandfullyembedtheinterimtargetsintotheiroperations,someFIshavealsostartedtotakeactionsto10Thisconstitutesanon-exhaustivelistofinitiativesthathavedevelopedoraredevelopingfreeofchargestoolsandmethodologies.Whiletodateandtoavailableknowledge,nocomprehensivelistoftoolsandmethodologiesexists,asexamples,sometoolsarelistedonthewebsiteoftheLuxembourgSustainableFinanceInitiative(https://lsfi.lu/tools/)11Forfurtherconsideration,seeNGFS(2022),“EnhancingMarketTransparencyinGreenandTransitionFinance”,Chapter3,andalsoOECD(2022),“ESGratingsandclimatetransition.”442022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupincorporatenet-zeroconsiderationsintheirbusinessstrategy,engagement,andpolicies.•Strategy▪Monitoraconsistentandwiderangeofmetricstoassessprogressinimplementingnet-zerostrategyandpriorities(e.g.,targetsforemissionsreductions,supportandscalingofclimatesolutions;engagement,internalimplementation,andwhererelevant,retirementoftransitionassets).▪Integratenet-zerocommitmentsintocorporategovernance,skills,andculture(e.g.definerolesforBoardandseniormanagementforownership,oversightandresponsibilityfornet-zerotargets;providetraininganddevelopmenttosupportteamsandindividualstoembednet-zerointotheorganizationalcultureandpractices;explorepotentialincentives,suchascompensation,promotions,awards,linkedtonet-zerotargets.)▪Implementsector-specificstrategiesfordecarbonization,asappropriate,inordertosupporteffortsbyclientsandrealeconomyactorstoaligntheirpracticeswithappropriatesectoralpathwaystonet-zero(e.g.,facilitatetransitionfinancingforcompaniesindifferentsectorsinparticularhigh-emittingorhard-to-abatesectors;developandrolloutproductsthathelpaccelerateandde-riskdecarbonizationintherealeconomyandinvestmentsinclimatesolutions;workonproductsorservicesthatcancatalyzethenet-zerotransitionbyde-riskingandunlockingemergingtechnologies).▪Workwithappropriateactorstofacilitateanorderly,just,andaffordabletransition(e.g.,engagewithclient,portfoliocompaniesandgovernmentstounderstandand,asappropriate,mitigatelocalizednegativesocialimpacts).•Engagement▪Engagewithclientandportfoliocompaniestoencourageand,whenfeasible,enablethemtoalsomakecrediblevoluntarynet-zerocommitments(e.g.,encouragenet-zeroalignmentandsupportthedevelopmentandimplementationoftransition452022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupplans;supportclientandportfoliocompanyalignmentofentity-leveltrajectorieswitheconomy-widetrajectoriestowardsnet-zero);seeBox2.1foraninitiativeinJapan.Hands-offdivestment,inisolation,isunlikelytobeaneffectivestrategytoeffectsocialchangeforthetransition.Thisrequiresgreatertransparencyofexpectationsandcorrectionmechanismsandincentivesforaccountabilitywhereimplementationfallsbelowfirms’transitionplansandtargetsovertime.•Policies▪Establish,disclose,andapplypoliciesandconditionsrelatedtohigh-emittingsectorsandassociatedlow-emissiontechnologies(e.g.,considerpoliciestophaseoutfinancingofunabatedfossilfuels).▪Establish,disclose,andapplypoliciesandconditionsontheuseofcarboncreditsandoffsets(e.g.,regardingprioritizingmitigationactionstoreducedirectemissionsbeforeoffsettingwithcarboncredits,onlyusingcarboncreditsforresidualemissions,toneutralizeresidualfinancedemissionswithpermanentremovals).3.CapacityconstraintsandchallengesWhilemanyFIshaverespondedtocallsfrominternationalnetworksandmadecommitmentstoachievenet-zeroforoperationsandtheirinvestments,manychallengesremain.Belowaresomeofthekeychallenges,someofwhichcanbeamplifiedindevelopingcountriescontexts:•Lackofenablingenvironmentandprofessionalcapacityfornet-zerotransitionplanning.FIsrelyonaccurateandcredibleemissionsreportingfromtheirclientsandportfoliocompaniesinordertocalculatetheirfinancedemissions.Thereiscurrentlylimitedrobustandforward-lookingemissionsdataavailabletoFIs,withsignificantgapsforsmallandmediumenterprises,emergingmarketsand462022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupdevelopingcountries,andcertainsectors.Andinmanydevelopingcountriesthereisagenerallackoftrainedprofessionalsformeasuringportfolioalignmentandtoundertakedataassurance.Capacitybuildingalsothroughtheengagementofpublicbodiesinthisareaiscriticallyneededasagroundworkfornet-zerocommitments,aswellassupportingpublicpoliciestoimprovetheavailabilityofinformation,suchascorporatedisclosures,whichwouldenableFIstohaveaccesstothenecessarycorporatelevelinformation.•Lackofkeyinputsfortargetsettingandtransitionplanning.FormostcompaniesandFIsembarkingonnet-zerotargetsettingandtransitionplanning,oneofthefirsthurdlestheyfaceisthelimitedavailabilityofcredibledataandreferencepoints.Whilesomejurisdictionshavelaunchedambitiousregulatoryinitiativesinthisarea,thelackofclearandpubliclyannouncedpoliciesinmanycountrieshasmadethisexerciseparticularlychallenging.Whiletherehasbeennotableprogressinthedevelopmentofclimatereferencescenarios,suchasthoseissuedbytheNGFS,limitsontheirusageandapplicabilityremain12.Forexample,greatersectoralgranularityisneededandconsiderationsshouldbegiventonon-linearityoftransitionpathwaysforsomecountriesandsectors.Inaddition,sometoolsforsettingorverifyingnetzerotargetshavebeendevelopedmainlybasedonthe2050netzerotimelinethatarenotfullyapplicabletopotentialusersunderothertimelines.•Pressurestorelaxpledgestomaintainshort-termprofitabilityAnFIjourneytonet-zeroisusuallyplannedoveranextensiveperiodoftime.Hence,FIneedtoinstitutionalizecommitmentsincludingaccountabilitymechanismsforinterimandlong-termtargets.Indeed,andamongothers,shareholderrotation,aswellas12TheNGFSisworkingonimprovingtheusabilityoftheNGFSclimatescenariosbyenhancingtheirgranularity(includingbydownscalingvariablesatcountrylevelandexpandingthenumberofrepresentedsectors),improvingtheiroverallmacroeconomicmodellingandsectoraldynamicsaswellasthemodellingofacuteandchronicphysicalrisks.472022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupunforeseenchangesincost-structuresorprofitability,forexamplecausedbyapandemicorgeopoliticaltensions,risktoincentivizeboardsandinvestorstorelaxpledgesovertimeinordertomaintainshort-termfinancialreturns.Yet,progressoninstitutionalinvestors’growingemphasisonlong-termenterprisevalueandcommitmenttonet-zerointheirengagementstrategiescouldhelpfostergreatercommitmenttonet-zeropathwaysdespiteshort-termprofitfluctuations.•Difficultyinaccountingformanagedphase-outofhigh-emittingassetsFIs’net-zerocommitmentscannotbeachievedwithouttransitionsoftheirclientsandportfoliocompanies.SomeFIscouldsupportmanagedphaseoutofhigh-emittingassetsofclients,suchasacquisitionofcoal-firedpowerplantswithaclearobjectivetoretireordecommissiontheassetsovertime.Suchfinancingmayleadtoatemporaryincreaseoffinancedemissionsandriskexposuresintheshort-termevenwhentheircarbonintensityisimprovedoverthelonger-term.Thesepossibleshort-termside-effectsmaydisincentivizeFIstoprovidetransitionfinancetotransformhighemittingsectors.MoreworkisneededtodeterminehowFIswithnet-zerocommitmentscanfinancethemanagedphase-outofhigh-emittingassetsinwaysthatareconsistentwiththeircommitments,andhowthosecommitmentsarereported.4.RecommendationstoenhancecommitmentcredibilityTheSFWGacknowledgesthegrowingnumberofFIsadoptingvoluntarynet-zeroand/orsustainabilitycommitments.Inordertoensurethatthesecommitmentstrulysupportanorderly,justandaffordabletransition,itisimportantthattheyaredeemedcredibletosendthenecessaryandappropriatesignalstotherealeconomy.During2022,SFWGmembersbenefittedfromengagingwithmarketactors,voluntarystandardsetters,thinktanks,andinternationalorganizationswhoareactiveinthisspace;482022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupcollectively,thesestakeholdershavecontributedtoasenseofemerging“marketpractices”tobeadoptedandadaptedbythemajorityofFIsmakingnet-zerocommitments,beingmindfulofthesize,businessmodelofentities,andjurisdictionsinwhichtheyoperate.Throughtheseconsultationsandknowledgeexchanges,theSFWGhasdevelopedvoluntaryrecommendationsforprivatesectorfinancialfirmsandforgovernmentstoenhancethecredibilityofFIs’commitments.I.RecommendationsforprivatesectorFIsWhenmakingvoluntarynet-zerocommitments,FIscouldconsiderthefollowingrecommendations:•Recommendation1:Applycommitments,wherepossible,toalloperations,financing,products,services,andbusinesslines,andbein-linewithholdingtheincreaseintheglobalaveragetemperaturetowellbelow2degreesCelsiusabovepre-industriallevels,andpursuingeffortstolimitthetemperatureincreaseto1.5degreesCelsiusabovepre-industriallevels.Wherepossible,FIsshouldconsiderintegratingvoluntarynet-zerocommitmentsintotheirbusinessstrategy,engagement,policies,corporategovernance,riskmanagement,skills,andculture.Institutionsshouldestablish,discloseandapplyrelevantstrategies,policiesandconditions,includingpoliciestodisclose,transitionandphaseoutfinancingofunabatedGHG-intensiveactivities/assets,orpoliciesontheuseofcarboncredits.Institutionscanworkwithappropriateactorstofacilitateanorderly,just,andaffordabletransitionFIsthathavemadevoluntarynet-zerocommitmentsshouldalsoidentifyactualorpotentialadverseimpactsoftransitionandsetpoliciestopreventandmitigatesuchimpacts.FIsshallalsocoverscope1and2emissions,and,wheredatapermits,materialscope3.•Recommendation2:Engagewithclientstoalignpracticeswithappropriatesectoralpathwaysandengagewithclientandportfoliocompaniestoencourageand,iffeasible,enablethemtomakevoluntarynet-zerocommitmentsandimplementthem.492022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroup•Recommendation3:Accompanyend-datetargetstoachievenet-zerowithscience-based,time-boundinterimtargets,benchmarkedagainstcredibletools,pathwaysandframeworks,thatdemonstrateafeasiblepathtowardsnet-zero.Institutionsshouldconsiderincluding,(1)athoroughbaselineanalysisofcurrentportfolioemissions,ideallyperformedatthetimethecommitmentismade(withintwoyearsofmakinganet-zerocommitment)and(2)adoptanemissionstargettobeachievedwithinacertaintimeframe–e.g.,amid-termfive-yeartarget.Commitmentsandtargetsshouldalsobescience-basedandideallyverifiedbyathirdparty.•Recommendation4:Useindependentthird-partyverification/assurance(e.g.,byauditors,consultancies,NGOsorassurancecompanies),keepinginmindthedomesticcircumstances.Third-partyverificationbodiesshouldbetransparentinthemethodologytheyusetoverifyinformationintransitionplans.II.Recommendationsforrelevantauthorities,internationalorganizationsandnetworksRelevantauthoritiesshouldapplythetransitionfinanceframeworkdevelopedbytheSFWG–andinparticularkeepaneyetotherecommendationsinPillars2(reportingframeworkoftransitionplans)–tosupportvoluntarynet-zerocommitmentsandcreateanenablingenvironment.•Recommendation5:Relevantauthoritiesandregulatorsinindividualjurisdictions,andinaccordancewithcountrycapacity,theirownnet-zerocommitments,anddomesticlaws,couldconsiderencouragingvoluntaryFInet-zerocommitments,articulatinghowtheywillsupportand/orengagewithvoluntaryFInet-zerocommitmentsandcorporatenet-zerotransitionplansinamannerconsistentwiththeirmandatesandobjectives,inadditiontodomesticsustainabilityreportingrequirements.RelevantauthoritiescanhelptherealeconomytransitionbyprovidingclarityonhowtheyplantoachievethegoalsoftheParisAgreement,aswell502022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupasmeetingtheirNationallyDeterminedContributions.Thiscouldincludeimplementingmitigationpoliciescoherentwithclimategoalsandestablishingpolicyframeworksthataddressexistingmarketfailuresandenableprivatesectorfinancialflows.•Recommendation6:Relevantinternationalorganizations,MDBs,initiativesandnetworksshouldcoordinatetheireffortstosupportambitiousvoluntaryfinancialsectorcommitments,includingbyprovidingcapacity-buildingservices;supportingeffortstoimprovecomparability,transparency,andbroad-basedaccesstotools,technologiesandmethodologies(alsosuitablefordevelopingcountries);andofferingplatformsforknowledgeanddatasharing.Internationalnetworks,NGOsandthinktanksspecializedincarbonaccounting,science-basedtargetsetting,andscenariodevelopmentshoulddevoteresourcestofacilitateuptakeanduseoftools.MDBsandotherIOscouldpromoteknowledgesharingandtechnicalassistanceprogramstocountriesthatrequestthem.5.RecommendationstoprogressivelyenhanceaccountabilityoffinancialinstitutionsthathavemadevoluntarycommitmentsDespitethefactthatasignificantnumberoffinancialinstitutionsstillneedstobuildcapacitytotakenet-zerocommitments,andthatglobalchallengesremain(includingindataandreferencescenarioavailability),improvingearlyongreateraccountabilityofthesecommitmentisneededtosupportscaling-upclimate-alignedfinancialmarkets,promotemarketintegrity,andpreventformsofsustainability-washing.Accountabilityforcredible,voluntary,financialsectornet-zerocommitmentscanhelpinformtransitionplanstoachievenet-zeroandothersustainabilitygoals.Furthermore,accountabilityforthesecommitmentswilldependontransparent,understandable,monitorableinformationaboutnet-zero512022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupperformancethatcanbetrackedandevaluated.Yet,initiativesfortrackingandassessingprogressoffinancialsectornet-zeroalignmentarestillintheirearlystages.Afewnascentinternationalinitiativesandnational-leveltrackingeffortsaredevelopingtherelevantcapabilities.Currenteffortsmainlyconsistofvoluntary,self-reporteddataplatformstoregisterandupdateprogressonclimate-relatedcommitments,orhigh-levelassessmentsofvoluntarynet-zerocommitmentsthatdonotspecifyplansforperiodicupdates.IOs,networksandinitiatives,suchastheOECD,ClimateDataSteeringCommittee,GFANZ,ClimatePolicyInitiative,andWorldResourcesInstitutearestartingearlyworktofillexistinggaps.Anumberofjurisdictionsarealsotakingstepstoincorporatetransitionplanningandnet-zerotargetsettingandperiodicupdateonprogresstowardsachievingthosetargetsintotheirdisclosurerequirements.Theseinternationalinitiativesshouldensurebroaderandglobalrepresentation,inclusiveness,andtransparencytodeliveraccountableoutcome.Recognizingthatthesevoluntarycommitmentshavebeenespeciallymade,indevelopedcountries,andthatmanyEMDE’smayrequireadditionaltechnicalassistancetodevelopthecapabilitiestoidentify,setandtracknet-zeroandothersustainabilitycommitmentsfromFIs,theSFWGhasidentifiedasetofrecommendationstovoluntarilyandgraduallyenhanceaccountabilityofthesecommitments.TheSFWGrecognizesthatthesecommitmentsarestillatanearlystageandarevoluntary,andthatdeliveryonnet-zerocommitmentswillrequireajointeffortfromthepublicandtheprivatesectorandwilldependonactionstakenattheentitylevelandintheaggregate.Accordingly,therecommendationsincludevoluntaryactionstargetedatprivatesectorFIs,marketalliances,governments,internationalorganizations,andnetworks,acknowledgingthatdependingonentity’sreadiness,theserecommendationscouldbeconsideredandimplementedatdifferentpaces.TheSFWGwillcontinuediscussingchallengesandprogresswiththeimplementationofFIs’voluntarycommitmentstofurtherenhancecredibilitygradually.•Recommendation7:Providepubliclyavailable,consistentandcomparableinformationonmetrics,scenarios,methods,andbenchmarksusedtosettargets.FIsthathavecommittedtoanet-522022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupzerotargetshouldmonitoranddiscloseaconsistent,comparable,andreasonablerangeofmetricsinaconsistentandcomparablewaytoassessprogressinimplementingnet-zerostrategyandpriorities(e.g.,targetsforGHGemissionsorintensityreductions;supportandscalingofclimatesolutionsandsustainablefinance;transparencyonengagementstrategies;portfolioalignmentmetricssuchasimpliedtemperaturerise,internalimplementation,andwhererelevant,retirementofGHG-intensiveassets).Informationshouldbeinterpretableandsupportedbyup-to-datescience,withtransparencyonthemethodologyusedandconsistentwithdataavailabilityovertime.•Recommendation8:Reportannuallyoninstitutionalprogressandprovideinformationonanygapsorchallengestomeetingtargets.Institutionsthathavevoluntarilycommittedtoanet-zerotargetshouldestablishefficientprocessesforinternalmonitoringandforexternalreportingonprogressandanypossiblecorrections.FIsthathavevoluntarilycommittedtoanet-zerotargetshouldalsocommittorevisitingand,ifappropriate,revisinginterimtargetsandpathwaysbasedonevolvingmarketdynamics,technologicaldevelopments,currentpolicyenvironment,andshiftingabatementcostcurves.TheseFIsshouldprovidepubliclyavailableinformationthatclearlyexplainsanyadjustmentstointerimtargetsandpathways.TheseFIsareencouragedtoshareimplementationexperiencesandlessonslearned,toencourageclear-eyedassessmentofprogressagainsttargets.FIscansupporteffortstotrackprogressbyengagingwithrelevantinitiativesandprovidingtransparent,credible,andcomparableinformationattheFIlevel.•Recommendation9:Worktogethertoencourageaccountability,sharelessonslearnt,andaddresscommonchallenges,includingthroughjointinitiativesofFIsthathavemadenetzerocommitments.FIsthathavevoluntarilycommittedtoanet-zerotargetshouldlearnfromoneanotherthroughdiscussionandsharedetailoftools,data,andmethodologiesused,asappropriate,toenhancecomparabilityacrossFIsandsuitabilitytolocalcontextsand532022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupconsiderations,andtoenableandacceleratedeliveryonnet-zerocommitments.Theseinitiativesshouldsupportcomparability,whichwilladvanceeffortstotrackprogressintheaggregateanddrivefurthermomentumandaccountability.