Finance

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Finance, encompassing public and private activities that deal with the allocation of credit and capital resources, serves as a critical driving force for real economic growth. The transition to an inclusive green economy, in particular, will be capital demanding. However, the current financial system often fails to take into account the long-term social and environmental impact of certain economic activities, resulting in underinvestment in green sectors and overvaluation of environmentally damaging assets such as the fossil fuel industry.

In response to the gap between the capital resources needed and current investment flows, endeavors are being made to align the financial system with the needs of green growth. The UNEP Inquiry results, released in late 2015, demonstrate a growing trend in policy innovation from central banks, financial regulators and standard setters, in both developed and developing countries, who are incorporating sustainability factors into the rules that govern the financial system. Additional research and understanding will help the international financial system prioritize the green economy agenda and propel green growth.

Relevance to the SDG

Sustainable Development Goal 1, target 1.4, calls for increasing access to appropriate financial services, including microfinance, to poor and vulnerable population. In addition, SDG 10 target 5 calls for improvements in regulation and monitoring of the global financial system.

SDG 1.4
               Microfinance                  
   SDG 10.5
Sustainable Financial System

Projects

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, Partnership for Action on Green Economy (PAGE), United Nations Environment Programme (UNEP), International Labour Organization (ILO), United Nations Development Programme (UNDP), United Nations Industrial Development Organisation (UNIDO), United Nations Institute for Training and Research (UNITAR)
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Learning Products

World Bank, Korea Green Growth Partnership (KGGP)
Smith School of Enterprise and the Environment (SSEE), University of Oxford
United Nations Development Programme (UNDP)

Insights

Remco Fischer, UNEP FI, discusses UNEP FI works at the interface between governments and the finance sector and has a critical role to play in the intergovernmental climate process.

The GGKP Knowledge Partner, CDKN attended the Global Green Growth Week was held in Jeju, Republic of Korea, 5-9 September.

Steven Stone, UNEP, discusses the link between sustainability and financing and the various mechanisms and instruments in place - existing, and to be created - to finance the green economy transition.