The UNEP published its Inquiry, The Financial System We Need on October 8th, 2015 at the World Bank/ IMF meeting in Lima. The Inquiry explores, “how changes in financial system design can bring the environment more effectively into financial decision-making.” Along with the report, the UNEP also launched a web portal ‘Inquiry Live’ providing access to 50 research pieces. We were lucky enough to speak with Simon Zadek, Co-director of the Inquiry.
What was the purpose of the Inquiry / what were you hoping to uncover?
The Inquiry’s mandate was to explore how the development of financial and capital markets could be better attuned to sustainable development outcomes. Our focus has been on the “rules of the game”, so the roles of central banks, financial regulators, standard setters and the like, not so much the entrepreneurial, exemplary activities of particular actors. Over 20 months, the Inquiry sought to discover and map the practical experience of such rule makers in embedding social and environmental parameters into the heartland of the financial system.
What are your key findings and who are they most relevant for?
The key finding is that far more is going in the space than anyone had previously imagined, much although not all of the most innovative experimentation is happening in developing and emerging countries, and that there are clear patterns and trends to these early stage innovations that can be learnt from and built on. From Bangladesh to Brazil, and from South Africa and Kenya to China and Peru, and taking account of leading practice in developed countries such as the UK and France, we see the potential for what is currently a “quiet revolution” to be powered up and reshape the next generation of financial system developments to ensure that financial decision making takes sustainable development more fully into account.
How do you think these findings will impact the global financial system and support new SDGs?
What we have found, mapped and assessed suggests that private finance could be more effectively attuned to the financing needs associated with many of the sustainable development goals, particularly the big numbers for infrastructure developments from energy to mobility, and urban build to agriculture and water and health systems. Whether our findings will have this effect in practice depends on leadership, public awareness and international cooperation on many fronts.
At The Ground_Up Project, we give visibility to SMEs that are doing some amazing work at the local level, for people and the environment. What will be the impact of the Inquiry on financing for Small and Medium Enterprises?
Hard to say– clearly financial policy, regulation, and standards impact finance for SMEs. Even the much-discussed Basel 3 rules, intended to be purely about risk, have been adjusted to support lending to SMEs. Some of the innovative practices we noted in developing countries such as Bangladesh and Kenya focused a lot on financial inclusion, including measures to ensure financing for SMEs. The linkages between SMEs and green finance remains an under-explored topic in theory, but on the ground such linkages are becoming clearer and need to be illuminated.
What happens next?
There are a ton of things in play that do not depend on the Inquiry’s report, but in which the Inquiry has already had some involvement, sometimes at a catalytic level. National action is needed by central banks, regulators and other actors, and the cases of Indonesia and China illustrate just how ambitious they can be. Action is also needed at the international level, and China has announced plans to launch a green finance track during their presidency of the G20 in 2016, a process that the UNEP Inquiry is proud to be supporting. Perhaps most mundane is that folks need to read and hear about what we have found, so I would encourage your readers to go to www.unepinquiry.org and download the material in any one of seven languages, to both have a look and pump it into their networks.
Simon Zadek is the co-Director of the UNEP Inquiry, senior fellow at the International Institute for Sustainable Development, visiting scholar at the Tshingua School of Economics and Management, and distinguished senior fellow at the Academy for Business in Society.