01Focus Area Market development and approaches to align investments to Sustainability Goals
02Focus Area Consistent, comparable, and decision-useful information on sustainability risks, opportunities and impacts
03Focus Area Assessment and management of climate and sustainability risks
04Focus Area Role of IFIs, public finance and incentives
05Focus Area Cross-cutting issues
01. Market development and approaches to align investments to Sustainability Goals.Reported Progress Summary: International Organizations (IOs) have been actively working to align investments to Sustainability goals through the five actions within the Focus Area. In this regard, IOs have deployed several efforts setting frameworks and guidelines to overcome obstacles in the financial system and facilitate the achievement of the SDGs. Additionally, some of them have been planning to enable interoperability while working on a research and development agenda, while others have been working on providing more clarity and transparency about commonalities and differences between taxonomies. Additionally, some work has been developed on building infrastructure transition pathways in the sustainable infrastructure landscape, and some institutions have been working on developing partnerships for the promotion of sustainability.
The G20 encourages jurisdictions that intend to develop their own alignment approaches to refer to a set of voluntary principles:
Principle 1: Ensure material positive contributions to sustainability goals and focus on outcomes;
Principle 2: Avoid negative contribution to other sustainability goals (e.g., through do no significant harm to any sustainability goal requirements);
Principle 3: Be dynamic in adjustments reflecting changes in policies, technologies, and state of the transition;
Principle 4: Reflect good governance and transparency;
Principle 5: Be science-based for environmental goals and science- or evidence-based for other sustainability issues; and
Principle 6: Address transition considerations.
Improve coordination at the regional and international level to facilitate the comparability, interoperability, and as appropriate the consistency of different alignment approaches, including via work of relevant IOs, and by encouraging:
- Jurisdictions which intend to pursue a taxonomy-based approach to consider developing sustainable finance taxonomies using the same language (e.g., international standard industry classification and other internationally recognized classification systems), voluntary use of reference or common taxonomies, and regional collaboration on taxonomies.
- Collaboration and active engagement of service providers, where consistent with applicable laws, with appropriate IOs and financial authorities to enhance comparability, interoperability, and transparency of approaches, including forward-looking portfolio alignment tools, ESG rating methodologies, verification and labelling approaches.
Relevant international organizations, networks or initiatives to further advance work towards better understanding the technical aspects and interlinkages of existing and emerging alignment approaches, as well as good practices, and develop specific recommendations for enhanced comparability and interoperability.
Better integrate transition finance considerations into sustainable finance alignment approaches, with a focus on interoperability with existing and emerging approaches for sustainable finance, based on the mapping and review of existing and emerging approaches by the SFWG and appropriate IOs.
G20 and relevant IOs to identify opportunities to promote scaling up of climate and sustainable-aligned financial instruments, products and markets, including sustainable capital market instruments.
02. Consistent, comparable, and decision-useful information on sustainability risks, opportunities and impacts.Reported Progress Summary: Aiming to work on consistent, comparable, and decision-useful information on sustainability risks, opportunities and impacts, International Organizations (IOs) have been joining efforts to facilitate the comparability, interoperability and the consistency of different alignment approaches while working on provide consistent standards to maximize positive impacts for the financial sector. Additionally, IOs have been working on improving corporate disclosure on sustainable development-related matters while also working on addressing some information gaps on sustainable data. Developing infrastructure transition pathways, aiming to fill information gaps in the sustainable infrastructure landscape by increasing transparency around long-term infrastructure plans and how they can be best aligned to transition goals has also been part of the agenda.
G20 to welcome the work program of the IFRS Foundation to develop a set of internationally consistent, comparable, and reliable baseline standards for disclosure of sustainability-related information on enterprise value creation. These standards should build on the TCFD framework and take into account the work of other sustainability reporting organizations, involving them and consulting with a wide range of stakeholders.
- The IFRS Foundation work program, including its proposed International Sustainability Standards Board (ISSB), should be governed by a transparent and inclusive governance structure with public oversight provided by the Monitoring Board and a process of consulting a wide range of stakeholders.