•Recommendation10:Governmentsandinternationalorganizationsandnetworkscould,asappropriateandapplicable,considermeasurestoenhancetheaccountabilityandcomparabilityoffinancialsectornet-zerocommitmentsinamannerconsistentwiththeirmandatesandobjectivesaswellaslocallawsandregulations,recognizingthevoluntarynatureofsuchcommitments.Nationalauthoritiesandregulatorscouldconsider,withintheirmandates,someformofprogressmonitoringonregulatedFIs,encouragetheuseofcomparableparameterstoreportonandmonitor,supportdomesticorcross-borderdataplatformstoservebothregulatorsandfinancialmarketparticipants.Internationalorganizationsandnetworkscouldcontinuetoworktowardsmorecomparabletechnicalapproaches,methodologies,andmetricsfornet-zerotarget-setting,progresstracking(includinginaggregate)andimplementationthatconsiderinternational/regionalregulatorydevelopmentsandnationalcontexts.Jurisdictions,internationalorganizationsand/ornetworksengagedineffortstotrackprogressoffirmswhohavevoluntarilycommittedtonet-zeroareencouragedtoprovideprogressupdatetotheG20SustainableFinanceWorkingGroup.542022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupChapterIII-ScalingupSustainableFinanceInstrumentswithaFocusonImprovingAccessibilityandAffordability1.BackgroundThesustainablefinancemarkethasgrownrapidlyoverthepastyears,andbothmarketparticipantsandnationalauthoritiesareincreasinglyrecognizingtheimportanceofsustainablefinanceinstrumentsinchannelingcapitaltoaddressclimatechangeandsupportotherSDGsAsaproportionofglobalfinance,however,thesustainablefinancemarketremainssmall,andmanyfirms,especiallythoseindevelopingcountriesandSMEs,continuetofacesignificantchallengesaccessingthisgrowingmarket.Forexample,greenbondsissuedby55lowermiddle-incomecountriesaccountedforonly1.7%oftheglobalissuance.Similarly,IslamicdebtinstrumentssuchasGreenSukukhavemobilizedlessthanUS$15billiontodate(whencomparedtothemultitrillion-dollarIslamicfinanceglobalassets).Andtheglobalsustainablefundmarketisestimatedtoaccountforjust4%ofthetotalglobalfundmarketbyvalue.FirmsizeisalsoimportantasSMEscontinuetohavelimitedaccesstosustainablefinanceinstrumentsdespitetheirrolesasessentialdriversofeconomicactivity,employmentinmostcountriesandjusttransitions.Whereaccesstotheseinstrumentsisavailable,developingcountriesandSMEstypicallyfacehighfinancingcosts.AddressingtheseinvestmentgapswillultimatelybeinstrumentalinachievingthegoalsoftheParisAgreementand2030AgendaAgainstthisbackground,theSFWGhasincludedspecificactions(i.e.,action5,15,19),intheG20SustainableFinanceRoadmap,topromotethedevelopmentofclimateandsustainable-alignedfinancialinstruments,blendedfinancialinstrumentsandmechanisms,engineeringde-riskingfacilitiesproductsandmarkets,includingsustainablecapitalmarketinstruments,toeliminatebarriershamperingthescalingupofprivatesectorsustainableinvestment.In2022,theSFWG,byworkingwithknowledgepartnersanddrawinginputfromtheprivatesector,hasidentifiedsuch552022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupbarrierstoscalingupsustainablefinance,takenstockofafewfocusareasanddevelopedasetofrecommendationsforjurisdictionstohelpimproveaccessofcorporates(includingSMEs)todomesticandinternationalsustainablefinancemarkets,inanaffordableway.2.BarriersandChallengesTheSFWGhasidentifiedbothgenericfinancialmarketandsustainable-financespecificbarrierstoscalingupsustainablefinanceinstruments.Genericbarriersarethosethatlimitdevelopmentofandaccesstofinancialmarketsmorebroadly.Forexample,withoutthekeymarketinfrastructurelikeawell-functioningbankingsystem,efficientcapitalmarkets,sounddevelopmentpolicies,andeffectiveriskmanagementinstruments(e.g.,foreignexchangerisk),itisdifficulttoscaleanyfinancialmarket.Thoseissuesremainfoundationalandwillaffecttheefficacyofsustainablefinance-specificpoliciesmorebroadly.TheSFWGrecognizesthesignificantrolethosegenericbarriersandpublicpolicycanplayinjurisdictions’accessandcostoffinancing,aswellasinthecreationofapipelineofhigh-qualitysustainableprojects.Whilethescopeofthisreportisprimarilytoidentifyandproviderecommendationstosurmountsustainablefinance-specificbarriers,thereissignificantoverlapandinterplaybetweenthetwo.Sustainablefinance-specificbarriersinclude:•Inadequateawarenessandexpertise.Inmanycountries,regulators,financiers,andcorporatesdonotyetordonotsufficientlyincorporatesustainabilityintotheirdecisionmakingorlackthetechnicalandfinancialexpertisetoaccessanduseavailablesustainablefinanceinstruments.Forexample,manydevelopingcountrieslackthecapacitytoinitiate,manage,andcarryoutdemonstrationprojectstoshowcasetheviabilityofsustainableprojects,ifdonesuccessfully(throughinternaleffortsorinternationalassistance),thesecanhelpinvestorsbetterassesstherisksandopportunitiesofsustainableprojectsinemergingmarketsandcanhelpreallocatecapitaltowardssustainableinvestmentsinthefuture.•Lackofsustainableinvestmentalignmentapproachesandsupportiveregulatoryframeworks.Manyjurisdictionslackaclearapproach,rules,562022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupandregulationstoimproveriskmanagementandaligninvestmenttowardssustainableends.Thiscanalsoincludealackofregulationsforalternativefinancingmechanisms,suchasIslamicfinance.ThiscanraisetherisksofgreenandSDGwashinganddeterinvestorsfromutilizingsustainablefinanceinstruments.Moreover,developingandimplementingsustainablefinanceregulatoryframeworksisoftenchallengingduetodifficultytocoordinateamongdisparatedomesticagencies.•Highcostofsustainabilityproductsanddata.Internationalinvestorsareincreasinglyseekingmoredetailedandhigherqualitysustainabilityinformationthatisnotavailableintraditionalfinancialstatements.However,mostcorporatesindevelopingcountriesandmostSMEsareunlikelytoprovidesuchinformationduetoeitherthelackoflocalregulationsonsustainabilityreporting,thehighcostsassociatedwithproducingsuchinformation,orboth.Datalimitationscontributetothehighcostofsustainablefinancialproducts,whichtypicallycarryadditionalcosts,suchastheneedtomonitorandverifytheuseofproceeds.EspeciallyforSMEs,thismaymakeaccesstocapitalmoredifficult.•Lackofinternationalassistance,includinggreende-riskingfacilities.Manylow-incomecountrieshavelowcreditratings,withmanybelowinvestmentgrade.Technicalassistanceprogramshavehelpedjurisdictionstoimproveunderlyinginstitutionsandinfrastructuretherebyattractinginvestment,andinternationalde-riskingfacilities,includingthoseprovidedbyMDBs,haveplayedapositiveroleinchannelinginternationalfinancetosustainableprojects.However,thecurrentsupplyoftechnicalassistance,de-riskingfacilities,andotherblendedfinanceinstrumentsonlycoversafractionofthedemandandthereforeneedstobeimprovedandincreased.•Lackofgreenorsustainabilityaligneddemonstrationprojects.Inmanynascentsustainablefinancemarkets,akeyhurdlethatdetersinvestorparticipationistheperceivedrisksonpolicy,market,technology,operation,andgreenwashing.Lowreturnprofilesofsustainable572022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupprojectscanbeanobstacleaswell.Someoftheseperceivedriskscouldbeaddressedbydemonstrationprojectsthatdemonstratetoinvestorsthatrisksaremanageableandthereturnsacceptable.However,manydevelopingcountrieslackthecapacitytoinitiatedemonstrationprojectsontheirownandrequireinternationalassistance.•Lowinvestmentduetoariskyenvironment.Duetotheincreasingseverity,unpredictability,andfrequencyofrisks,thescalingupofinvestmentsintransitionalactivitiesinlow-incomecountriesarelaggingbehind.Thoserisksincludepoliticalriskssuchasconflicts,climateriskslikedrought,geo-physicalriskssuchasearthquakes,aswellasepidemicsanddiseaseoutbreaks.•Limitedchoiceandaccesstosustainablefinanceinstruments.Thereisapaucityofsustainablefinanceinstrumentsdesignedforusebyfirmsinlow-incomecountriesandbySMEs.Manyfirmsinlow-incomecountriesandSMEsstruggletofindsustainablefinanceinstrumentsthatapplytotheirprimaryindustries,andSMEsoftendonothavetheexpertisenorsufficientcapitaltoaccesssustainableloan,sustainablesukukandsustainablebondmarkets.3.EmergingoptionsforenhancingaffordabilityandaccessibilityofsustainablefinanceToaddresskeybarrierstoscalingupsustainablefinanceinstruments,theSFWGhasdrawnoninputsfromcountryexperiencesandbyrelevantIOsandKPstothefollowingkeyareasoffocusandreviewedsomeoftheemergingoptions:capacitybuilding,de-riskingfacilities,policyincentives,anddeployingdigitaltechnologies,andsustainablesupplychainfinancing.Thisreporthasfocusedonfindingsolutionstobarriersspecifictosustainablefinance,notingthatmanygenericbarrierstofinancialmarketdevelopmentarebeingdiscussedinotherplatformsandbyotherIOs.582022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroup3.1.EnhancingcapacitybuildingonsustainablefinanceStakeholders-governments,stockexchanges,assetowners,financialfirms,andcorporates-areinneedofexpertiseandskillsinsustainablefinancetosupportthedesignandimplementationofsustainablefinancepoliciesandroadmapsinordertofulfilltheirrespectivecommitmentsrelatedtotheSDGsandtheParisAgreement.Thecapacitiesneededfallinareasincludingawarenessraisingonrisksandopportunitiesassociatedwithclimatechange,andothersustainabilityfactors;policymakingandimplementationbygovernmentagenciesonstrategiesandroadmapsforsustainablefinance;developmentofalignmentapproaches,disclosurerequirementsandfitforpurposesustainablefinancedataecosystems,andotherSDGalignmenttools;identificationandmanagementofenvironmentalrisks,aswellasbusinessandproductdevelopmentandproject&keyperformanceindicators(KPI)achievementevaluationbyfinancialfirmsinsupportsustainableactivities.SMEshaveanimportantroletoplayinthetransitiontolow-GHGemissiondevelopment,butmostofthemdonothave,orseek,accesstothesustainablefinancemarkettomaximizetheirpotentialimpact,duetohighcostsorthelackofknowledgeandcapacity.LocalFIs,thekeyprovidersoffinancetoSMEs,alsofacecapacityandawarenessconstraintsrelatedtosustainablefinance.EngagementwiththeISSB,initseffortstodevelopglobalbaselinedisclosurestandards,canalsoplayaroleinreducingreportingcostsforSMEs.SeveralIO,MDBs,technicalassistanceproviders,internationalnetworks,andcountryauthorities,havedevotedresourcestocapacitybuildingwhichhaveyieldedpositiveresultsinshapingsustainablefinancepolicyframeworks,sustainablefinanceinstruments,anddisclosureinafewcountries(seeboxesinannex).Theseefforts,withrelativelylowfinancialcoststotheMDBsandareoftensupportedbydonors,couldbescaleduptohavemuchgreaterimpactastheyhelptomakedomesticfinancialsystemsinagivencountrymoresustainable.592022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroup3.2.Scalingupblendedfinanceandde-riskingfacilitiesBlendedfinancemechanisms,includingde-riskingfacilitieshavebeenintroducedasinnovativefinancingtoolsintotheinternationaldevelopmentcommunityinrecentyears,notablywiththeadoptionoftheSDGsandtheParisAgreementin2015.In2022,blendedfinancewasoneofthekeyfocusoftheG20DevelopmentWorkingGroup(DWG)whichhasbeenworkingondevelopingG20PrinciplestoScale-UpBlendedFinanceinDevelopingCountries,IncludingLeastDevelopedCountries(LDCs),andSmallIslandDevelopingStates(SIDS)13.Blendingpracticesvaryacrossinstitutions,includingtheuseofconcessionalandnon-concessionalpublicfinancefromMDBs,otherDevelopmentFinanceInstitutions(DFIs)anddevelopmentaidprograms,andtoalesserextent,donorsandotherthirdparties.Akeybenefitofblendedfinancemechanisms,asopposedtopurelypublicfinance,isthatitcrowdsinprivatecapitalandcanexpandthetotalamountofsustainablefinanceavailableandtherebyimprovetheaffordabilityandaccessibilityofsustainablefinance.Itcanalsooperateasamechanismtocreatesustainablemarketsbybeingtheinitialfinancethatallowsamarketorsectortodevelop.Manycountries,MDBs,IFIsandinternationalplatformshavepresentedsuccessfulcasesofusingblendedfinancemechanismsincrowdinginprivatesectorfinancingforsustainableinvestments.However,thesupplyofsuchoperations,mainlyofferedbyMDBsandotherIFIs,isfarbelowthedemandfromdevelopingcountriesforsustainableinvestments.Reasonsforthisprobleminclude:thescaleofblendedfinanceoperationsisconstrainedbytheavailabilityofconcessionalfinancingandgrantfunding;blendedfinanceinvolvescomplexrelationshipmanagementamongdonors,privatefinanciers,andgovernmentsandrequiresveryspecializeddesignandgovernance;administrativecostsofblendedfinanceoperationsarehighduetotheirsmallsize,slowdisbursement,andcomplexityoftransactions.MDBsalsohavetobemindfuloftheirowncreditratings,sincetheyalsohavetheir13https://g20.org/3rd-g20-dwg-prioritize-blended-finance-to-overcome-developing-countries-sdg-funding-constraints/602022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGrouplimitswithrespecttotherisktheyareableorwillingtotake.Therecanalsosometimesbeatradeoffbetweenaproject’sscalabilityandimpact.Smallerscaleprojectscanhavesignificantdevelopmentimpactbutcanbemoredifficulttofinance.Finally,theneedforspecificexpertiseinfinancialengineeringandthehighcostsandlongdurationofprojectpreparationandimplementationaremajorchallengesforMDBsinscalingupblendedfinanceandotherde-riskingfacilities.3.3.IntroducingpolicyincentivesPublicpolicycanbeusedtoenhanceaccesstosustainablefinanceorimprovetheriskandreturnprofileofsustainableinvestmentsinordertoincentivizeprivatesectorparticipation.IntheG20SustainableFinanceRoadmap,theSFWGhascommittedtoworkwithotherG20groups,relevantinternationalorganizations,networksandinitiativesasappropriate,toanalyzetheimplicationsofpublicpolicyleversonmarketsignalsthatcouldinfluencesustainableinvestmentdecisions.Thesepolicyinstrumentscouldinclude,amongothers:carbontaxes,emissiontradingmechanisms,fiscalsubsidiesforsustainableactivities,governments’greenprocurementaswellasregulatorymeasurestoimprovetransparencyorimproveriskmanagementandthusindirectlyencouragelow-GHGemissiontechnologiesacrossallsectors(seeTable3.1intheannexforillustrativeexamples).Non-pricingpolicymeasurescanalsoplayanimportantroleaspartofthepolicytoolbox.Ifpairedwithawiderenablingpolicyenvironment,allthesepolicyincentivescanreducetheriskofinvestmentsinsustainableactivities,enhancetheexpectedinvestmentreturnoftheseprojectssoastoandattractprivatesectorcapitalforgreenandsustainableinvestment,andtherebyimprovetheaffordabilityandaccessibilityofsustainablefinance.Thesepoliciesshouldbeseenascomplementarytoambitiousfinancialsectorpolicies,astheyaremutuallyreinforcing.Realsectorpricesignalsareimportanttokeepfinancingflowstosustainableinvestments.Finally,asstressedduringtheG20forumoninternationalpolicyleversforsustainableinvestment,theimportanceofinnovationinbridgingthegapsinthefinancingoftransformative612022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGrouptechnologiesforclimatetransitions,especiallyindevelopingcountriesandsmallercompaniescannotbeoverstated.3.4.DevelopinganddeployingdigitaltechnologiesDigitaltechnologiescanhelptoreducethecostofdatacollection,assessmentandreportingcosts,whichinturnwillassistintheidentificationorlabellingofsustainableassetsandactivities,andthetrackinganddisclosureofESGinformation.Sustainablefinanceinstrumentsoftenrequirehigh-qualitydisclosureoftheirenvironmentalorsocialcharacteristicsandpurpose.Forsectorssuchasagriculture,manufacturing,construction,andtourism,onwhichmanydevelopingeconomiesrely,datacollectionandprocessingcanbecostlyandlaborious.TherearefurtherchallengesforSMEsinunderstandingandimplementingtheframeworksforenvironmentaldisclosure.ThedevelopmentanddeploymentofrelevantemergingtechnologiescouldallowSMEsandotherfirmstoaccesssustainablefinanceatmorelowercosts.Financialtechnologieshavebeenplayinganimportantroleinpromotinginclusivedevelopmentofthefinancialsector.Forexample,thedevelopmentanddeploymentofmobilepaymentsystemshasfacilitatedthecoverageoffinancialservicestoruralpopulationsallovertheworld.Inrecentyears,financialandotherdigitaltechnologieshavealsobeenusedbyfinancialfirmsinanumberofcountriestocollectgranulardataunderlyingESGrating,environmentalbenefitmeasurementandriskdetection,sustainableloanlabeling,tradingofsustainableassets,andtoimplementsustainablesupplychainfinancing(SSCF).SSCF,inparticular,canenhancetheaccesstosustainablefinancetoSMEsandreducetheirfundingcosts.Thetradingandmanagementofsustainableassetswillalsobegreatlyenhancedbydigitaltechnologies.Transactionsofsustainableassetscanbeintegratedwithclimateriskanalysis,creditriskmanagement,supervisionandotherrelevantfieldsusingtechnologiessuchasartificialintelligence,cloudcomputing,distributedledgertechnology,amongothers.Assuchsustainable622022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupfinancialtechnologiesarestillnascent,theyhavenotyetbeenabletobedeployedbroadly,particularlytodevelopingcountries.3.5.AdoptingsustainablesupplychainfinancingSustainablesupplychainfinance(SSCF)integratesESGconsiderationsintoregularsupplychainfinance,usingconsistentmethodologiesanddatatorankasupplier'ssustainabilityperformanceandthenprovidingpreferentialfinancingforsupplierswithgoodsustainabilityperformance.PartiesinvolvedinSSCFmayincludeFIs,focalcompanies,suppliers(whicharetypicallySMEs),andthird-partyratinginstitutions.Fintechtools,suchasdigitalplatformsandblockchain-basedtechnologies,arealsousedtofacilitatetheoperationsofsuchmechanisms.SSCFpracticeshaveservedsuppliersacrossvarioussectorslikemanufacturingandretailingofelectronicequipment,textile,agriculture,detergent,andotherhomecareappliancesinnationaleconomiesincludingChina,theUnitedStates,Germany,Pakistan,andothers,andregionaleconomiesincludingAfricaandSoutheastAsia.ThesemechanismshavesubstantiallyenhancedtheaccessofSMEstosustainablefinanceandreducedtheirfundingcosts.ThetwomainmechanismsofaSSCFinclude:1)low-costloanstosuppliersbasedonafocalcompany’scredit;and2)paymentadvancestosuppliersbasedontransactionsbetweensuppliersandthefocalcompany.Thelow-costcapitalmaybeprovidedbyFIslikebanksorfocalcompaniesthemselves.SuppliersareeligibletosuchSSCFwithlowcostiftheirsustainabilityscoresreachthethresholdsetbythefocalcompanyorareaccessibletodifferentdiscountratesdependingontheirsustainabilityscores.Theirsustainabilityperformancesareassessedandverifiedbythefocalcompanyitselforathird-partyratinginstitution.Variousjurisdictions,includingtheEuropeanUnion,areintroducingduediligenceregulationcallingoncompaniesandfinancialserviceproviderstoidentifyandrespondtoenvironmentalandsocialissues632022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupacrosstheirsupplychainsandvaluechains.14Regulatorsarealsoconsideringaccompanyingmeasuresaspartoftheseexpectations,underwhichgovernmentsupportforSSCFcanplayanimportantrole.4.RecommendationsTheSFWGmakesthefollowingrecommendationstoMDBs,countryauthorities,andprivatesectorplayers,withaviewtoenhancingtheaccessibilityandaffordabilityofsustainablefinance,includingfordevelopingcountriesandSMEs.Theserecommendationsareanon-exhaustivelistofactionsthatcouldbeusedonavoluntarybasistoaddressthekeybarrierstoscalingupsustainablefinanceaccordingtocountryspecificcircumstances,leveragingAction14and15oftheRoadmap.ForMDBs,technicalassistanceproviders,andotherinternationalorganizations:•Recommendation11:Devotemoreresourcesandexpertisetode-riskfinanceoperationsforsustainableactivitiesindevelopingcountries.MDBsshoulddevotemoreresources,withintheirmandateandcapitalconstraints,tosupportblendedfinanceoperationsandtechnicalassistanceprogramstohelpclientspreparebankableandsustainableprojectsandprogramsfordevelopingcountries.Theyshouldalsoencouragestafftoworkonblendedfinanceprojectsandprogramsthroughtheirinternalincentivestructureandmobilizeresourcesacrosstheorganizationthroughtheuseofbothconcessionalandnon-concessionalfinance.Itwouldbedesirabletodevelopacompletesolutionforblendedfinance,fromidentificationandpreparationofbankableprojectstoblendedfinancialclosure,takingintoaccounttheG20DWGworkonPrinciplestoscaleupBlendedFinance.MDBsandDFIsshouldcollaboratefurthertobuildrelevantknowledgeandunderstandingwithrespecttomarketstructure,regulations,institutions14Seebroadlyhttps://www.business-humanrights.org/en/big-issues/mandatory-due-diligence/642022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupandthelocalpoliticaleconomydynamicswithindevelopingcountries.Smartandinnovativeblendingoperationsshouldalsoavoidcrowdingoutprivatecapital.Furthermore,theuseofclimate-relatedriskinsurancehaspotentialtoincreasethesupplyofblendedfinancingmechanisms(seeBox3.2).•Recommendation12:Enhanceandexpandcapacity-buildingservices,includingviatrainingofofficials,regulatorsandfinancialsectorprofessionals,tosupportthedesignofsustainablefinancepoliciesandroadmapsindevelopingcountries,andenhancecapacitiesoflocalFIs.MDB,technicalassistanceproviders,andinternationalorganizationscanfocusoncapacitybuildingprogramsthataddressthedevelopmentofsustainabilityalignmentapproaches,sustainablefinancepoliciesandregulation(incl.disclosurerequirements),verificationservices,ESGratingmethodologies,policyincentives,greenfinanceproductdevelopment,andapplicationoffintechtoolstosustainablefinance.Theformsofcapacitybuildingcanincludetrainingactivitiesaswellastailoredtechnicalassistanceprograms.Thisshouldalsoincludesupporttolocalbanksandinsurancecompaniesthathaveinplaceorwanttodevelopsustainablefinancestrategiesandcrediblenet-zerotransitionplans.•Recommendation13:Explorealternativesustainablefinancemechanisms,suchasbyservingascorner-stoneinvestorsforsustainableortransitionprojectsororganizingdemonstrationprojectsindevelopingcountriestosupportthegenerationofaninvestibleSDG-orParis-alignedpipeline.MDBsandotherIFIscanhelplaunchdemonstrationprojectsinvestingintypicalsustainableandtransitionactivitiesindevelopingcountrieswithaclearpurposeoflearningaboutwaystoreducepolitical,business,andoperationalriskswhenimplementingsimilarprojects.Theselearningsshouldhelpimprovefundingaccessandreducefundingcostsofsimilarprojects.MDBparticipationcouldincludeactingasprovidersoffundsoroftechnicalassistanceforprojectdesignandoperations.•Recommendation14:Promoteinternationalcollaborationtoimprovethecomparabilityandinteroperabilityofsustainableinvestmentalignmentapproachesasappropriateandapplicable,onvoluntarybasis,inordertofacilitatecross-bordersustainableinvestmentflows.CooperationbetweenMDBsbilateraldevelopmentfinanceinstitutions,technicalassistanceproviders,countryauthoritiesandinternational652022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGrouporganizationstodevelopinternationallycomparableindicatorsortoolsmayfacilitatecross-borderandcross-marketsustainablecapitalflows.Thiscouldbeachievedthroughthecomparisonofalignmentapproaches,suchastaxonomiesandstandards,andtheidentificationofareasofcommonalityanddifferences(e.g.,CommonGroundTaxonomybytheInternationalPlatformonSustainableFinance).MDBscouldpromoteregionalcollaborationonalignmentapproachestofacilitatethedevelopmentofregionalsustainablefinancemarkets.ForcountryauthoritiesanddomesticFIs:•Recommendation15:Developapproachestoaligninvestmentwithsustainabilitygoals.Aligningonhowmarketparticipantsshouldidentifysustainableandtransitionalactivitiesisfoundationaltothedevelopmentofawell-functioningsustainablefinancemarket,asithelpstoprotectmarketintegrityandprovidesthebasisfordevelopingproductsandallocatingpolicyincentives.Governmentsandregulatorscouldusetheirconveningpowertodevelop,adopt,orencouragesystemstoaligninvestmentwiththeSDGsandtheParisAgreement,including,butnotlimitedto,principle-ortaxonomy-basedidentificationschemesandguidanceonlabelingofsustainablefinancialproducts.Jurisdictionsarealsoencouragedtocoordinateandlearnfromoneanothertoadoptbestpracticesandpromoteinteroperabilityamongapproaches.•Recommendation16:HelptheISSBtobettersupportdevelopingcountriesandSMEs.Therefore,allcountriesandrelevantnationalcorporatereportingstandardsettersbasedontheirspecificdomesticcircumstances,shouldactivelyparticipateintheISSB’sworkandbeinnovativeindevelopingbestpracticestolowerthecostofdisclosingandaccessingsustainabilitydata.Forexample,nationalorlocalgovernmentscouldconsiderdeveloping,orencouragetheprivatesectortodevelop,sustainabilitydataplatformstoservefinancialmarketparticipants.•Recommendation17:Developthenecessaryinfrastructurefordomesticsustainableloanandbondmarkets.Experiencesfrom662022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupjurisdictionswithmoredevelopedsustainablefinancemarketssuggestthatgreenloanandgreenbondmarketscanbescaledupquicklywhenjurisdictionsareequippedwiththebasicmarketinfrastructureforbankingservicesandbondmarkets.Indevelopingthesemarkets,governmentsandregulatorsshouldhaveaclearstrategytowardstheidentificationandlabellingofgreenloansandbonds,themethodologiesforvalidatingtheenvironmentalbenefitsofunderlyingactivities,andnecessarysustainabilitydisclosurerequirementsorstandards.Forinstance,thebenefitsofthestandardizationoftargetsandkeyperformanceindicatorswithinasectorfortransitioninstrumentssuchassustainability-linkedbondscouldbepursued.Governmentscouldalsoleadbyexamplebyissuingsovereignsustainablefinancialinstrumentswhich,throughademonstrationeffect,canhavepositivespilloversonthemethodologiesandstandardsofverificationanddisclosureforcorporatesustainableissuance15.•Recommendation18:Introducepolicyincentivestoscale-upsustainablefinanceinstruments.Manypolicyincentivescouldbeconsideredbycountryauthoritiestoencourageparticipationofprivatecapitalinsustainableinvestment.Thiscouldincludegovernmentsubsidiesforgreenloanandgreenbondverification,correctingmarketsignalsthroughenvironmentally-relatedtaxesandotherprice-basedinstruments,interestsubsidiesforgreenprojects,fiscalincentivesforgreenbondsandcentralbankactions–withintheirmandates-thatcouldincreasethedemandforsustainablefinancialassets.Otherpolicies,suchasemissionstradingschemesorotherpricingmechanismsandregulatoryaction,canhelpcreateanenablingenvironmenttoboostthedemandforandreducethecostsofsustainableproducts,services,andtechnologies.Jurisdictionscanselectanoptimalmixofthesepolicyincentivesbasedontheirlocalcircumstances.•Recommendation19:Deploydigitaltechnologiestoreducethecostsofsustainablefinanceoperations.Digitaltechnologieshavethepotentialtoincreasetheefficiencyandreducethecostsofsustainablefinanceoperations.MDBs,technicalassistanceproviders,andrelevant15https://www.bis.org/publ/qtrpdf/r_qt2209/images/chap4-gra4.jpg672022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupinternationalorganizationsandnetworksshoulddevotemoreresourcesinassistingandprovidingcapacitybuildingfordevelopingcountriestoadoptanddeploysuchtechnologies.Examplesofusecasesofdigitaltechnologiesincludeidentificationandlabellingofsustainableactivitiesandassets,trackinganddisclosureofgranularESGinformation,tradingandmanagementofsustainableassets.•Recommendation20:DevelopsustainablefinancialproductssuitableforusebySMEs,andincentivizetheiruptake,suchasinthecaseofSSCF.SMEsoftenlackaccesstosustainablefinancecapitalmarketinstrumentsduetohighcostsforthemtoaccesscapitalmarketsandlackofsustainabilityratingoraccreditation.AdoptingSSCFinaphasedmannerwhileconsideringcountrycircumstances,forexample,isonewaytohelpsolvebothissues.GovernmentsshouldencourageorprovideincentivestofirmstoadoptSSCFandotherinnovativesustainablefinanceproductsandservicesforSMEs.MDBscouldsupportthiseffortbyofferingtechnicalassistancetodevelopingcountries.•Recommendation21:SupportSMEsandlocalFIstodeveloptheirawarenessandcapacityinaddressingclimatechangetoreducetheirimpact.SMEsoftenhavemorelimitedinformationandcapacitytotackleclimatechange.LargerlocalFIs’connectionwithwide-rangingSMEscouldbeanimportantchanneltoovercomethisissue,astheycouldprovidevaluableadvicebasedonrichinformationonSMEs’businessstrategiesandchallengestheyface.Thisshouldincludeworktosupportlocalbanks,pensionandsovereignwealthfunds,andinsurancecompaniestodevelopandimplementsustainablefinancestrategiesandcrediblenet-zerotransitionplans.Thischannelisparticularlyimportantforjurisdictionswithabank-centricfinancialsystem,includingdevelopingcountries,wheregreeningsupplychainscanhaveasignificantimpactinachievingthecountry’sclimatechangecommitments682022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupChapterIV–ReportingonprogressontheG20SustainableFinanceRoadmapIn2021,theG20re-establishedandelevatedtheG20SustainableFinanceWorkingGroup(SFWG)toscaleupsustainablefinancethatsupportsthegoalsofthe2030AgendaandtheParisAgreement.Thesameyear,theG20FMCBGendorsedthevoluntaryandflexibleG20SustainableFinanceRoadmapproducedbythegroupandthefocusedworkonthreepriorityareas.Buildingonresourcesprovidedbyseveralinternationalorganizations(IOs),networks,otherinitiatives,andG20workinggroups,aswellasfeedbackfrommembersorcollectedduringaseriesofconsultationswithstakeholders,thisreporttakesstockoftheprogressmadeandexistingpracticesimprovedinthesethreeareas.ItalsosummarizestheprogressachievedinadvancingtheRoadmapreportedtoUNDPinitsroleastheSFWG’ssecretariatandcanhelpintheidentificationofgapsforfurthertechnicalassistanceprovisionbyIO’s.ThefulldetailsoftheprogressreportedbybothIOsandG20membersisavailableonanonlinedashboardontheSFWG’swebsitewhichwillbeupdatedannually.Inaddition,thirteencountriesvoluntarilysubmittedtheirworkinthedifferentfocusareasoftheroadmap16.Whilethedetailedcountryreportscanbefoundinthedigitalrepositoryitisworthnotingthatfivecountrieshighlightedworkondevelopingnationaltaxonomiesorcollaboratingindevelopingregionaltaxonomiesandsevencountriesreportedissuingsustainablefinancialinstrumentstoenabletheadvancementofsustainabledevelopmentwhileothersreportedworkingonsettingstandardsandlabellingtoimprovereliability,comparabilityandtransparency.Additionally,anothersevencountriesmentionedworkonunderstandingsustainabilityriskswhetherthroughscenarioanalysis,riskassessment,orstress-testing.Fivecountriesreportedworkingoncapacitybuildingactivitieswhetherinternallyorexternallyincollaborationwithotherpartnerjurisdictionsand16Thenon-submissionofcountry’svoluntaryinputstotheonlinedashboarddoesnotimplythatthecountryisnotmakingprogresstoaddresstheprioritiesidentifiedintheRoadmap.692022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGrouporganisations.Fivecountriesreportedworkingondatatopicseitheronestablishingdatabasesorenhancingsharingandinteroperability.Finally,thereportingofprogressisanon-goingprocessasmorejurisdictionsarecontinuingtosubmittheirvoluntaryprogresstrackingandotherscontinuetoupdatethemontheonlinedashboard.Section1:ReportingProgressontheSFWG’s2021PriorityAreasTopic1:ImprovingcomparabilityandinteroperabilityofapproachestoaligninvestmentstosustainabilitygoalsOverthepastfewyears,majoreffortshavebeendeployedtothedevelopmentofapproachesandtoolstoalignfinancialinvestmentswithclimateandothersustainabilitygoals,whichcontributetosustainablefinancemarketdevelopment.However,ifdevelopedinsilosandwithoutdueconsiderationoftheirinteroperability,theproliferationofinconsistentapproachescouldgeneratemarketfragmentationandincreasetransactioncosts,resultinginahigherriskofgreenandSDG-washing,andultimatelyharmingeffortstomobilizefinancetowardssustainableends.Inthisregard,theSFWGdevelopedalistofhigh-levelvoluntaryprinciplesfordevelopingalignmentapproachesandrecommendationsforinternationalcoordination.SomeoftheSFWGKnowledgePartners’progressisasfollows.TheInternationalPlatformonSustainableFinance(IPSF)reportedworkingoncoordinatingapproachesanddevelopingcoherentsustainablefinanceframeworks/tools,inareasthatenableinvestorstoidentifysustainableinvestmentopportunitiesacrosstheglobe.TheIPSFworkontransitionfinancewillexplorehowsustainablefinancealignmentapproachessuchastaxonomies,labelsandportfolioalignmentmetrics,corporatestrategyanddisclosuresmayintegratetransitionconsiderations.TheIPSFalsoreportedworkingoncomparabilityandinteroperabilityoftaxonomiesandhasdevelopedtheCommonGroundTaxonomy(CGT),contributingtointernationaleffortstoimproveglobalcomparabilityandinteroperabilityoftaxonomies.702022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupIOSCOpublishedaConsultationReportonESGRatingandDataProductsProviders,asitreportedalackoftransparencyaboutmethodologiesunderpinningthesustainabilityratingsordataproductswhichonlycoverlimitedindustriesandgeographicareasleadingtoinformationgapsforinvestorsseekingtofollowcertaininvestmentstrategies.Topic2:OvercominginformationchallengesbyimprovingsustainabilityreportinganddisclosureSustainabilityreportingremainsincompleteandinconsistentacrosscompaniesandjurisdictionsimpedinginvestorsaccessto-usefulsustainability-relatedinformation,whichcouldleadtofinancialassetsbeingmispricedbythemarket,withadditionalchallengesfacingtheSMEs.Thissituationrisksthemarket’sintegrityandunderminestheirabilitytosupporttheproperallocationofcapitaltowardssustainabilitygoals.Severalregionalorinternationalframeworksalreadyexistorareunderdevelopmenttohelporganizationsassessanddisclosesustainability-relatedinformation.Theseframeworkscansupportbothcompanies’disclosuresandfirms’investmentprocesses,byspecifyingastructure,definitions,metrics,andmethodologies.TheIFRSFoundationestablishedthenewInternationalSustainabilityStandardsBoard(ISSB)todevelopacomprehensiveglobalbaselineofhigh-qualitysustainabilitydisclosurestandardstomeetinvestors’informationneeds.Inthiscontext,IOSCOwelcomedthestrongengagementfromvariousstakeholdersontheISSB’sexposuredraftsandagreedonthecriteriaforIOSCO’spotentialendorsementoftheISSB’sproposals.TheendorsementprocesswillbeginaftertheISSBhasissueditsfinalstandards.IOSCOhasalsobegunworkincollaborationwiththeinternationalstandardsettersforauditandassurancetopromoteacommonglobalapproachtoindependentandhigh-qualityassurancestandards.Topic3:EnhancingtheRoleofInternationalFinancialInstitutionsinsupportingthegoalsoftheParisAgreementand2030Agenda712022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupWhileMDBshavemadegoodprogress,thereremainsagapbetweenthescopeoftheirclimateworkprograms,includingtheprovisionoftechnicalassistance,andthescaleandspeedrequiredtoachievetheobjectivesoftheParisAgreementand2030Agenda.Inthisregard,theMDBsreportedworkingtoscaleupandacceleratetheirworkinthisarea,enhancingtheclimate-relatedfinancingcommitments,theengagementwithgovernmentsinemergingmarketsanddevelopingcountriesandthesupportforqualityNDCsthroughfinancingandcapacityassistance.EventhoughMDBsguaranteeproductscontinuetoplayastrongroleinmobilizingprivatesectorinvestments;Effortsareunderwaytoinnovatenewproductsandadaptexistingonestoattractprivateinvestmentsinnewerareas.TheMDBClimateWorkingGroup,launchedatCOP24,isworkingunderajointapproachwithsixcoreareasforaligningwiththeParisAgreementandcoversallfinanceflows.Foritsoperationalization,roadtestingmethodologiesarebeingdeployedtofinalizeintimetomeetMDBcommitments,aimingtohavethisworkcompletedandoperationalby2023–2417.AtCOP26,theMDBsreleaseda“CollectiveClimateAmbitionJointStatement”whichwelcomesthegrowingambitionreflectedinthenewNationallyDeterminedContributions(NDCs)andcommitstosupportthedeliveryoftheseplansandtocontributetoaligntheirfinancingflowswiththeParisAgreement.MDBsalsocommittedtoscalingupclimatefinance,operationalisingnewapproachestosupportNDCsandacceleratingtherealizationoftheobjectiveoftheUnitedNationsFrameworkConventiononClimateChange(UNFCCC).Inadditiontothat,MDBsareworkingonanewjointLong-TermStrategiesInitiativethataimsatsupportingcountriesinthepreparationandimplementationoflong-termlowGHGemissionand17Themethodologyisdesignedtoclassifyoperationsonaproject-by-projectbasis,lookingattheiremissionsprofiles.Inthiscontext,projectsareclassifiedascorrespondingtoajointlyagreed-onpositivelistofprojecttypesthatareconsidereduniversallyalignedwiththegoalsoftheParisAgreementinallcontexts,ortoanegativelistofprojectsthatareuniversallynotaligned.722022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupclimate-resilientdevelopmentstrategiesintheframeworkofsustainablefinance.TheFinanceinCommonSummit(FICS)operatesasaplatformforMDBstoworkwithregionalassociationsofPublicDevelopmentBanks(PDBs),aswellaswiththeInternationalDevelopmentFinancingClub(IDFC)andindividualinstitutions.PDBsareimportantactorsoftheglobalfinanciallandscape:theymanageUSD23trillionoftotalassetsandprovideuptoUSD2.7trillionofannualinvestments,outofwhichmorethan83%isfromPDBsfromG20countries.FICSreinforcesthecoherenceinPDBs’strategiesandoperationsbyacceleratingtheirconvergencetowardssharedstandardsandbestpractices,todeliveramoreeffectivecollectiveactionforsustainabledevelopment.FICSproducedafirst“ProgressReporttotheG20”whichcontributestoandalignswiththeobjectivesoftheRoadmap.Itincludesconcreteprojectsontheground,effortstodeveloptaxonomies,orcontributionstotheRoadmap’sactions.Section2:ReportingProgressontheSFWGG20RoadmapFollowingtheG20SustainableFinanceRoadmap,thissectionprovidesanoverviewoftheprogressmadeineachofthefiveFocusareasproposed:(1)Marketdevelopmentandapproachestoaligninvestmentstosustainabilitygoals;(2)Consistent,comparable,anddecision-usefulinformationonsustainabilityrisks,opportunitiesandimpacts;(3)Assessmentandmanagementofclimateandsustainabilityrisks;(4)RoleofIFIs,publicfinanceandpolicyincentives;and(5)Cross-cuttingissues.1.FocusArea1:MarketdevelopmentandapproachestoaligninvestmentstoSustainabilityGoalsEighteenIOs,networksandinitiativeshavereportedcontributingtooneorseveralofthefiveactionsintheFocusArea1.Inparticular,IOsreporteddeployingseveraleffortstosetframeworksandguidelinestoovercomeobstaclesinthefinancialsystemandfacilitatetheachievementoftheSDGsandtheParisAgreement.Additionally,somereportedplanningtoenableinteroperabilitywhileworkingonaresearchanddevelopmentagenda,while732022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupothershavebeenworkingonprovidingmoreclarityandtransparencyaboutcommonalitiesanddifferencesbetweentaxonomies-basedapproach,andotheralignmentapproaches.Someworkhasalsobeendevelopedonbuildingtransitionpathwaysinthesustainableinfrastructurelandscape,andsomeinstitutionshavebeenworkingondevelopingpartnershipsforthepromotionofsustainability.Overcomingbarriers.UNEPFIisproposing(expectedformallaunchbythelastquarterof2022)asetofprinciplesforresponsiblebankingandalegalframeworktoidentifyandovercomethebarrierstoafinancialsystemthatfacilitatestheachievementoftheSDGs.Additionally,UNEPandUNCTADhavedevelopedamethodology18tomeasurethenumberofcompaniespublishingsustainabilityreports;andIPSFandDESAcontinueexploringsustainablefinancealignmentapproaches.Improvingcoordination.InstitutionssuchasIFC(SBFN),UNCTAD(SSE),UNDP,UNEPFIandWorldBankhavebeenworkingactivelyonthedevelopment,atanationallevel,ofalignmenttoolsandapproaches(initiallyfocusedonSustainableFinanceTaxonomies),andotheractivitiesandstrategiesthatcanbeimplementedtopromotesustainablefinanceincountries.Theseentitieshavealsobeenprovidingengagementplatformsfortheirmemberstosharetrendsanddevelopmentsinspecifictopicsofinterestforbetterregionalintegrationtoshapeacoordinatedapproachwithothermembers.AnexampleofsuchcoordinatedworkistheWorkingGrouponSustainableFinanceTaxonomiesinLatinAmericaandtheCaribbean(GTT-LAC).TheCoalitionofFinanceMinistersforClimateAction(theCoalition)hasalsoservedasaplatformfordialogues19withrepresentativesfromISSBandTNFDtoencouragecoordinationaroundcorporatesustainabilityreportingpractices.TheIMF,WBG,OECD,andBISareworkingjointlytooperationalizeanddesignacommonminimumguidancefortheG20high-levelvoluntaryprinciplesforsustainablefinancealignmentapproaches,includingtaxonomies20.The18https://wesr.unep.org/article/indicator-126119https://www.financeministersforclimate.org/news/hp5-stakeholder-dialogue-corporate-sustainability-reporting-updates-issb-and-tnfd20ForthcomingjointreportexpectedtobepublishedinOctober2022742022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupguidancebuildsonpreviousworksuchastheCommonGroundTaxonomyandtheinputpapersubmittedtotheSFWGbyUN-DESAandIPSFin202121.Itwillapplyprimarilytoassetlevelapproaches,withafocusontaxonomies.Additionalguidancewillbeneededoninteroperabilityofotherapproachesincludingportfoliolevelapproaches,labellingandrating.Inthemeantime,someFIsareimplementingtheRoadmaptoaligntheirportfolioswithnet-zerotargets.GFANZmembershavecoordinatedonasetofdraftguidelinesthatwillimprovecredibilityandcomparabilityoffinancialsectortransitionplansandareworkingonsectoralpathwaysandreal-economytransitionplanstosupportcoordinatednet-zeroplanningandengagementthatwillfacilitatemarketdevelopmentandalignmentofinvestmentswithsustainabilitygoals.GFANZalsohasadedicatedworkstreamonportfoliomanagementalignmenttoenhanceportfolioalignmentmethodologies,shedlightoncommonalitiesbetweenalignmentmethodologies,andpromoteadoptionbyaddressingbarrierstodeveloping,implementingandusingportfolioalignmentmetrics.Benchmarkingandmeasuring.UNCTADreportedmonitoringtheevolutionofthesustainablefinancemarkettoaccuratelymeasureitssize,geographicalexposure,andcontributiontosustainabledevelopmentoutcomes.OtherIOscontinuetoproviderecommendationsandguidelinestohelpcountriesintheassessmentofthealignmentoffinancialcentrestotheSDGsandthemonitoringandreviewbuildingblockoftheirIntegratedNationalFinancingFramework(INFFs).TheOECDhasbeensurveyingtheinvestmentstrategiesofinstitutionalinvestorsonanannualbasistounderstandalignmentofprivatefinancingwithSDGSandESG.TheOECDhasalsopublishedareportonfinancialmarketsandclimatetransition,andonESGratingandclimatetransitionwhichhighlightedemergingpracticesandgrowingmarketfragmentation,andofferedrecommendationstoimprovethecomparabilityofmetrics,andinteroperabilityofapproaches.2221UN-DESA,IPSF(2021).ImprovingCompatibilityofApproachestoIdentify,VerifyandAlignInvestmentstoSustainabilityGoals.https://g20sfwg.org/wp-content/uploads/2021/09/G20-SFWG-DESA-and-IPSF-input-paper.pdf22SeeOECD(2021),FinancialMarketsandClimateTransition:Opportunities,challengesandpolicyimplications”,OECD(2022),“ESGRatingsandClimateTransition:AnassessmentofthealignmentofEpillarscoresandmetrics”.752022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroup2.FocusArea2:Consistent,comparable,anddecision-usefulinformationonsustainabilityrisks,opportunities,andimpactsNineteenIOs,networks,andinitiativeshavereportedworkingtowardstheactionsinFocusArea2.Overall,IOshavebeensupportingeffortsforconsistentinformationstandardstomaximizepositiveimpactsforthefinancialsector,improvingcorporatedisclosureonsustainabledevelopment-relatedmatters,addressingsomeinformationgapsonsustainabilitydata.Consistencyofinformationstandards.TheIFRSFoundationestablishedthenewInternationalSustainabilityStandardsBoard(ISSB)todevelopacomprehensiveglobalbaselineofhigh-qualitysustainabilitydisclosurestandardstomeetinvestors’informationneeds.VariousinternationalorganizationsengagingwiththeISSBindifferentcapacities,workedjointlywiththeIFRSFoundationtoinformdifferentjurisdictionsonthedifferenttechnicalaspectsoftheISSBstandardsettingprocessandencouragedcountriestoparticipateactivelyintheconsultations.UNEPFIisworkingactivelyacrosssectorstoprovideconsistentstandardsforthefinancialsectortomaximisepositiveimpactswhileothers,suchasGI-HUBandDESA,havebeenworking,eachseparately,ondevelopingaframeworktoleverageprivatesectorparticipationandimprovecorporatedisclosureonsustainabledevelopment-relatedmatters.UNCTAD’sSustainableStockExchanges(SSE)programmeisworkingactivelywithstockexchangesaroundtheworldtoprovideconsistentguidancetolistedcompaniesonthereportingofsustainabilityinformationsuchastheModelGuidanceonClimateDisclosuretoguideissuersonTCFDimplementation.Bridginginformationgapsonsustainabledata.Forinstance,UNEPFIhasdevelopedanImpactMethodology,whichprovidesaframeworktoassesstheimpactsofabank’sportfoliosonsustainabilityfactors.OECDcarriesoutanannuallargepensionfundsurveytounderstandinstitutionalinvestmentactivityrelatedtosustainabledata.TheUNCTADSSEprogrammehasbegunbenchmarkingstockexchangesinG20countriesbasedonthesustainabilityperformanceofissuersoneachexchange,examiningfactorssuchasclimate762022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupemissionsandgenderequality.23OtherIOssuchastheIMF,UNCTAD,NGFSandDESA,aredraftingreportsand/orcreatingmetricstoreducethedatagapsandimprovethedataqualityoftheavailableresourcesincludingmonitoringpoliciesandregulatoryframeworksrelatedtosustainablefinance.InApril2022,theIMFsubmittedtotheIndonesianG20PresidencyaworkplanforapossiblenewDataGapsInitiative(DGI)focusedonfourtopics:(1)ClimateChange;(2)HouseholdDistributionalInformation;(3)FintechandFinancialInclusion;and(4)AccesstoPrivateandAdministrativedataandDataSharing.Improvingdataquality,andusefulness.Toparticipateintheimprovementofdataquality,theNGFSpublishedareportondatagapsprovidingspecificpolicyrecommendationsforimprovingtheavailability,quality,andcomparabilityofclimate-relateddatainJuly2022andiscurrentlyworkingonfinalizingadirectoryofclimate-relateddecision-usefulmetricsanddatasources.Moreover,UNEP-FIandUNCTADhavebeenengagingwithdataproviderstocreatecomparablealignmentmetrics.WhiletheUNEP-FIandOECDhavebeenparticipatingactivelyintheSMEworkstreamoftheEUplatformonsustainablefinance,IPSFandDESAhavepublishedandpresentedreportsprovidinginformationaboutvariousjurisdictions’frameworksinthisareaandinparticularforSMEsregardingtheiraccesstosustainablefinanceflowsandtheirissuesgiventhesustainablefinanceapproaches,respectively,whileencouragingongoingorfutureworktobetterunderstandthechallengesandbenefitsofsustainabilityreportingforSMEsandemergingmarketeconomies.Natureandbiodiversity-relatedinformation.TheUNEP-FIreportedplanstopresentatooltoalignportfolioswiththepost-2020GlobalBiodiversityFrameworkduring2022.TheSBFNreportedworkingonknowledgeexchangeseffortstogathertheirmembers’demandsonnatureandbiodiversity-relatedsupport.UNCTADreportedisrevisingthecoreSDG23UNSSE(2021)CarbonEmissionsinPublicMarkets:analysisofover2,000companieson22stockexchangesinG20countries,andUNSSE(2021)Genderequalityoncorporateboards:analysisof2,200issuerson22stockexchangesinG20countries.https://sseinitiative.org/publications/772022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupindicators(GCI24)toincludenewindicatorsonlanduseandbiodiversity.LaunchedinJune2021,theTaskforceonNature-relatedFinancialDisclosures(TNFD)hassetouttobuildupontheapproachadoptedbytheTCFDandalignwiththeemergingglobalbaselineforsustainabilitystandardscurrentlyunderdevelopmentbytheInternationalSustainabilityStandardsBoard(ISSB).Natureandbiodiversity-relatedinformationarealsoconsideredindraftEuropeansustainabilitystandardscurrentlyunderconsultation25.TheCoalitionofFinanceMinistersforClimateAction(theCoalition)’sreportonnature-relatedrisk26alsoincludespolicyrecommendationtobetterintegratenatureandbiodiversity-relatedinformationintoministryoffinance’sdecisionmaking.3.FocusArea3:AssessmentandmanagementofclimateandothersustainabilityrisksTheFSBhasbeencoordinatingtheroadmapforaddressingclimate-relatedfinancialrisks.InadditiontoanannualprogressreportpresentedtotheG20FMCBGinJuly2022,itwillsubmitthreeotherreportstoG20FMCBGin2022,onachievingconsistentclimate-relateddisclosures,onscenarioanalysis(co-developedwiththeNGFS)andonregulatoryandsupervisoryapproachestoaddressingclimate-relatedrisks.Inaddition,eighteendifferentIOs,networks,andinitiativeshavereportedworkingtowardstheactionsproposedintheFocusArea3.IOshavebeenactivelyworkingaimingtoperformassessmentandmanagementofclimateandothersustainabilityrisksusingasetofdiversestrategies.Tosupporttheimprovementofbanks'riskmanagementand24UNCTAD2019.GuidanceoncoreindicatorsforentityreportingoncontributiontowardsimplementationoftheSustainableDevelopmentGoals(GCI).Availableat:https://unctad.org/en/PublicationsLibrary/diae2019d1_en.pdf25https://www.efrag.org/Assets/Download?assetUrl=%2Fsites%2Fwebpublishing%2FSiteAssets%2FED_ESRS_E4.pdf26https://www.financeministersforclimate.org/news/hp5-publishes-report-nature-related-risks-finance-ministries782022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupsupervisors'practices,theBaselCommitteeonBankingSupervisionhasdevelopedprinciplesfortheeffectivemanagementandsupervisionofclimate-relatedfinancialrisks.SomeIOshavebeenworkingonperformingstudiesofliabilityriskandothersprovidinganassessmentoftheimplicationsofclimatechangeandtheroleofsustainablefinancemarketsinsupportingtransition.Additionally,workonthetransitionfinanceframeworkhasbeenperformed,whileprovidinginformationaboutmacroeconomic,growth,employment,andstabilityimplicationsofaclimateMinskyshocktofinancialmarketsandtheeconomyandshowingtherolethatcanbeplayedbyFIsandinstrumentstoamelioratetherisk.Consideringsustainabilityrisksinfinancialrisksassessment.TheIMFhasstartedimplementingaworkplantoincorporateclimatechangeconsiderationsinFinancialSectorAssessmentProgramriskanalysisandplanstoaddclimatescenariosforphysicalandtransitionriskthatdrivedifferentpathsformacro-financialvariablesasanextstep27.TheNGFShaspublishedathirditerationofitsclimatescenarios.Moreover,whiletheUNEP-FI,theNGFSandOECDstartedassessingbiodiversity/nature-relatedrisksinthefinancialsystems,theSIFprovidesassessmentfortheinsuranceprotectiongapandregulatorypolicyoptions.OtherIOssuchastheUNCTAD,SBFN,DESAandOECD28areworkingonreportsorpublicationsthatprovidefurtherinformationregardingfinanceandtechnicaladvice,measurementframeworks,andclimate-relatedrisksassessmentsforgovernments,financialsectorregulators,stockexchanges,andFIs.ILOupcomingguideforfinancialinstitutionswillprovidepracticalrecommendationshowtointegrateJustTransitionconsiderationsintheiroperations,includingtheassessmentofassociatedrisksandopportunities.TheCoalitionhasproduced27SeetheIMFStaffClimateNote:ApproachestoClimateRiskAnalysisinFSAPs(imf.org)28TheOECDisfinalizingitsreportonManagingClimateRisksthroughRBCduediligence:atoolforinstitutionalinvestorsprovidesguidanceonhowinvestorscanapplytheduediligenceframeworkrecommendedbytheOECDGuidelinesforMultinationalEnterprisestoidentifyandrespondtoclimateriskstosocietyandtheenvironment,includingintermsofclimateriskgovernance,assessment,management,tracking,reportinganddisclosure.792022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupanoteonclimate-relatedrisk29toraiseawarenessandexploreappropriateriskmanagementapproaches.Understandingthemacroeconomicimplicationsofclimaterisksandclimatepolicies.TheG20FWGhashadaninitialdiscussiononthemacroeconomicimplicationsofclimatechangeandassociatedclimatechangemitigationpolicyoptions.Moreover,toprovideaconcretefollow-upontheMinisterialmandateofthe2021Octoberand2022FebruaryCommuniqués,theFWGhasbeenworkingtoconductamoresystematicanalysisofmacroeconomicrisksstemmingfromclimatechangeandofthecostsandbenefitsofdifferenttransitions,includingbydrawingonwell-establishedmethodologies.TheCoalitionrecentlypublishedarecommendationreportonnature-relatedrisk30,tobetterunderstandeconomicandfinancialrisksofnaturelosswiththepolicyoptionstoaddressthem.Separately,theCoalitionalsoreleasedanotherreport31thatlookedintoimplicationofministryoffinance’climatepolicies,includingonmacroeconomicmodelling,climate-informedfiscalriskassessmentandgreenbudgeting.Understandingsustainabilityrisksimplications.Inthisline,theILOiscontributinganinputpapertothetransitionfinanceframeworkbyhighlightingthesocio-economicimpactsoftheclimatetransition,whiletheIMFisassessingthebroadermacroeconomicimpactsofvariousclimatepolicies.TheNGFShaspromotedtheimplementationofclimatestresstestsandfurthersitsworkwithregardtothesupervisionofclimate-relatedandenvironmentalrisks.UNEPFIandDESAareplanningactivitiesrelatedtoinformingstakeholdersaboutclimate-riskconsiderationsandhowtoincorporatethemintotheirworkplans.29https://www.financeministersforclimate.org/sites/cape/files/inline-files/Climate-Related%20Risks%20for%20Ministries%20of%20Finance%20-%20An%20Overview%20%28CFMCA%29_1.pdf30https://www.financeministersforclimate.org/news/hp5-publishes-report-nature-related-risks-finance-ministries31https://www.financeministersforclimate.org/sites/cape/files/inline-files/Driving%20Climate%20Action%20through%20Economic%20and%20Fiscal%20Policy%20and%20Practice.pdf802022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroup4.FocusArea4:RoleofIFIs,publicfinance&incentivesSeventeenIOs,networks,andinitiativeshavereportedworkoractivitiesthatfocusedontheactionsofFocusArea4.IOshavecommittedtoseveralplansorJointActionsonthesustainablefinancefront,andsomeofthemhavebeenworkingondevelopingaframeworkonhowtobestleverageprivatesectorparticipationtoscaleupsustainableinfrastructureinvestmentwhileprovidingtechnicalassistanceintheregiontodevelopfinancialproductsandservicesforclimatemitigationandadaptation.Moreover,someofthemhavealsobeenworkingwithinstitutionalinvestorstomobilizemorecapitalforsustainabledevelopment32andsomeothereffortshavebeenmadetoupdateorganizationalstrategytoconsideremergingissuesincludingtheCOVID-19pandemic,SDGsandtransitionstolowgreenhousegasemissionsandclimate-resilientfuture.Theforumoninternationalpolicyleversforsustainableinvestment,hostedbytheG20IndonesiaPresidency,discussedarangeofpolicyleversthatcanincentivizeorcreateanenablingenvironmentforsustainablefinanceandincreaseinvestmentthatsupportanorderly,justandaffordabletransitiontowardslow-greenhousegasemissionsandaclimate-resilientdevelopment33.Buildingonthistechnicalinitiative,theG20FMCBGshadafruitfulexchangeofnationalexperiencesonpoliciestoaddressclimatechangeandpreservefinancialstabilityandeconomicgrowthinthelong-term34.TheIMFisassessingthebroadereconomicimpactsofvariousclimatepolicies,includingbothpricingandnon-pricingpoliciesinajointIMF-OECDreportonequivalenceandcomparabilityofpricingandnon-pricingpolicies.Aligninginstitutionstosustainabilitygoals.UNEP-FIandIsDBhaveimplementedactionplanstoprovidebetterguidelinesregardingsustainablefinanceandclimatechange.Inaddition,theAIIBhascommittedtoaligning32TheAsianGreenBondFund(https://www.bis.org/press/p220225.htm)launchedbyBISin2022,isaninitiativetochannelcentralbankreservestofinanceprivatesectorandotherinvestmentsingreenprojectsinAsia.33seethesummaryoftheeventinAnnex34SeethepressreleaseoftheHigh-LevelBreakfastDiscussiononClimateMitigation,whichwasheldinJuly2022,inBali,asapartofTheThirdSeriesofG20FMCBGMeetingActivities.812022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupitsoperationstotheParisobjectivesbyJuly2023whiletheSBFNassistsmembersfromacrossemergingmarketstoadvancenationalsustainablefinanceroadmapsandunlockinvestmentopportunities.UNCTADandGI-HUBarealsoworkingonresearchabouttheroleofbanksinsupportingclimateactioninemergingcountriesanddevelopingavoluntaryandnon-bindingframeworkonprivatesectorparticipationtoscaleupsustainableinfrastructureinvestmentrespectively.Mobilizingprivatefinance.Specifically,theAIIBhascreatedaSpecialFundWindow(SFW)tomakeitsfinancingmoreaffordabletoitslessdevelopedmembers,whileUNCTAD’sSustainableInstitutionalInvestment(SII)programmehasbeenworkingwithinstitutionalinvestorstomobilizemorecapitalforsustainabledevelopmentandensuretheirinvestmentstrategiesandportfolioholdingsarealignedwiththeSDGs.TheBISlaunchedtheAsianGreenBondFundthatchannelcentralbankreservestogreenprojectsintheregionincompliancewithstrictinternationalgreenstandards,providingalternativesofgreenfinancialinstruments.TheIMFpublishedanotethatdiscussespotentialwaystomobilizedomesticandforeignprivatesectorcapitalinclimatefinance,asacomplementtoclimate-relatedpolicies.TheIMFissettopublishananalyticalchapteroftheGlobalFinancialStabilityReportthattakesamorein-depthlookatfinancialmarketsandinstrumentsinscalingupofprivateclimatefinanceinemergingmarketanddevelopingeconomies.Meanwhile,theCoalitionofFinanceMinistersforClimateActionshascalledfortheneedofprivatesustainableinvestmentforgreenrecovery35aswellasmappedprivatefinancialsector’scommitmentsandmethodstoalignwiththeParisAgreementgoalsandexploreshowfinanceministriescansupportthesecommitments36Capacitybuilding.Inthiscontext,theIMFissupportingcountriesintegratingclimatepoliciesintheirmacro-frameworksthroughcapacitydevelopment;theIsDBplanstopromotesustainable,resilient,inclusiveeconomicgrowththatiscompatiblewithenvironmentalandclimategoalsforinclusivehuman35https://www.financeministersforclimate.org/news/coalition-publishes-2021-green-recovery-report-building-momentum-strong-recovery-and36https://www.financeministersforclimate.org/sites/cape/files/inline-files/Financial%20Sector%20Paris%20Alignment%20%28CFMCA%29%20-%20Summary%20for%20Policymakers_0.pdf822022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupdevelopmentthatisbuiltuponafoundationofsustainable,resilient,andsustainableinfrastructure.TheNGFShassetupaTaskforceon“CapacityBuildingandTraining”toidentifygoodpracticestofacilitatetheupskillingofcentralbankersandsupervisorsinthefieldofclimate-relatedandenvironmentalrisks.TheCoalitionlaunchedareport37thatanalysevariouscountries’sustainablefinanceroadmapstobetterunderstandcommonalitiesanddifferencesandidentifybestpractices,tofacilitatecountryexperiencesharing.5.FocusArea5:Cross-cuttingissuesSeventeenIOs,networks,andinitiativeshaveactivelybeenengagedwithactivitiesaimingtoaddresstheActionsinFocusArea5.IOshaveworkedtoidentifybarrierstoachievingacoherentsystemofnormsforimpactmanagement.Moreover,workinggroupshavebeenestablishedtoexplorehowsustainablefinancealignmentapproachesmayintegratetransitionconsiderationsandframeworksweredevelopedonhowtoleverageprivatesectorparticipationtoscaleupsustainableinfrastructure.Stock-takeofemergingdigitalsolutions.Inthisregard,theGreenDigitalFinanceAlliance’sGreenFintechClassificationReport38mapsdatabaseofgreenfintechinnovationsandidentifieswaystoimprovetheenablingenvironmentthatfosteraccessibilityofsustainabilitydata.UNEPFIisworkingtoaddressbarrierstoachievingacoherentsystemofnormsandresourcesforimpactmanagement,whiletheAIIBhasbeenactivelyinvestinginfundsandprojectsthatapplydigitaltechnologyusedtosupportsustainabilitygoals.Furthermore,theGI-HUBisworkingondigitalizationandautomation,aimingtoenablecost-efficientandbetter-qualityinfrastructureandtoworkwithotherrelevantIOs,todevelophigh-levelprinciplesforacredibleandconsistentframeworkwithbetter-qualityinfrastructurethatisalsoresilienttofutureshocks.TheBISalsolaunched,throughitsInnovationHubCentreinHongKong,“ProjectGenesis”,thatexplorestokenizationofgreenbondstoenableinvestmentsinsmalldenominations,combinedwithreal-time37https://www.financeministersforclimate.org/sites/cape/files/inline-files/Sustainable%20Finance%20Roadmaps%20Report%20-%20Nov%202021.pdf38https://greendigitalfinancealliance.org/green-fintech-classification/832022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGrouptrackingofenvironmentaloutputs–asawaytoencourageinnovativeapproachestogreenbonddistributionandtransparency.Financingajustclimatetransition.IPSFhasestablishedaworkinggrouptoexplorehowsustainablefinancealignmentapproachesmayintegratetransitionconsiderations.TheUNEPFIhasworkedonthepracticalapplicationsoftheEUTaxonomyforbanklending,assessingthepossibilitiesEURegulationprovidesfortransitionfinanceandsynergiesbetweenimpactanalysisandtarget-setting.Inadditiontothat,theUNCTADhasbeenpromotingtheuptakeofsustainabilitybycapitalmarketsandtheOECDhasbeendraftingguidelinesforeligibilityandintegrityduringtransitionfinancing.Inthemeantime,someFIsareimplementingtheRoadmaptoaligntheirportfoliotonet-zerotargetsbyworkingonsectoralpathwaysandreal-economytransition.TheOECDhasreviewedESGandclimatetransitionpracticesandissettingouthigh-levelpolicyrecommendationsformarketpracticestostrengthenESGinvestingandtheClimateTransition39,aswellasGuidanceonTransitionFinance,focusingoncrediblecorporateclimatetransitionplans.TheILOdevelopedareportfocusingonFinanceforaJustTransitionandtheRoleofTransitionFinanceandisproducingapolicybriefonfinancingajusttransition.Aligningcapacitybuildingefforts.ICMAandIsDBhavedevelopedtraining/developmentprogramsrelatedtosustainablefinance/development.Others,suchasNGFS/BIS/SIF/IAISandDESAhaveworkedonplatformcontentfortrainingcoursesandbettercommunicationamongcentralbanks/prudentialsupervisorsandprivateinvestors,respectively.SBFNandUNCTADhavebeenprovidingtechnicalassistanceandcapacitybuildingtoworkalongwithgovernments.OECDisdevelopingaframeworktoassistcomprehensiveapproachtocapacitybuildingforsustainableinfrastructure,bothfrompolicyareaandsectorperspectives.TheCoalitionhasalsodevelopedmappings40ofvariouscapacitybuildingsthatarerequiredtofurthermainstreamclimateactionsinministryoffinance.39OECD(2022),PolicyGuidanceonMarketPracticestoStrengthenESGInvestingandFinanceaClimateTransition,forthcoming.40https://www.financeministersforclimate.org/news/hp2-publishes-report-mainstreaming-climate-action-ministries-finance842022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroup852022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupAnnexforChapterIInanefforttodemonstratetheworkingelementsofthetransitionfinanceframeworkindifferentcontexts,andtoenhancecross-jurisdictionsunderstandingofdifferentapproachestoscalingupfinancefortheclimatetransition,G20SFWGmembersheardcasestudiesfromjurisdictionsandFIsworkingonclimatetransition.Box1.1TransitionFinanceinJapanInMarch2020,astudygrouponenvironmentalinnovationfinancewithintheMinistryofEconomy,Trade,andIndustry(METI)publishedaconceptpaperthatillustratesprinciplesonTransitionFinance.Tocomplementtheseprinciples,theMETI,theMinistryofEnvironment,andtheFinancialServicesAgencypublished“BasicGuidelinesonClimateTransitionFinance”inMay2021.TheguidelinesweredevelopedinaccordancewithICMA’sHandbook.Theguidelinesareaimedatservingasareferenceformarketparticipantsontheissuanceanduseoftransitionfinance.AspertheGuidelines,issuersandfundraisersshouldarticulateatransitionpathwayandassigntargetsalignedwiththeParisAgreement.Asareferenceforcompanies,theMETIandotherrelevantagenciesaredevelopingsector-specificdecarbonizationroadmapswhereeffectivenessandavailabilityoftransitionandinnovativetechnologiescontributingtonet-zeroaredescribedintimelineby2050.Todate,theroadmapsforiron&steel,chemistry,electricity,oil,gas,paper&pulp,cement,shippingandaviationsectorshavebeendeveloped.AroadmapfortheautomobilesectorisplannedtobedevelopedinFY2022.Toincentivizecompanies’businessshiftsupportedbytransitionfinance,Japanhasalreadyintroducedasubsidyschemeforthirdpartyverification.(Source:Japan)862022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupBox1.2TransitionalactivitiesintheEUTaxonomyTheEUTaxonomyforSustainableactivities(EURegulation(EU)2020/852)isaclassificationsystemwithalistofenvironmentallysustainableeconomicactivities.TheEUtaxonomyprovidescompanies,investorsandpolicymakerswithappropriatedefinitionsforwhicheconomicactivitiescanbeconsideredenvironmentallysustainable.Inthisway,itaimstocreatesecurityforinvestors,protectfromgreenwashing,helpcompaniestobecomemoreclimate-friendly,mitigatemarketfragmentationandhelpshiftinvestmentswheretheyaremostneeded.Beyonditsroleasatransparencytool,largerand/orlistedcompaniesarelegallyrequiredtoreportontheirenvironmentallysustainableactivities.Theuseoftheclassificationsystembeyondreportingisvoluntary.TheRegulationestablishes6environmentalobjectivesfortheEUTaxonomyandsetsout4overarchingconditionsthataneconomicactivitymustmeetinordertoqualifyasenvironmentallysustainable.UndertheRegulation,delegatedactsprovidethelistofenvironmentallysustainableactivitiesbydefiningtechnicalscreeningcriteriaforeachenvironmentalobjective.Specifically,fortheenvironmentalobjectiveof“climatechangemitigation”,theEUTaxonomyincludesbothlow-carbonactivitiesandtransitionalactivities.IntheEUTaxonomy,a“transitionalactivity”isaneconomicactivityforwhichthereisnotechnologicallyandeconomicallyfeasiblelow-carbonalternativebutsupportsthetransitiontoaclimate-neutraleconomyconsistentwithapathwaytolimitthetemperatureincreaseto1.5℃abovepre-industriallevels,includingbyphasingoutGHGemissions,inparticularemissionsfromsolidfossilfuels,andwherethatactivity:(a)hasemissionlevelsthatcorrespondtothebestperformanceinthesectororindustry;(b)doesnothamperthedevelopmentanddeploymentoflow-carbonalternatives;and(c)doesnotleadtoalock-inofcarbon-intensiveassets,consideringtheeconomiclifetimeofthoseassets.Pursuanttothecurrentdelegatedacts,thereare28transitionalactivitiesin5sectorsintheEUTaxonomy,includingmanufacturing,energy,transport,constructionandrealestateactivities,informationandcommunication.For872022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGrouptheseactivities,technicalscreeningcriteriaaresetforcarbonintensity,energyefficiencyand/ortransitionpathways.Forexample,“renovationofexistingbuildings”isatransitionalactivityifmeetingthefollowingTechnicalScreeningCriteria:•Substantialcontributiontoclimatechangemitigation:thebuildingrenovationcomplieswiththeapplicablerequirementsformajorrenovations;alternatively,itleadstoareductionofprimaryenergydemand(PED)ofatleast30%;•DoNoSignificantHarm(DNSH):theactivityshouldnotdoanysignificantharmtoanyoftheother5objectivesoftheEUtaxonomy;ApartfromtheTechnicalScreeningCriteria,atransitionalactivityshouldalsocomplywithminimumsocialsafeguards,andinformationdisclosurerequirementsforbothfinancialandnon-financialundertakings.Forexample,afinancialproductshoulddisclose:1)theenvironmentalobjective(s)towhichtheinvestmentunderlyingthefinancialproductcontributes;2)adescriptionofhowandtowhatextenttheinvestmentsunderlyingthefinancialproductareineconomicactivitiesthatqualifyastransitionalactivitiesintheEUTaxonomy.InMarch2022,theEUPlatformonSustainableFinancereleasedaReportonenvironmentaltransitiontaxonomy.ThePlatformreportprovidesinputonthistopic,withoutprejudginganydecisionbytheCommissiononthematter.(Source:EuropeanCommission)Box1.3China’sHuzhouCityTransitionFinanceCatalogAsoneofChina’sgreenfinancepilotzones,Huzhouhasintroducedpoliciesandpracticesingreenandtransitionfinance.InJanuary2022,theHuzhouCityTransitionFinanceCatalog(firstedition)(“theCatalog”)wasissuedasthefirstmunicipal-leveltransitionfinancetaxonomyinChina.TheCatalogdefinestransitionfinanceas“financialservicesthatuseavarietyoffinancialinstrumentstosupportthedecarbonizationofGHG-intensive882022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupcompaniesandadoptionlow-carbontechnologies.”Withjointeffortsofvariouslocalgovernmentalagencies,thecatalogueincluded30transitionalactivities(includingtechnicalpathways)inninesectorsandsetsthelow-carbontransitionperformancetargetsfortheseactivities.Theseninesectorsarepower,ferrousmetal,non-ferrousmetal,nonmetalmineralproducts,chemical,fiber,textile,paper,andagriculture.ForeachsectorintheCatalog,severaltechnicaltransitionpathwaysarespecified.Forexample,severaltechnicalpathwaysprovidedfortheagriculturesectorinclude:GHGemissionsreductionviainstallingsolarphotovoltaicpanelsontopofagriculturalgreenhouses;carbonsinksthroughintegratedfisheries;carbonsequestrationthroughcropstrawreturnedtofarmland;andGHGemissionreductionthroughlivestockandpoultrymanuremanagement.Foreachtransitionactivityincluded,theCatalogsetsaperformancebenchmark(averageindustrialperformance)andaperformancetarget,whichcanbemeasuredinimprovementinenergyefficiencyoftheactivity(usedinfirsteditionoftheCatalog)and/orreductioninGHGintensity(inplannedrevisionoftheCatalog).InadditiontopublishingtheCatalog,HuzhouhasalsoinitiatedthefirstbatchoftransitionprojectsbasedontheCatalogandofferedincentivessuchasinterestsubsidiesandguaranteestotheseprojects.(Source:HuzhouMunicipalGovernment)Box1.4CooperationforSustainableFinanceinBrazilAtthepolicylevel,theMinistryofEconomy(ME)introducedESGcriteriaintoitspublicdebtmanagementandintothecriteriaforgrantingsovereignguaranteesforinternationalloans.TheMEalsoissuedasimplifiedandacceleratedapprovalprocessfortheissuanceofgreenbondsforinfrastructureinvestments(Decreeno.10.387/2020),afteraconsultationprocessthatalsoinvolvedBrazil’sFinancialInnovationLab(Lab).TheLabisamulti-stakeholderplatformthatbringstogetherover1,000sustainablefinanceexpertsfromthepublicsector,thefinancialand892022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupeconomicsectors,academiaandcivilsocietytopromotesustainablefinancethroughknowledgegatheringandsharing,exchange,pilotingofinnovativeinstruments,andpolicydialogue.ItfunctionsthroughhighlyactiveworkinggroupsandissteeredbyBrazil’sSecuritiesandExchangeCommission(CVM),theBrazilianAssociationofDevelopmentBanks(ABDE),theInter-AmericanDevelopmentBank(IDB)andDeutscheGesellschaftfürInternationaleZusammenarbeit(GIZ)throughtheFiBraSproject.UntilMay2022,theLabhaspublished44reports,conductedover40webinars,andengagedintwelveregulatoryinitiatives,amongthemthereviewofCVMResolutionno.59/2021whichenhancessocial-environmentaldisclosureofpubliclytradedcompanies.TheLabisalsoamemberoftheInternationalNetworkofFinancialCentresforSustainability(FC4S).Since2018,BrazilhasbeencollaboratingwithpartnercountriestoadvancesustainablefinanceinBrazilthroughtheengagementofboththepublicandprivatesector.TheprojectFinançasBrasileirasSustentáveis(FiBraS),anexampleofthiscollaborativeapproach,isfundedbytheGermanFederalMinistryforEconomicCooperationandDevelopment(BMZ)andimplementedbythe(GIZ-theGermandevelopmentagency)inpartnershipwiththeMinistryofEconomy(ME)andtheCentralBankofBrazil(BCB).TheprojecthastheobjectivetomobilizeinvestmentsforgreenandsustainableeconomicdevelopmenttowardstheSDGsandtheParisAgreement,andtoincreaseresilienceagainstclimate-related,environmentalandsocialrisks.41Theprojectsupportsseveralsustainablefinanceinitiativesatthepolicy,regulatoryandmarketlevelthroughmeansliketechnicalassistance,capacitybuilding,policydialogueandstakeholderengagement.