Bali, 26 September 2022 – the 4th SFWG Meeting during the 2022 Indonesia Presidency.
1. The 2022 SFWG achievements at a Glance
The Sustainable Finance Working Group (SFWG) has just concluded its work under the 2022 Indonesia Presidency. The Group aims to mobilize finance as a way of ensuring global growth and stability, and promoting the transitions towards greener, more resilient, and inclusive societies and economies. The Group is tasked to identify institutional and market barriers to sustainable finance and develop options to overcome such barriers and contribute to a better alignment of the international financial system to the objectives of the 2030 Agenda and the Paris Agreement.
At the 17th G20 Heads of State and Government Summit that have taken place on November 15-16 2022 in Bali the G20 Leaders endorsed the SFWG 2022 work and its final deliverable, the 2022 G20 Sustainable Finance Report. The Summit has been the pinnacle of the G20 process and intense work carried out by the Finance Ministries, Central Banks, Technical Ministries and Experts, International Organizations, Groups and Networks, as well as with Engagement Groups and the private sector throughout the year.
The report summarizes the work of the SFWG in 2022. This work has been anchored in the G20 Sustainable Finance Roadmap (the “Roadmap”) actions, endorsed as voluntary by G20 Leaders at the 2021 Rome Summit. Specifically, the report:
- tracks progress on the recommended actions in the Roadmap;
- describes the outcome of SFWG activities across three workstreams – Developing a Framework for Transition Finance, Improving the Credibility of Private Sector Financial Institution Commitments; Scaling up Sustainable Finance Instruments – which includes high-level principles and voluntary recommendations, and;
- reports key takeaways from the forum on international policy levers for sustainable investment held in June 2022
The report builds on the outcomes of the 4 SFWG meetings (meeting summaries can be accessed here through https://g20sfwg.org/document-repository/ ) as well as on the discussions during the Private sector roundtable and policy levers forum.
2. Just Launched – G20 Progress Tracking Online Dashboard
In 2022, the SFWG launched a G20 Progress Tracking Dashboard that allow users from all over the world to access the latest progress over the 19 Actions of the G20 Sustainable Finance Roadmap. The dashboard is based on reported efforts by international organizations, global networks, and stakeholders to advance the five Roadmap’s priorities and/or focus areas of action, which are:
- Market development and approaches to align investments to Sustainability Goals;
- Consistent, comparable, and decision-making-useful information on sustainability risks, opportunities, and impacts;
- Assessment and management of climate and sustainability risks;
- Role of IFIs, public finance, and incentives, and;
- Cross-cutting issues.
3. 2022 Focus Area
Transition Finance Framework
(see our recent blog on the topic here)
Chapter 1 of the Sustainable Finance Report centers on the transition finance framework. Despite the fast rate of growth in green and sustainable finance sectors, there is a lack of sustainability-aligned financing activities in the global economy. In response to this, SFWG developed high-level principles on transition finance framework in order to guide the development of policies and financial services and support sustainability-related transition. The five main pillars of transition framework include:
- Identification of transitional activities and investments;
- Reporting of information on transition activities and investments;
- Developing transition-related finance instruments;
- Designing policy measures; and
- Assessing and mitigating negative social and economic impact of transition activities and investments.
Improving the Credibility of Private Sector Financial Institution Commitment
Private financial institutions (FIs) play a crucial role in financing transition activities and net-zero investments. Over the past year, there has been a considerable number of private sector financial firms in developed countries that made net-zero or other climate-related commitments. However, there exist challenges that hinder more FIs to make commitments, including lack of capacity to collect emissions data, a need for sufficient methodologies and tools, etc.
As such, SFWG performed a thorough assessment of current market practices on climate commitments and provided a series of voluntary recommendations for private sector financial firms and governments to enhance the credibility of FIs’ commitments. These include – for FIs, to integrate voluntary net-zero commitments into all aspects of firms’ business strategies, policies, for relevant authorities, to encourage commitments by articulating how they will support net-zero commitments in a manner consistent with their objectives, and more. More details can be found in Chapter 2 of the Sustainable Finance Report.
Scaling Up Sustainable Finance Instruments
(see our recent blog on the topic here)
Scaling-up sustainable finance instruments with focuses on accessibility and affordability, is necessary in creating an enabling environment for the growth of sustainable capital flows, as many finance ministries and central bankers emphasized during the Group meetings throughout the year.
The SFWG has identified the key challenges and developed recommendations to “help eliminate barriers and bridge the gap in scaling up private sector sustainable investment” and “improve access of corporates (including Small- and Medium- Sized Enterprises (SMEs)) to domestic and international sustainable finance markets, in an affordable way”.
Several key takeaways from the recommendations. are:
- The importance of assigning more resources and expertise to de-risk finance operations for sustainable activities in developing countries. Multilateral Development Banks (MDBs) should devote more resources, within their mandate and capital constraints, to support blended finance operations and technical assistance programs to help clients prepare bankable and sustainable projects and programs for developing countries. MDBs and Development Financial Institutions (DFIs) should collaborate further to build relevant knowledge and understanding with respect to market structure, regulations, institutions, and the local political economy dynamics within developing countries.
- Enhance and expand capacity-building services, including training of officials, regulators and financial sector professionals, to support the design of sustainable finance policies and roadmaps in developing countries, and enhance the capacities of local FIs.
4. Looking Forward – India’s Forthcoming G20 Presidency
The SFWG is excited about India’s upcoming G20 presidency that will commence on the 1st December 2022 under the theme “One Earth. One Family. One Future”. During its presidency, India G20 will work on female empowerment, enhancement of climate financing, circular economy and green hydrogen, among a series of other priorities. The SFWG looks forward to collaborating with India to achieve its sustainability-aligned goals.
5. Resources / Key Inputs for 2022
Input Papers submitted to the SFWG to inform its discussion
Input papers are prepared by the authoring institutions as a contribution to the SFWG but have not been endorsed by it nor do they represent the official views or position of the Group or any of its members.
25 Oct, 2022
28 Sep, 2022
31 Mar, 2022
The 2nd Meeting of the Sustainable Finance Working Group (SFWG)
The blog on the transition finance framework
The blog on scaling up sustainable finance instruments
The blog on the IO progress report and call for country to report voluntarily
For submissions, comments, or queries on the SWFG Annual Newsletter Bulletin, please get in touch with the team at: email@example.com
add the link to the final communiqué [LP1]