Sustainable finance endeavours to transform the financial system in a way that systematically balances risk, return and sustainability.
It does this through accounting for environmental, social and governance (ESG) considerations in the investment decisions of financial market participants. It further enables the active channelling of capital to companies and sectors that advance sustainable outcomes and include ESG-related risks in financial risk management. Sustainable finance plays a central role in delivering on the EU’s international commitments on climate and sustainability, as well as on the objectives of the Paris Agreement.
In October 2019, the EU launched the International Platform on Sustainable Finance (IPSF) to strengthen international cooperation and coordination on increasing cross-border sustainable financing. The platform currently comprises 18 members, including many SPIPA countries.
SPIPA has been working closely with the IPSF on two major areas that have been identified as particularly important; namely, taxonomies and disclosures. Both can help prevent the fragmentation of sustainable finance practices and facilitate the development of a common understanding on green financial products. Furthermore, international cooperation on taxonomies and disclosures can give emerging economies with less-developed policy frameworks access to advanced practices that they may choose to implement.
In the area of taxonomies, SPIPA supported the development of the so-called Common Ground Taxonomy (CGT), published in October 2021. The CGT highlights the commonalities between the EU and the Chinese sustainable finance taxonomies, both viewed as the frontrunners in this area. This comparison aims to serve as a basis for increased comparability and future inter-operability of sustainable finance taxonomies globally.
As both the EU and the Chinese taxonomies evolve, the IPSF aims to develop the CGT further by including other environmental objectives besides the currently included ones of climate change mitigation and transition considerations. Additionally, it intends to widen the scope of the CGT to other finalised taxonomies.
SPIPA further collaborated with the IPSF on the development of a comparison report on disclosure systems. The report provides an overview of ESG-related policy measures, describes the characteristics of different approaches and identifies global trends and gaps. It also supports global efforts to improve sustainability disclosures as a cornerstone of sustainable finance and to facilitate corresponding policy among members of the IPSF. As such, the objectives and analysis of this report aligned well with the objectives of SPIPA and its goal to increase international cooperation on sustainable finance-related matters.
While cooperation with the IPSF was SPIPA’s chief sustainable finance focus, SPIPA also initiated policy dialogues on climate finance between the EU and Japan, Mexico and Australia respectively to promote the implementation of the Paris Agreement.
SPIPA’s partner in Japan, the Institute for Global Environmental Strategies, facilitated a series of engagement opportunities that enhanced political momentum towards net-zero emission initiatives and assisted the alignment of regional financial institutions with the regional objectives of the United Nations Sustainable Development Goals and the Paris Agreement.
SPIPA also supported the development of a policy report, Unlocking Australia’s Sustainable Finance Potential, which contributed to improved awareness among financial regulators, institutions and policymakers on key programmes in development under the EU’s sustainable financial systems