(Source:MinistryofEconomyofBrazil,GIZ)41Website:https://www.gov.br/produtividade-e-comercio-exterior/pt-br/assuntos/assuntos-economicos-internacionais/cooperacao-internacional/projeto-fibras-2013-financas-brasileiras-sustentaveis902022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupBox1.5DisclosureofSnam’sTransitionActivitiesTheBankofChina(BOC)issueditsfirsttransitionbondintheoffshoremarketinJanuary2021,raisingatotalamountofaroundRMB6billion.Asof31December2021,theproceedshavebeenallocatedtotheBOCTransitionPortfolio,whichwassplitintotwosectors,i.e.,92%forthepublicutilityindustryand8%forthecementindustry.Theexpectedannualemissionreductionsbyprojectsinthesesectorsare418,915tonsand3,531tonsrespectively.TheproceedswereusedtosupporteligibleprojectsinbothChinaandtheEUforacquisition,researchanddevelopment,manufacturing,construction,equipmentoperationand/ormaintenance,procurement,andinstallationofequipmentandrelatedfacilities.Basedontheprinciplesof“AvoidanceofCarbonLock-in”and“DoNoSignificantHarm”andthelistof“ExplicitlyExcludedProjects”,theBOCsetthefollowingthresholdsforprojecteligibility:⚫Projectsinthepublicutilityindustry◼Below72.8tonsCO2/TJofnaturalgasinChinaandbelow100gramsofCO2e/kWhofcarbonemissionsinEU⚫Projectsinthecementindustry◼Clinker-to-cementratiotobebelowthenationalaverageof0.64inChina◼Energyconsumptionof105kgstandardcoal/ton(equivalentto3.07GJ/ton)orlowerinChina◼Carbonemissionstobebelow0.766tonsofCO2e/tonintheEUInApril2021,theNorthAmerica-basedBMOFinancialGroupfinancedadealwithGibsonEnergy,aCanadianenergycompany,byamendinganexistingcreditfacilityof$750millionCanadiandollarstoa5-YearSustainability-LinkedRevolvingCreditFacility.ThisfacilityhadamarginadjustmentincentivemechanismtiedtoGibson’scommitmenttoreducecarbonemissionsandincreasetherepresentationofwomen,aswellasracialandethnicminorityrepresentationinitsworkforceandonitsboard.Inthistransaction,apartofGibson’sborrowingcostswilldependonwhetheritachievespre-determinedsustainabilitytargets.912022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupThisfacilityincludedanenvironmentalcommitmenttoreduceitsScope1andScope2GHGemissionsintensityby15%by2025,asocialrequirementtoincreasetherepresentationofwomeninitsworkforceto40%–42%andracialandethnicminorityrepresentationinitsworkforceto21%–23%by2025,andaGovernancecomponent,toincreasetherepresentationofwomenontheBoardtoatleast40%,withatleastonememberoftheBoardidentifiedasaracialorethnicminorityand/orIndigenousminorityby2025..(Source:Snam)Box1.6Sustainability-LinkedBonds42Sustainability-linkedbonds(SLBs)aredebtinstrumentsaimedatfacilitatingthetransitiontoanetzeroeconomy.Theydosobyloweringthecostofcapitalifissuersmeet,atanentity-widelevel,pre-definedsustainabilityperformancetargets(SPTs)withinagivendate.Inturn,SPTsarebasedonmetricsknownaskeyperformanceindicators(KPIs).FundsraisedwithSLBscanbeusedforgeneralfinancingpurposes,ratherthanbeingtiedtospecificprojects.Iftheperformancetargetsarenotmet,theissuerissubjecttoafinancialpenalty.ThisincentivemechanismdistinguishesSLBsfromconventionalgreenbonds,whichinsteadfinancecontractuallyagreedactivities(seeTable1formoredetails).Thepenaltytypicallyconsistsofadditionalpaymentstobondholdersintheformofeitherastep-upcoupon,aredemptionpremium,oranoffsetmechanism.SystematicexternalverificationofKPIsversusthetargetsisintegratedinthebonddocumentation.42ThisboxdrawsuponNetworkforGreeningtheFinancialSystem(NGFS)(2022):“Enhancingmarkettransparencyingreenandtransitionfinance”,section2.4,pp.37-41,aswellas“Sovereignsandsustainablebonds:challengesandnewoptions”BISQuarterlyReview,Sept.2022.922022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupSustainability-linkedbondGreenbondUseofproceedsGeneralfinancingpurposeGreenprojectsIssuertypePotentiallyanyentitywithacommitmenttoanambitioussustainabilitytrajectoryEntitiesabletogeneratelarge-scalegreenprojectsPerformanceindicatorMetrics-basedKPIsattheissuerlevelandassociatedSPTsImpactevaluationrelyingonmetrics-basedKPIsattheactivitylevelPenaltyformissinggreentargets43ReputationalcostsandfinancialpenaltyReputationalcostsPre-issuancereviewSecond-partyopinions,notablyonalignmentwithICMA’ssustainability-linkedbondsprinciples-Second-partyopinions,notablyonalignmentwithICMA’sgreenbondsprinciples-Certifications(ClimateBondsStandard)Post-issuancereviewSystematicexternalverificationofKPIsvs.SPTsintegratedinthebonddocumentationMorevariabilityregardingtheavailabilityandqualityofimpactreportingSource:NFGSGrowthoftheSLBmarketpickedupmarkedlyin2021,includingissuanceinbothadvancedeconomiesandemergingmarketeconomies.Ithasbeenaveragingbetween$25and$35billionperquartersinceQ22021,comparedtomostlyvalueswellbelow$10billionquartersbeforethat(BIS2022).Europehasseenthelargestissuance(NGFS).EventhoughthemarketforSLBsisstillinitsinfancy,SLBsissuedtodatehaveadheredtoafairlystandardizedsetofkeyperformanceindicatorcategories.WhileKPIsrelatedtothereductionofgreenhousegas(GHG)emissionsare43ThismeansmissingthepresetsustainabilityperformancetargetinthecaseofaSLB,ormisallocationofgreenproceedsinthecaseofagreenbond.932022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupdominant,KPIscanalsorefertoenergyconsumption,renewableenergyinstallation,waste/recycling,faunaprotection,wateruse,diversity,amongothers(Figure1).Asnoted,KPIsandSPTsoftenreferencesustainabilityeffortsattheleveloftheissuingentity.Thisdesignpresentsseveraladvantages.Inparticular,itopensthedoortoalargerrangeofissuersthat,whilewillingtocommittomitigationefforts,havelimitedcapacitytogeneratelarge-scalegreenprojectsdue,forinstance,totheirsectoralspecialisation.Atthesametime,itiscrucialtoclearlydefinewhichleveloftheissuingentitythesustainabilitymeasuresandtargetsapplyto.WhileflexibilitywithrespecttotheunderlyingKPIsenhancesmarketcompleteness,standardisationofSPTsandKPIscouldhelptoscaleupsustainablefinance.Theproductionofcomparability-enhancinginformationcanbeapublicgood,byfacilitatingliquidityinanassetandreducingtheburdenoninvestorstounderstandthespecifics.WithinthedominantKPIcategoryofGHGemissions,KPIshavebeenbasedondifferentemissionsscopeswithheterogeneousunitsofmeasurement.GHGKPIscanthereforeCategoriesofKPIsusedinsustainability-linkedbondsScopeofemissionscoveredbyGHGKPIsFigure1:SLBsfeaturevariousunderlyingKPIs,thoughGHGemissionsdominate942022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupbemeasuringquantitativelyandqualitativelydifferentlevelsofemissions,resultinginpotentiallydivergingGHGemissionsdynamicsfortheissuer.Scope3emissionsprovideamorecomprehensivepictureofthetotalcarbonfootprintofanissuer.TransparencyontherangeofactivitiesincludedinScope3isalsokey,asthereisahighdegreeofvariabilitydependingonthesector.TheuseofacommonunitofmeasurementforGHGemissionsisalsocrucial.AnotherkeyaspectfortheselectionofKPIsfromaninvestorviewpointiscomparabilitywithindustrypeers.Ideally,KPIsshouldbeconsistentlydesignedanddisclosedbyfirms,includingthosethatdonotissueSLBs.ThiswouldallowinvestorstobetterassesshowwelltheissuingfirmisperformingrelativetoitspeersandhowambitioustheSPTis.Usingindustry-specificactivitymetricsrecommendedbyreportingstandardsetterssuchasISSBandtheEuropeanFinancialReportingAdvisoryGroup(EFRAG)astheKPIsforSLBscouldenhancecomparabilityandmarkettransparency.SovereignissuanceofSLBsposesuniqueopportunitiesandchallenges.SovereignSLBscanprovidestrongsignalstowardsachievinghigh-levelclimate-policyobjectivessuchastheParisAgreement.Conventionalgreenbondsmaynotresultinamaterialreductionofcarbonemissions(SeeEhlersetal(2020)44).Incontrast,SLBscanbelinkeddirectlytoreducedgreenhousegasemissionsthroughthechoiceofappropriateKPIs.Whatismore,thetargetforgreenhousegasemissionreductioncanbealignedwiththeParisAgreementbysettingSPTsaccordingly(e.g.,a50%reductionby2030).(Source:NGFS,BankforInternationalSettlements)Box1.7EUJustTransitionFundWhiletheEUhaslegallycommitteditselftoachievingclimateneutralityby2050throughitsEuropeanClimateLaw,itfacessignificantsocio-economic44Ehlers,T,BMojonandFPacker(2020):“Greenbondsandcarbonemissions:exploringthecaseforaratingsystematthefirmlevel”,BISQuarterlyReview,September,pp31–57.952022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupdisruptionsalongthisjourney,especiallyinregionsthatrelyonfossilfuelextractionandgeneration.Tomitigatenegativesocialandeconomicimpactsfromtheclimatetransition,theEUlaunchedJustTransitionMechanism(JTM),aframeworkthatprovidesdedicatedfinancialresourcesandtechnicalassistancetoEUmemberstates,withthreepillarsoffunding:JustTransitionFund(JTF)thatprovidesprimarilygrants,InvestEUJustTransitionSchemethatcrowdsinprivateinvestments,andanewPublicSectorLoanFacilitythatleveragespublicfinancing45.TheJTFsupportseconomicdiversificationandreconversionofhigh-emittingregionsandwillcontribute100%ofitsfundstoEUclimategoalsandtheJTM,withatotalbudgetof19.32billioneurosbetween2021-2027.AlthoughallEUcountriesareeligiblefortheFund,regionsfacingbiggestthechallengesonfossilfuelphase-outandtransformationwillbeprioritized.TheJTFwillallocatefundsinareassuchasinvestmentsinSMEs,researchandinnovations,cleanenergy,up-andreskillingofworkers,job-searchassistance,transformationofexistingcarbon-intensiveinstallationandothers.AsthethirdpillaroftheJTM,thePublicSectorLoanFacilitywillcombine€1.5billionofgrants,financedfromtheEUbudget,with€10billioninloansfromtheEuropeanInvestmentBank(EIB),tomobilizebetween€25and€30billionofpublicinvestmentthatwillmeetthedevelopmentneedsofjusttransitionterritories.ThefacilitycouldbeextendedinthefuturetofinancepartnersotherthantheEIB.(Source:EuropeanCommission)Box1.8ADB’sDe-riskingforclimatetransition:EnergyTransitionMechanismBoththeGovernmentofIndonesiaanditsnationalelectricitycompany(PLN)hascommittedtoachievecarbonneutralby2060.Whilethereisasignificantpotentialforrenewableenergyutilizationinthepowersectorinthecountry,coalisadominatingprimaryenergysourcesduetoitsaffordabilityand45EuropeanCommission962022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupaccess,andthepotentialoversupplyofenergyremainsachallenge.Toaddresstheissue,IndonesiaisteamingupwithAsianDevelopmentBank(ADB),tointroducetheEnergyTransitionMechanism(ETM),whichaimstoaccelerateclimateactions,reduceenergycostsbyspeedinguptheretirementoflegacycoal-firedelectricity,mobilizeinvestmentinrenewablegenerationandcleantechnologyandtoacceleratetheclimatetransition.TheETMembodiedthefive(5)pillarsoftheSFWG’stransitionfinanceframework.TheETMwillincentivizeearlyretirementofcoal-firedpowerplants(CFPPs),whileinvestingintogreenenergyfacilities/renewableenergyplants.AcountryplatformwasestablishedbasedontheFinanceMinisterDecreeassigningPTSMI,astate-ownedenterprise,tomobilizefinancingandoverseethetransitionplans,itsemissionsreductiontargets,aswellasdisclosureofcorporategovernanceanduseofproceeds.Theplatformwillbe972022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupfinancedviaablendedfinancemechanism,usingvariousfinancingmodalitiestoimproveitscommercialviability,includingdebtsinstrumentssuchassustainability-linkedloan,de-riskingorguaranteeproducts,aswellasinvestmentsincludingincollaborationwiththeIndonesiaInvestmentAuthority(INA–thecountry’ssovereignwealthfund).Furthermore,thegovernmentispreparingvariousregulationsandpolicies,includingthroughaPresidentialRegulationandaFinanceMinisterRegulation46,tocreateanenablingenvironmentforETM’simplementation.Lastly,inalignmentwiththepillar5,theETMwillassessthepotentialeconomicandsocialunintendedconsequencesofthecoalphasingoutontherespectivecommunitiesandprovidemitigationplans.TheETMModelsToacceleratetheclimatetransitioninAsiaandthePacific,theAsiaDevelopmentBank(ADB)unitesregionalandinternationalpartnerstopilotanEnergyTransitionMechanism(ETM)thatcanbescaleduptodevelopingregionsandbeyond.AttheCOP26in2021,theADB,inpartnershipwiththegovernmentsofIndonesiaandthePhilippines,launchedthepilotETMinSoutheastAsia.ThefirstseedingfinancingfortheETMwasUSD25milliongrantedbyJapan.46PresidentialRegulationonRenewableElectricityPricingandMinisterofFinanceRegulationSupportingtheAccelerationofEnergyTransitioninElectricitySectortoAchieveSustainableDevelopmentGoalsThroughCompanies(PTSMI)areexpectedtobecompletedinNovember2022.982022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupTheprimaryfocusesofETMinSoutheastAsiaareensuringlegacycoalretirementandjusttransitionfortheaffectedregions.Receivinggrantsandhighlyconcessionalfundsfromgovernmentsandphilanthropies,thispilotETMwillprovidebothconcessionalfinanceandtechnicalassistance.TheETMfundingwillbeallocatedthroughtwochannels.OneisinvestinginprivatesectorIPPsandstate-ownedutilitiesthroughdirectADBsupportorco-financing.TheotherissupportinglegacycoalretirementandcleanenergytransactionsthroughthecountryfacilityincollaborationwithIFIs,andlocalandinternationalinvestors.WithinthecurrentdesignofpilotETM,theinvestmentwillclusterundertwoparts:theCarbonReductionFund(CRF)andtheCleanEnergyFund(CEF),featuringearlylegacycoalretirementandinvestmentinrenewableassetsrespectively.Differenttransactionmodelswillbeexploredtoachieveearlierretirement.Asfortechnicalassistance,theETMaimsforabroadrangeoftopics,includingjusttransition,skillsandlivelihooddevelopment,policyandregulatorysupport,carbonfinancedevelopmentandothers.CommitmenttoSafeguardsandaJustTransitionarecriticalpartsofETMwork.Proposedactivitiesinclude(butnotlimitedto)theconductofregionalfeasibilitystudies,environmentalandsocio-economicscopingstudiesandjusttransitionassessments.(Source:theGovernmentofIndonesiaandADB)992022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupBox1.9SustainablefinanceandclimaterisksinItaly:theinitiativesoftheMinistryofFinanceandoftheBankofItalyIn2021,theItalianMinistryofEconomyandFinance(MEF),withthesupportofaresearchteamundertheStructuralReformSupportProgrammeoftheEuropeanCommission,carriedouttheproject“Sustainablefinanceandinvestmentsforthetransitiontoagreeneconomy”.Thespecificobjectivesoftheprojectwereto:•supportthedevelopmentoftheSovereignGreenBond(SGB)FrameworkoftheItaliangovernment;•provideanupdatedassessmentoftheadditionalinvestmentrequiredby2050toachieveclimateneutrality;•identifythebestpoliciesandmeasuresthatcanbeputinplacetochannelprivatefinancetowardssustainableinvestmentsandprovideItalywithanimprovedpolicyframeworktochannelprivate(andpublic)capitaltotheachievementofclimateneutralityby2050;•assesstheeconomicandsocialimpactsofthelow-carbontransitioninItalyandidentifymeasurestocompensateforormitigatethenegativeeffectsidentifiedAsaresult,in2021Italyenteredthemarketofsovereignbondsthatfinancesustainabledevelopmentthroughtheissuanceofthenew“2045BTPGreen”,ofwhichtwotrancheswereissuedforatotalnominalvalueofEUR13,500millionandforanetproceedofEUR13,265.13million.ThefirstissueachievedarecordnumberofbidsforinauguralsovereignGreenBondissuesinEuropewiththeparticipationofapproximately530investors,morethanhalfofwhomwereESGinvestors;totaldemandamountedtomorethanEUR80billion.ThefirstItalianSovereignGreenBondwillfinanceItaly’sGreenTransitionstrategyalreadystartedinthepastyears.ThroughtheissueofSGBs,ItalywillfinancepublicexpendituresintendedtocontributetotheachievementofoneormoreofthefollowingenvironmentalobjectivesoftheEUSustainableFinanceTaxonomy:Climatechangemitigation,Climatechangeadaptation,SustainableuseandprotectionofwaterandmarineresourcesTransitiontoacirculareconomy,Pollutionpreventionandcontrol;Protectionandrestorationofbiodiversityandecosystems.Moreover,theuseofproceeds1002022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupwillhelpItalysupportthe2030SustainableDevelopmentGoalsoftheUnitedNations.Inaddition,adraftSustainableFinanceActionPlan(SFAP)wasdesignedbytheprojectteamtoaddressthebarriersidentifiedaspreventingtheflowofprivatefinancetowardssustainableactivities.TherecommendedSFAP(forthcomingontheMEFwebsite)isbuiltaround15high-levelrecommendations,splitintotwogroups:•Greeningfinancewhichaimstomainstreamclimateandenvironmentalfactorsasafinancialandstrategicimperativeacrossallplayersinthefinancialsystem,withaparticularattentionforcurrentandfuturefinancialrisksandopportunities;and,•FinancingthegreenwhichaimstoacceleratethemobilisationofprivatefinanceforcleanandresilientgrowthinlinewithItalianpolicyobjectives.Themeasuresaddressedunderthisheadingaddress,asapriority,thecategoriesofinvestorswithintheItalianecosystemthatshowthegreatestwillingnesstoinvestinsustainableprojects.Theyalsoaimtoaddressprojectsandcompaniesatdifferentstageoftheirdevelopment,i.e.,frominnovationtomarketdeployment,throughtheuseofdifferentfinancialinstrumentsandinvestmentproducts.TheBankofItalyhaspublishedthefirstReportonsustainableinvestmentsandclimate-relatedrisks.ThisReport,whichispreparedannually,istheBankofItaly'sresponsetothecommitment-undertakenwiththeResponsibleInvestmentCharter-tocommunicatetheresultsachievedbythesustainableinvestmentstrategiesadoptedforportfoliosnotrelatedtomonetarypolicy,andtocontributetofosteringtheESGcultureinthefinancialsystemandamongcitizens.TheReportisinspiredbytherecommendationspreparedbytheTCFDandtheGuideonclimate-relateddisclosureforcentralbanks,publishedbytheNGFS.TheReporthasasectionforeachofthefourareasidentifiedbytheTCFD:(a)governance;(b)strategy;(c)riskmanagement;and(d)metricsandtargets.Governance.‒Theintroductionofsustainabilitycriteriaintotheinvestmentdecision-makingprocessdidnotrequireanysignificantchangestobemadetotheBank’sgovernanceformakingitsinvestmentchoices:thevariousCommitteesandDirectoratesweretaskedwithaddingsustainability1012022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupconsiderationstothepre-existingfinancialcriteria,basedontraditionalfinancialconsiderations.ToensureaconsistentapproachtosustainabilityacrossalltheBank'sfunctions,aClimateChangeandSustainabilityCommitteewassetup,chairedbyamemberoftheGoverningBoardandaHubwascreatedtosupporttheCommitteeincoordinatinganddirectingtheBank’sactivitiesrelatingtoallESGissues(portfolioinvestments,bankingandfinancialsupervision,economicresearch,andbusinessoperations).Strategy.‒Since2019,thesustainableinvestmentstrategyhasbeenextendedintermsofbothassetclassesandtargets,steadilypayinggreaterattentiontoESGfactorsandinparticulartoclimate-relatedones.Moreover,thischoiceaimstocontributetotheachievementofthesustainabilityobjectivesidentifiedbothatEuropeanlevel,withtheapprovalofRegulation(EU)2021/1119,outliningtheframeworkforachievingclimateneutrality,andatnationallevel,withtheamendmentofArticles9and41oftheConstitution,whichintroducedareferencetotheprotectionoftheenvironment,biodiversityandecosystems,alsointheinterestoffuturegenerations.Attheendof2021,thevalueoftheportfolioswhereasustainableinvestmentpolicycouldpotentiallybeapplied,wasaround€210billion.Foreuro-areagovernmentbonds,whichaccountforalargeshareofthetotal,thesustainabilitymetricsarecurrentlymonitoredbutdonotcontributetoinvestmentdecisions,forvariousreasons;anexceptionismadeforthegreenbondsofeuro-areasovereignissuersandofsupranationalinstitutions,currentlyvaluedat€1.7billion,whoseshareoftheBank'sinvestmentsisforeseentogrowovertime.Riskmanagement.‒TheBank’spolicyforinvestinginprivatesectorinstruments(inparticularequity)usedtofollowthemarketneutralityprinciple(thecompositionoftheportfolioreplicatedthatofthemarket,althoughsomesectorswereexcluded).Since2019,theBankhasgraduallyintroducedclimate-relatedandsustainabilityfactorsintotheexistingriskmanagementmodels.Atfirst,theywereincludedaftertheassetportfolioallocationstep,inthesecurityselectionphase,firstfortheequityportfolios,andthenforthebondportfolios.Subsequently,sustainabilityconsiderationswerealsoappliedattheassetallocationstep,butonlyforprivatesectorissuers.Inthisway,theESGfactorsarenowtakenintoaccountduringthewholeinvestmentprocess,fromallocationtotheselectionofindividualsecurities.1022022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupMetricsandtargets.‒TheanalysisofmetricsandtargetsshowstheprogressmadebytheBankinrecentyears.Fortheinternallymanagedequityportfolio(worth€16billionandaccountingforover90percentoftheBank'sprivatesectorinvestments),thecarbonfootprintdeclinedby60percentcomparedwith2018–theyearpriortothelaunchofthesustainableinvestmentstrategy–andis37percentlowerthanthemarketbenchmark.Weightedaveragecarbonintensity(-24percent),useofelectricity(-21percent),useofwater(-14percent)andproductionofwaste(-28percent)arealsobetterthanthebenchmark.Withregardtosocialmetrics,theshareofwomenemployedis7percentagepointshigherthanthebenchmarkandtheinjuryrateis9percentlower.(Source:ItalianMinistryofEconomyandFinance,BankofItaly)Box1.10CoordinatedEffortstoDevelopingtheSustainableFinanceLandscapeintheUAETheUAEwasthefirstcountryintheMiddleEastandNorthAfricaregiontocommittonet-zerothroughitsNet-Zero2050strategicinitiative.TheinitiativeaimstoreducenationalcarbonemissionstozeroinalignmentwiththeobjectivesoftheParisClimateAgreement.MaintainingasustainableenvironmentalsoformedanimportantpillaroftheUAE’sVision2021,whichcontainedelevenKPIstargetingenvironmentalsustainability.TheUAEalsohassignificantinternationalpresenceinthefieldofsustainability,mostnotablyforbeingtheupcominghostoftheCOP28.Toachieveitscommitments,theUAEestablishedanationalSustainableFinanceWorkingGroup(SFWG)whichwaslaunchedin2019.ThegroupisproactivelyadvancingthesustainabilityagendaoftheUAEbydevelopinganationalsustainablefinancetaxonomy.Thegroupisalsofocusedonsettingsustainabilitygovernanceanddisclosurefortheprivatesector.In2021,themembersoftheUAESFWGissuedapublicstatementdetailingtheircommitmenttoachievingtheUAE’ssustainabilityobjectivesandtheUAE’snet-zerocommitment.1032022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupTheUAE’sdirectionsetforthbytheSFWGisguidedbyapplicablenationalplans,particularlytheSustainableFinanceFramework2021-2031.TheobjectiveoftheFrameworkistomobilizecapitaltowardssustainableinvestmentopportunitiesandtofacilitatethecreationofinnovativesustainablefinanceproductssuchasgreendeposits,greenmortgages,greenbonds/sukuk,greenloansandgreeninsurance/takaful47.TheFrameworkconsistsofthreemainpillars.Thefirstpillarisdesignedtoensurethatenvironmentalsustainabilityisincludedasakeydriverforthedevelopmentoffuturenationalfinancialpolicies,regulationsandguidelines.Thesecondpillartargetstheprovisionofsustainablefinancialproductsanddevelopingincentivestopromoteattractingsustainableinvestments.Thefinalpillarfocusesoncreatinganenvironmenttodeveloptherequiredskillsandcompetencies,fosterresearchanddevelopment,andpromoteentrepreneurshipinthefieldofsustainablefinance.(Source:UAEMinistryofFinance)47UAESustainableFinanceFramework2021-20311042022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupAnnexforChapterIIBox2.1.SupervisoryGuidanceonClimaterelatedRiskManagementandClientEngagementinJapanSupportingclients'transitionsisimportantforFIstomaketheirownbusinessfoundationresilientandsustainable.InJuly2022,theFinancialServicesAgencyofJapanpublishedSupervisoryGuidanceonClimate-relatedRiskManagementandClientEngagement.Asakeymessage,theguidanceemphasizesthat,ascompaniesfacevariouschallengesrelatedtoclimatechange,itisimportantforFIstobuildaresilientbusinessfoundationandsustainablebusinessmodelsthroughengagingintheirclientsandsupportingclients’responsestoclimaterelatedopportunitiesandrisks.ThisguidancedocumentsviewpointsofsupervisorydialoguesregardingFIs’climaterelatedriskmanagementandFIs’engagementwiththeirclientstosupporttheclients’responsestoclimaterelatedopportunitiesandrisks,includingpossibleapproachesandcaseexamplesofclientengagement.Viewpointsofsupervisorydialogues1052022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroup•DevelopingStrategiesandEstablishingGovernance➢Recognizingclimatechangeresponseasamanagementissue,formulatingastrategyforcompany-wide,andestablishinganappropriateframeworkinlinewiththisstrategy.•IdentifyingandAssessingOpportunitiesandRisks➢IdentifyingandassessingopportunitiesandrisksthatclimatechangebringstoclientsandFIs’ownbusinessmanagementinaforward-lookingmanner.➢UtilizingscenarioanalysistofurtherdevelopFIs’ownstrategies.•SupportingClients'responsestoClimateChangeandManagingClimate-relatedRisks➢ReducingFIs’climate-relatedrisksoverthemediumtolongtermthroughproactivelysupportingtheclimatechangeresponseincludingtransitionsofclients.➢Assessingandrespondingtohowclimate-relatedriskswillaffecteachriskcategoryoverthemediumtolongterm,whiletakingintoaccounttheirownbusinesscharacteristics.•SharingInformationwithStakeholder➢ProvidingstakeholderswithusefulandaccurateinformationonFIs’strategies,policiestosupportclients'climatechangeresponses,andclimate-relatedriskmanagement.ApproachesandcaseexamplesofclientengagementFIsareencouragedtoaccumulatetheirknowledgeofclimatechangeandunderstandtheeffectonclientsoftheevolutionintechnologies,industries,andnaturalenvironmentscausedbyclimatechange.FIsarealsoencouragedtoprovidesupporttoclients,suchasprovidingconsultingandsolution-deliveryservices,supplyingfundingforgrowth,andprovidingarea-widesupportandimprovingcooperationamongstakeholders,whiletakingintoaccountthestatusandneedsofeachclient.(Source:FinancialServicesAgencyofJapan)1062022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupAnnexforChapterIIITable3.1SelectedcountryexperiencesonpolicyincentivesIncentivesCasesCarbonpricingandemissiontradingmechanisms•EUEmissionsTradingSystem(ETS),startingfrom2005•USGHGemissioncap-and-traderegimesatstatelevelincludingtheninestatesalongtheeastcoastandCalifornia,startingfrom2009•KoreaEmissionTradingScheme(K-ETS),startingfromJanuary2015•UKEmissionsTradingScheme(UKETS),startingfromJanuary2021•ChinaEmissionsTradingSchemeatnationallevel(startingfromJuly16,2021)andlocallevelsinsevencities(startingfromJune18,2013inShenzhen)CentralBankActions•Chinacentralbank,PBOC,introducedthecarbonreductionsupportingfacilityinNovember2021tosupportthreekeygreensectors,includingrenewableenergy,co-benefitsofcarbonreductionandenvironmentalprotection,andCCUS•EuropeanCentralBankacceptedbondswithcouponslinkedtosustainabilityperformancetargetsaseligibleascentralbankcollateral.ECBannounceditsaimtograduallydecarboniseitscorporatebondholdings,onapathalignedwiththegoalsoftheParisAgreement.Tothatend,theEurosystemwilltiltcorporatebondholdingstowardsissuerswithbetterclimateperformance,measuredwithreferencetolowergreenhousegasemissions,moreambitiouscarbonreductiontargetsandbetterclimate-relateddisclosuresandpublishedaguideonSupervisoryexpectationsrelatedtoclimateandenvironmentalrisksmanagementanddisclosure.•HungarianCentralBank,MagyarNemzetiBank,introducedtheGreenMortgageBondPurchase1072022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupProgram48in2021asoneofthefirstassetpurchaseprogramsintheworldwithafocusonsustainability49.•AspartofitsStrategyonClimateChange50,BankofJapanintroducedtheFundsSupplyingOperationstoSupportFinancingforClimateChangeResponsesin202151.AsofJuly2022,atotalamountofJPY3,643.6billionwasdisbursedundertheoperations.Theoperationswillbeofferedbiannuallyinprinciple,untilMarch31,2031.•BankIndonesiaimplementedmorerelaxedLoantoValue(LTV)ratioforloanstopurchasepropertyandvehiclethatmeetscertaingreenstandards•BankIndonesiaintroducedGreenRPIMthatallowsBanktofulfiltheMacroprudentialInclusiveFinancingRatio(RPIM)requirementbypurchasingsustainable/greenbonds•BankIndonesiaallocateforexreserveonBISIPG3(greenbondspoolingfund•BancoCentraldoBrasildevelopedaregulatoryframeworkonruralcreditconsideringcompliancewithenvironmentalstandardsandcreatedanewsectiononSocial,EnvironmentalandClimateImpediments,inthebasicconditionsintheRuralCreditManual.48https://www.mnb.hu/en/monetary-policy/monetary-policy-instruments/asset-purchase-programs/green-mortgage-bond-purchase-programme49sustainability-and-central-bank-policy-green-aspects-of-the-magyar-nemzeti-bank-s-monetary-policy-toolkit.pdf(mnb.hu)50https://www.boj.or.jp/en/announcements/press/koen_2021/data/ko210727a.pdf51https://www.boj.or.jp/en/mopo/measures/mkt_ope/ope_x/index.htm/1082022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupOtherpolicyinstrumentsforclimatetransition•ChinaMinistryofFinanceandMinistryofEnvironmentalProtectionjointlylaunchedagovernmentgreenprocurementsystemin2006,52,53withclearlyguidanceonthescope,workingproceduresandspecificmanagementmethodsforgreenprocurement.•TheGovernmentofIndonesiastartedtoexercisegreenbudgetingthroughclimatebudgettaggingsystem,since2016untilnow.ThelistofgreenprojectsisthenutilisedasthepotentialunderlyingassetsofgreenSukuk,whichhasbeenissuedcontinuouslysince2017.ThegovernmentiscurrentlydevelopinganSDGframeworkthatcouldincludetransitionprojects•TheGovernmentofIndonesialaunchedtheSDGIndonesiaOne(SIO)platformin2018,asafinancingchannelforinfrastructureprojectswiththeSDGsimpacts.TheSIOplatformutilisesblendedfinancemechanismandhaspartneredwithphilanthropicentities,internationalorganisation(IOs),developmentbanksandcommercialbanks.•TheGovernmentofJapandevelopedaGreenInnovationFundatthelevelof2trillionyenin2021towardthegoalofachievingcarbonneutralityby2050.54•Singapore’sGreenandSustainability-LinkedLoanGrantScheme(GSLS)coversexpensesincurredbycorporatestoengageindependentsustainabilityassessmentandadvisoryserviceproviderstodevelopgreenandsustainabilityframeworksandtargets,obtainexternalreviews(includingasecondpartyopinion,verification,certificationorrating),andreport52https://www.mee.gov.cn/gkml/sthjbgw/qt/200910/t20091023_180041.htm53http://www.tanpaifang.com/tanguwen/2020/0709/72319_21.html54https://www.meti.go.jp/english/press/2021/0312_002.html1092022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGrouponthesustainabilityimpactoftheloan,uptoSGD100,000oftheseexpensesperloan.55•TheAustralianGovernmentintroducedtheAUD300millionAdvancingHydrogenFundin2020tosupporthydrogen-poweredprojects56.•TheGovernmentofCanadalaunchedtheGreenHomesGrantinMay2021tohelpCanadiansupgradetheirhomestosaveenergy,combatclimatechangeandcreategoodjobs.57•SouthAfricaintroducedtheNationalGreenFundin2011toprovidecatalyticfinanceforinvestmentingreeninitiativesthatwillsupportitstransitiontowardsagreeneconomy58.Regulatorymeasures•Indiaintroducedadditionalfloorspaceallowanceforgreenbuildings.•UKintroducedtheTenPointPlanwithanaimtolaythefoundationforaGreenIndustrialRevolutionandreduceUKemissionsby180milliontonnesbetween2023and203259.•WithintheGermanSustainableFinanceStrategy,toimprovefinancingofthetransitionbygovernmentalagencies.Theideabehindthestrategyisnottocreatenewagencies,structuresorprogramsbuttofurtherincorporatesustainabilityaspectsintoexistingschemessuchastheinternationallywell-knownKfWBankengruppeandExportGuarantees(“EulerHermes”).SeeBox3.1.55https://www.mas.gov.sg/news/media-releases/2020/mas-launches-worlds-first-grant-scheme-to-support-green-and-sustainability-linked-loans56https://www.energy.gov.au/news-media/news/government-announces-300m-advancing-hydrogen-fund57https://www.canada.ca/en/natural-resources-canada/news/2022/01/canada-greener-homes-grant-winter-2022-update.html58https://www.gov.za/about-government/government-programmes/green-fund?msclkid=30de17a8cea611eca98a141db4777a4359https://www.gov.uk/government/publications/the-ten-point-plan-for-a-green-industrial-revolution/title1102022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupBox3.1FinancingTransformation(GermanSustainableFinanceStrategy)TheGermanSustainableFinanceStrategy(ofMay2021)comprisesacomprehensivepackageofatotalof26measureswithinfinancialmarketpolicies.Thestepsaredesignedtomobilisesustainableinvestmentsandhencetoprotectournaturalresources,mitigateclimaterisksandstrengthenfinancialmarketstability.https://www.bundesfinanzministerium.de/Content/EN/Standardartikel/Press_Room/Publications/Brochures/sustainable-finance-strategy.pdf?__blob=publicationFile&v=8Thegoalofthemeasures14to17istoimprovefinancingofthetransitionbygovernmentalagencies.Theideabehindthestrategyisnottocreatenewagencies,structuresorprogramsbuttofurtherincorporatesustainabilityaspectsintoexistingschemessuchastheinternationallywell-knownKfWBankengruppeandExportGuarantees(“EulerHermes”).Measure14:ContinuingthedevelopmentofKfWintoatransformationbankTheGermangovernmentissupportingKfWintheimplementationofitssustainablefinancestrategy.Aspartofthiseffort,KfWisdevelopingintoatransformativedevelopmentbankforasustainableandcarbon-neutralfuture.1112022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroup4PillarsoftheKfWsustainablefinancestrategy(tranSForm):Measure15:TakingaccountofsustainabilityintheGermanFutureFundTheGermanFutureFundshasbeensetupasaninitiativeoftheGermangovernmentwiththeobjectivetostrengthenandpromotetheEuropeanVentureCapitalecosystem.IttargetsthelackofgrowthfinancingopportunitiesinGermanyprovidedbyEuropeaninvestorandtheFederalGovernmenthascommittedmorethan10bnEuros,providedbyseveralstate-ownedinvestorsunderthecoordinationofKfWCapital.Thefundswillflowintodifferentmodules,eachofthemcontributingtowardsclosingthisgapandalsotargetingfuturetechnologies.OneaspectoftheinitiativeistheconsiderationofESGcriteriaasaconditionfordeployingthefunds.Asthereexist7(ormore)moduleswithdifferentcharacteristics(fundoffunds,directinvestment,debtfinancings),sustainabilitycriteriaarehandledforeachmoduleseparately.Measure16:Takingsustainabilityexplicitlyintoaccountinforeigntradefinancing(knownas“EulerHermes”The“SpecialRenewableEnergiesInitiative”wasadoptedinordertoprovideadditionalincentivesforrenewableenergyprojects.Inaddition,coverrestrictionswereimplementedforcertainprojects:nuclearand1122022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupcoal-firedpowerplantsaswellasoilproductionusingroutineventingandflaring.Inaddition,Germanyisfoundingmemberoftheinternationalcoalition"ExportFinanceforFuture"("E3F")inordertodevelopsustainableandclimatefriendlyexportfinancepolicies.Forexample,renewableenergyandclimateprotectionprojectsareparticularlybeingpromotedthroughlongcreditperiodsofupto18years,amongotherthings.In2021,coverforrenewableenergiesfellto708millioneuros(2020:1.1billioneuros).Thelargenumberofnewrequestsforcoverin2022reflectsatemporarydeclinecausedbythepandemic.Inmostcases,coverwasprovidedforwindpowerprojects(664millioneuros),withexportcreditguaranteesissuedforthedeliveryofwindfarmstoFinland,Ireland,Türkiye,VietnamandLithuania.(seeannualreport;www.agaportal.de)Measure17:TakingsustainabilityexplicitlyintoaccountinthecaseofFederalGuaranteesBeforethefederalgovernmentassumesaguarantee,thefinancialrisksandeconomiceligibilitymustbeexamined.ThecorrespondingreviewcatalogwasexpandedinOctober2021toincludesustainabilityaspartofthereviewofeconomiceligibilityforthelarge-scaleguaranteeprogram.However,thenewsustainabilitycriteriondoesnotallowforanyreductionsintheassessmentoftheeconomicviability/riskofaproject(sustainabilitydoesnotreplaceviability).(Source:FederalMinistryofFinance,KfW)1132022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupBox3.2TowardsaGlobalShieldagainstClimateRisksTheInsuResilienceGlobalPartnership(IGP)forClimateandDisasterRiskFinanceandInsuranceSolutionsisaglobalmulti-stakeholderinitiative,whichaimstostrengthentheresilienceofdevelopingcountriesandprotectthelivesandlivelihoodsofpoorandvulnerablepeopleagainstclimaterisksanddisastersthroughClimateandDisasterRiskFinanceandInsurance(CDRFI)solutions.IGPgrewoutofthe2015G7InsuResilienceInitiativeandwasfoundedinajointeffortbytheG20andtheVulnerableTwenty(V20)Groupin2017attheUNFCCCCOP23.ThePartnershipworkswithintheinternationalresilienceandclimatecommunitytoraiseambitionanddrivecollaborationforscalingupCDRFIindevelopingcountries.Currently,IGPhasover110membersfromindustrialisedanddevelopingcountries,civilsociety,theprivatesector,developmentbanks,multilateralorganisationsandacademia.Asperendof2021,over300CDRFIprojectswerebeingimplementedinmorethan100countriesby24programmesunderthePartnership’sumbrella,leadingtofinancialprotectionforover150millionpeople.IGPdrivesbothsovereign-levelCDRFIinstruments,whichdisburseliquiditytogovernmentsquicklyandreliablywhendisastersoccurtosupportdisasterresponse,aswellasmeso-andmicro-levelinstruments,whichprovidedirectfinancialrelieftohouseholdsandbusinessestorecoverfromclimateanddisaster-relatedlosses.UndertheGermanPresidencyin2022,theG7havedecidedtoworktogetheronfurtherdevelopingexistingapproachestoCDRFIsoastocreateaGlobalShieldagainstClimateRisks.TheaimoftheGlobalShieldistomakefinancialprotectionmoresystematic,coherentandsustainedatagloballevel,bygatheringexistingactivitiestogetherunderoneroof,makingthemeasiertoaccess,andsupportingbettercoordinationandthemobilisationofadditionalfunding.TheGlobalShieldwillbuildonexistingprogrammesandplatformsundertheIGP.Itwillapplyevidence-based,systematicanalysisofcountries’protectiongapstodesign,fund,andfacilitateCDRFIinstrumentstoaddressthesegaps.Theinterventionswillbebuiltaroundnationalownershipandcoherentcoordinationamongstakeholdersatthecountrylevel.(Source:FederalGovernmentandGIZ)1142022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupBox3.3EBRDbuildingcapacityinKazakhstanongreentransitionInrecentyears,theEuropeanBankofReconstructionandDevelopment(EBRD)hassupporteditscountriesofoperationsongreenandsustainablefinancedevelopment,includingontheissuanceofgreenbondsandbuildinganenablingenvironmentforgreeningcapitalmarkets.1)GreenBondActivitiesTheEBRDisnotonlyaleadinggreenbondissuerandinvestor,italsohasadedicatedtechnicalassistance(TA)programtoaccelerategreenbondissuanceinmembercountries.Since2017,EBRDhasparticipatedin34greenbondissuances,coveringKazakhstan,Azerbaijan,Kyrgyzstan,Tajikistan,andTurkmenistan.BasedonintensiveengagementwithFIsinthearea,theTAProgramprovidestoolstotheissuers,includingGapAnalysisChecklist,EnergyPerformanceCriteriaandExternalReviewToolkit.2)FacilitatinganenablingenvironmentforgreencapitalmarketsInadditiontothedirectsupportongreenfinancialproducts,theEBRDhashelpedcountriesindevelopingpolicyframeworksforsustainablefinance.Oneexampleislong-termengagementwithKazakhstan,supportingthedevelopmentofaroadmapforalocalgreenfinancialsystem(2016-2017)andpolicyrecommendationsforgreencapitalmarketincentives(2021-2022).Atthenationallevel,afive-yearPartnershipArrangementwassignedbetweentheEBRDandKazakhstaninMarch202160,tojointlydesignaframeworktodecarbonizethecountry’senergysectortoachievecarbonneutralityby2060.TheEBRDalsosupportedthedevelopmentofinnovativefinancialinstrumentstostrengthenlocalsustainablefinancialmarket.Inaddition,theEBRDandKazakhstanfinancialregulatorybodyalsosignedan60Source:EBRDwillhelpKazakhstanachievecarbonneutralityby2060.31March2021.https://www.ebrd.com/news/2021/ebrd-will-help-kazakhstan-achieve-carbon-neutrality-by-2060.html1152022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupMOUtopromoteESGandcorporateclimategovernance,61wheretheEBRDwouldfacilitatethedevelopmentandimplementationoffinancialguidelinesandregulationstoaddressESGandclimate-relatedrisks.(Source:EBRD,2022)Box3.4SustainableBankingandFinanceNetwork(SBFN)TheInternationalFinanceCorporation(IFC)hashelpedregulatorsandFIsindevelopingcountriestoenhancetheirskillsandknowledgethroughknowledgeplatforms,toolsandspecificprograms.OneoftheseplatformsistheSustainableBankingandFinanceNetwork(SBFN).TheSBFN,originallynamedasSustainableBankingNetwork(SBN),aimstoshareknowledgeandbuildthecapacityforfinancialregulators,ministries,andindustryassociationsfromemergingmarkets.TheSBFNoffersitsmembersdemand-drivenpeer-to-peerknowledgesharingandtechnicalsupportfromIFCandWorldBankprograms.Asavoluntaryplatformoffinancialsectorregulatorybodiesandindustryassociations,SBFNnowhas72memberinstitutionsfrom62developingandemergingcountries,accountingfor86%oftotalbankingassetsinemergingmarkets.TheSBFNhasissuedGlobalProgressReportbiennially,whichprovidescomprehensivebenchmarksofnationalsustainablefinanceinitiativesacrossemergingmarkets.Moreover,41individualCountryProgressReportsarealsomadeavailablefromMarch2022ontheonlineKnowledgeBaseofSBFN.62SBFNsupportsitsmemberstoachievedualgoals:improvedriskmanagementandgovernanceofESGbyFIsandincreasedcapitalflowstoactivitieswithpositivesocialandenvironmentalimpact.Theabovegoalsareachieved61Source:EBRDandKazakhstan’sfinancialregulatorpromoteESGstandards.22ndMarch2022.https://www.ebrd.com/news/2022/ebrd-and-kazakhstans-financial-regulator-promote-esg-standards-.html62Source:GlobalandCountryProgressReports2021&2022.https://www.sbfnetwork.org/publications/global-progress-report-2021/1162022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupthroughfourmember-ledthematicworkinggroupsthatfocusonMeasurement,SustainableFinanceInstruments,TaskforceforLow-incomeMemberCountries,andData&Disclosure.TheWorkingGroupshaveactivelybuiltcapacitiesamongSBFNmembersthroughwebinarsandtheconductofthematicresearch.Forexample,theLow-IncomeMemberWorkingGroupundertookadiagnosticreportontheuniquechallengesandopportunitieslow-incomecountriesfaceinsustainablefinance,alongwithdetailedcasestudies,countryanalyses,andspecifictoolstoinformdecision-makingsandimplementingnationalsustainablefinanceroadmaps63.AsofApril2022,SBFN’s47membercountrieshavecollectivelyissuedover200nationalsustainablefinanceframeworksincludingroadmaps,regulations,voluntaryprinciples,taxonomies,andtechnicaltoolstoguideandenablesustainablefinanceinemergingmarkets;nineSBFNcountrieswillhaveestablishedtheirnationalgreenfinancetaxonomies,includingBangladesh,China,Colombia,Indonesia,Kazakhstan,Mongolia,SouthAfrica,andSriLanka;24SBFNcountrieshavelaunchedguidelinesforgreen,socialand/orsustainability-focusedfinancialinstruments,suchasloansorbonds.SBFN/IFCareassistingmembercountriestodevelopsuchguidelineswhentheydonothaveany,andtoexpandthemtosocialandothersustainabilityaspectswhentheyhavegreen-onlyguidelines.(Source:SBFN,2022)63Source:SBFNTASKFORCEFORLOW-INCOMEMEMBERCOUNTRIEShttps://www.sbfnetwork.org/working-groups/task-force-for-low-income-member-countries/1172022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupBox3.5BlendedFinancingofUpperTrishuli1(UT1)HydropowerinNepalNepalisabundantlyendowedwithhydropowerresourcesthatgobeyonddomesticdemand,buthasnotbeensufficientlyutilizedduetolackofinvestmentsforlargetransformationalprojects.Itcurrentlyimportsbothelectricityandfossilfuelstoprovidereliablepowerforindustryandcommerce.ThroughblendedconcessionalfinancesupportfromCanada,IDA18PrivateSectorWindow,Finland,andClimateInvestmentFunds,UT-1wasabletosecurethelargestforeigndirectinvestmentinNepalin2019.CommercialfinancingwasprovidedbyIFC,ADB,MIGA(MultilateralInvestmentGuaranteeAgency),AIIB(AsianInfrastructureInvestmentBank),Proparco,FMO(NetherlandsDevelopmentFinanceCompanyandCDC(BritishInternationalInvestment,formerlyCDCGroupplc,CommonwealthDevelopmentCorporation,andColonialDevelopmentCorporation).This$650Mprojectsupportsthedevelopmentofakeygreenfield216megawattrun-of-the-riverhydropowerprojectnorthofKathmandu.Whencompleted,UT-1willprovideimprovedandsustainableelectricityaccesstomillionsandcreatejobs.ItwillalsosetnewenvironmentalandsocialbenchmarksforNepalesehydropowerprojectsthatfollow.(Source:NepalWaterandEnergyDevelopmentCompany)Box3.6ClimateResilienceSolutionsFund(CRAFT)CRAFT,sponsoredbyEuropeanInvestmentBank,isthefirstprivatesectorinvestmentvehiclefocusedentirelyonclimateadaptationandresilienceinLatinAmerica,AsiaandAfrica.Itinvestsgrowthcapitalincompaniesprovidingtech-enabledservices,engineering,dataandsolutionstoenhanceadaptationandresiliencetoclimatechangemainlyfordevelopingcountries.1182022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupItisstructuredasalayeredfundwithfirstlossprotection(injuniorshares).Thejuniortrancheisaround10%oftotalcommitments,providedinitiallybytheGovernmentofLuxembourgaswellasNordicDevelopmentFund.ThetotalprojectcostisapproximatelyUSD250mn.(Source:EIB)Box3.7MongoliaGreenFinanceCorporationTheMongoliaGreenFinanceCorporation(MGFC)isajointpublic-privatesectorefforttocreateanationalfinancingvehicle(NFV)toovercometheexistingchallengesandconstraintsofclimatechangemitigationinMongolia.TheMGFCspecificallytargetsthemainstreamingofgreen,affordableandgender-inclusivefinancingforhouseholdsandbusinessestoswitchtolow-carbontechnologies;andtocreateanimprovedpolicyenvironmentandbuildthecapacityandawarenessofstakeholdersinsupportofthismission.1192022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupAccordingtoitsfundingproposal64,thetotalfinancingvolumeoftheMGFCprojectisestimatedatUSD49.7million,withUSD26.7millionrequestedfromtheGreenClimateFundintheformsofseniorloans,subordinatedloans,andequitycombined.ThegovernmentofMongoliahasalsocommittedequityinvestmentofatleastUSD5million,alongsidealistofFIsthathaveexpressedinterestedinsuchequityinvestment.Acomponentoftheprojectis“wholesalelendingtoParticipatingFinancialInstitutions(PFIs)”-CommerciallyviableEE,low-carbonandaffordablehousingprojectsareidentified,financedandimplemented.Specifically,itincludesthechannelingoffinancingthroughPFIsonawholesalebasisandthedirectchannelingoffinancingtolow-carbonandgreenprojectsatalaterstage.FundingsourcesincludeseniorandsubordinatedloansfromtheMGCF,plusseniorloansfromentitiesownedbythegovernmentofMongolia.(Source:MongoliaSustainableFinanceAssociation)Box3.8CasesforSustainableSupplyChainFinancingTheIslamicDevelopmentBank(IsDB)andTRINE(acrowdfundingplatformthatfacilitatessustainableinvestmentstoaccelerateenergyaccessindevelopingcountries)partneredtosupportdevelopingcountriesonsolarhomesystem(SHS)throughcrowdfundingfinancingmechanism.TheIsDB64FP153-MongolianGreenFinanceCorporation,FundingProposal:https://www.greenclimate.fund/sites/default/files/document/funding-proposal-fp153.pdfSuchinformationcouldbesubjecttoactualprogressofimplementation.However,nofurtherimplementationdocumentafterthisonewassharedontheGCFwebsiteinEnglishyet.1202022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupinvestedinthevariouscrowdfundingcampaigns.ItofferedMurahaba65financing,alsoreferredtoascost-plusfinancing.Throughthisfinancing,theIsDBcatalysedinvestmentandunderthefinancialstructure,repaymenttermsaremorepatientthanthosenormallyagreedtoforthistypeofloan.Toreducethestressofcashflowmanagementontheborrower,theIsDBwillreceiverepaymentinonebulletpayment,ratherthanamortizationpayments.TheIsDB’sloantenorwillalsobelongercomparedtothetypicalloansthatTRINEinvestorsareoffered.Thisservesasanadditionalincentiveforinvestorstobepaidfirstincaseofdefault.ThefundingfromtheIsDBasaninstitutionalinvestordidhaveacatalyticeffect.Thecampaignperiodwassignificantlyshorterthantheaveragetimetofund.Crowdinvestinginsolarisrelativelynewanditsriskprofileisnotwelldefined.Tobuildinvestors’confidenceinbusinesseswhosevolatilityvaries,companiessuchasTrinecanleverageinstitutionalinvestorsandtakethefirstloss.Thus,institutionalinvestorssuchasIsDBabsorbthepotentialimpactofsuchvolatility,whichcancatalyseinvestmentsbysmallerinvestors.Overall,thefinancingofenergycompaniesbyinvestors,bothindividualandinstitutional,hasnumerousbenefitsforbothinvestorsandendusersoftheoff-gridsolarsolutions.First,theinvestmentsmakeasignificantcontributiontomitigatingclimatechangebyhelpingcommunitiestransitionfromfossilfuelstocleanandrenewableenergy.Theenergyprovided,whichtheinvestmentsfacilitate,offersmultipledevelopmentbenefitstocommunitieswellbeyondachievingSDG7.Finally,therobustmodelofdebtfinancingensuresthattheinvestorswillearnareturnontheirinvestments.Formore,seeIsDB,TRINE,andUNDPReport(2021)onSDGImpactAssessmentCrowdInvestmentsforSolarHomeSystem(Nigeria).65MurabahaisanIslamicfinancingstructureinwhichtheseller(here,IsDB)andthebuyer(thesolarpartner)agreetothecostandmarkupoftheSHS.1212022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroupAnnex:DiscussingpolicyleversthatincentivizefinancingandinvestmentthatsupportthetransitionTheRoadmaprecognizedtheimportanceofpublicpolicyleversandtheirimplicationstosendmarketsignalsthatinfluencesustainableinvestmentdecisionsandincentivizetheparticipationofprivatecapitalinsustainableinvestments.Well-craftedpublicpoliciestomitigategreenhousegasemissionsareamongthecriticaldriversininfluencingcustomer,firm,andinvestordecisions.TheG20IndonesiaPresidencyconvenedaforumoninternationalpolicyleversforsustainableinvestmenton13June202266.ThisG20member-drivenforumprovidedaspaceformemberstoshareexperiencesanddiscussarangeofpolicyleversthatcanincentivizesustainablefinancingandinvestmentthatsupportjustandaffordabletransitionstowardsalow-greenhousegasemissionsandclimate-resilienteconomy,withdueconsiderationsfornationalcircumstancesandinlinewiththeParisAgreementandinaccordancewithnationallydefineddevelopmentpriorities.Someofthetakeawaysfromtheforuminclude:•ManyG20membersconcurredontheimportanceofcarbonpricingmechanismsasacost-effectivemethodtoreduceemissions.However,membersthoughtthatassessingthecost-effectivenessofonepricingmechanismversusotherspricingmechanismornon-pricingmechanismdependsonseveralassumptions;hence,country-and/orsector-specificassessmentsarenecessarybeforedevelopinganappropriatepolicymix.66https://g20sfwg.org/wp-content/uploads/2022/07/Presidency-Summary-%E2%80%93-Forum-on-International-Policy-Levers-for-Sustainable-Investment-%E2%80%93-13-June-2022.pdf1222022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroup•SeveralmembersexpressedtheneedtobetterunderstandtheinternationalimpactsofCarbonBorderAdjustmentMechanisms(CBAM),especiallyonemergingmarkets,andhowtheseproposalscouldinfluenceclimatepolicychoices].•Somemembersmentionedtheneedtoestablishandexpandcarbonpricingmechanismsgradually,andtomonitortheireffectivenessrelativetonon-pricingmechanisms.•Theuseofrevenuesfromcarbontaxescanbeanessentialaspectofpolicydesign,andparticipantsdiscussedtheconsiderationsbehindtheirapproachestoaddresssocioeconomicconsequences,greenspending,orgeneralrevenuemanagement.Somemembersmentionedofchallengesofdataavailabilityandverificationofemissionsproducedbycompanies.•Membersacknowledgedthatnon-pricingtoolscouldplayacriticalroletoreduceemissionsincountrieswheretypicalpricinginstrumentsaredifficulttoimplementduetodomesticpoliticalorotherconsiderations.Severalmembersexpressedtheneedtobetterunderstandtheeffectivenessofnon-pricingtoolscomparedtopricingtools.Membersalsoraisedissuesrelatedtoaddressingcross-ministerialcoordination,whichisoneofthecrucialchallengesinimplementingclimatepolicies,topreventnegativeeconomicanddistributionalimpactsatinternationallevelstemmingfromuncoordinatedclimatechangemitigationpolicies.•Theforumalsohighlightedtheimportanceoftechnologicalinnovationinsupportingtheclimatetransition.Somemembersfurtheropinedthatsuchinnovationisasessentialtodevelopingcountriesandsmallercompaniesastodevelopedandmoreprominentones.Itwasalsonotedthatadequatecarbonpricingisinstrumentalinfosteringthistechnologicalinnovation.1232022G20SUSTAINABLEFINANCEREPORTSustainableFinanceWorkingGroup•Membersreiteratedtheimportanceofaddressingthesocio-economicimplicationsofpolicyleversinsupportingtransitionsandsharedtheviewthatunlesssuchimplicationsareadequatelyaddressed,implementationofpolicyleversisunlikelytogainmomentum.•Althoughthefocuswasonnationalpolicylevers,thereisdemandforimprovingunderstandingofinternationalimpacts,coordinationandcooperation.Theforumidentifiedafewchallengesinallocatingpolicyincentivestoinfluenceinvestmentdecisions:•Informationasymmetry.Ifnotappropriatelymanaged,thisasymmetrywillleadtogreen-andSDG-washing.Thegovernmentincentivestopromotesustainableinvestmentcanenticesomeprojectownerstopretendtheyaregreen.•Cost-effectivenessofpolicyincentives.Thecost-effectivenessofsuchincentivescanbedifferentindifferentcountries.Moreanalyticalworkisneededtodevelopthepriceequivalencyofnon-pricingpolicyinstruments.•Enhancingcoordinationbetweenfinanceregulatorsandothergovernmentministriesorbodies.Althoughcentralbanksmustunderstandandevaluatetheeffectsofclimatepolicychoices,theydonothavefiscaltools,sectoralregulatoryfunctions,orpoweroverenvironmentalinformationdisclosurerequirements.Toaddressthischallenge,severalG20membersaswellastheSFWGco-chairsnotedthataconsortiumofrelevantministriesoragenciesisrequiredforeffectiveimplementationandselectionofpolicylevers,includingtoembedincentivesintogreenfinancepoliciesandregulations.

1、当您付费下载文档后，您只拥有了使用权限，并不意味着购买了版权，文档只能用于自身使用，不得用于其他商业用途（如 [转卖]进行直接盈利或[编辑后售卖]进行间接盈利）。
2、本站所有内容均由合作方或网友上传，本站不对文档的完整性、权威性及其观点立场正确性做任何保证或承诺！文档内容仅供研究参考，付费前请自行鉴别。
3、如文档内容存在违规，或者侵犯商业秘密、侵犯著作权等，请点击“违规举报”。

碎片内容

碳中和的最新文档