- The ISSB should develop a baseline global sustainability reporting standard while allowing flexibility for interoperability with national and regional requirements, and taking into account the need to avoid disproportionate burdens on small and medium-sized enterprises (SMEs).
- The ISSB should over time extend coverage from its initial focus on climate-related information to include other sustainability-related topics such as nature, biodiversity and social issues.
- The reporting standard that the ISSB develops would be subject to review for endorsement by IOSCO. If endorsed, the standard could then be considered by individual jurisdictions, on a voluntary basis, via national or regional standard-setting processes or in establishing domestic reporting requirements. Jurisdictions will have their own legal frameworks for adopting, applying, or otherwise making use of international standards.
Building on the ongoing work on data gaps by FSB, Network of Central Banks and Supervisors for Greening the Financial System (NGFS), Organization for Economic Co-operation and Development (OECD), Bank for International Settlements (BIS), International Monetary Fund (IMF) and other IOs, take concrete steps to further advance sustainability data strategies, governance and architecture frameworks that aim to improve data quality and accessibility for the financial system, and promote greater access to public sustainability data, including by developing a shared digital platform to improve accessibility to relevant publicly available sustainability data which is already available.
Encourage work by relevant IOs on improving data quality, usefulness, and transparency of methodologies, such as metrics choices and weightings, from ESG rating agencies and other sustainability data providers.
Encourage ongoing work by relevant IOs to better understand the challenges and benefits to sustainability reporting for SMEs and emerging market economies, and consider ways to address them, including via more efficient use of available information, leveraging on digital technologies, and enhanced capacity building efforts.
Encourage relevant international organizations, networks, and initiatives to further advance the understanding of nature- and biodiversity related metrics and indicators used in disclosures by corporates and financial institutions.
03. Assessment and management of climate and sustainability risks.Reported Progress Summary: International Organizations have been actively working aiming to perform assessment and management of climate and other sustainability risks using a set of diverse strategies. Some IOs have been working performing studies of liability risk and others providing assessment of the implications of climate change and the role of sustainable finance markets in supporting transition. Additionally, work about the transition finance framework has been performed, while providing information about macroeconomic, growth, employment, and stability implications of a climate Minsky shock to financial markets and the economy and shows the role that can be played by financial institutions and instruments to ameliorate the risk.
Building on existing work, relevant international organizations, networks, and initiatives should over the short to medium term explore the potential financial risk and financial stability implications of climate risks, and, as appropriate, expand the coverage of risk analysis to include other sustainability risks such as nature- and biodiversity-related risks, over the medium term.
As key risks are identified, G20 central banks, ministries of finance, regulators, and supervisors are encouraged, on a voluntary basis, to coordinate through the FSB, standards-setters, NGFS, and other bodies, as appropriate, to effectively identify, measure and manage sustainability-related financial risks. This may include the development of consistent risk definitions, tools, and methodologies to assess financial sector exposure to sustainability risks, including for climate risks, and by making use on voluntary basis of the NGFS’s reference scenarios. This may also include coordination on supervisory activities on the measurement, management and reporting of sustainability risk exposures, including regulatory guidance and supervisory expectations.
SFWG will work with the G20 Framework Working Group (FWG) to enhance understanding of the macroeconomic implications of climate risks and climate policies, including the impacts on growth, inflation, employment, income distribution and the costs of transitioning both within and across jurisdictions, as well as the policy mix needed to mitigate these impacts.
04. Role of IFIs, public finance and incentives.Reported Progress Summary: To address Focus Area 4, International Organizations (IOs) have been working proactively in different fronts. IOs have committed to several plans or Joint Actions on the sustainable finance front. Additionally, IOs have been working on developing a framework on how to best leverage private sector participation to scale up sustainable infrastructure investment while providing technical assistance to commercial financial institutions in the region to develop financial products and services for climate mitigation and adaptation. Moreover, some of them have also been working with institutional investors to mobilize more capital for sustainable development and ensure their investment strategies and portfolio holdings are aligned with the SDGS. Finally, some other efforts have been aligned to update organisational strategy to consider emerging issues including COVID-19 pandemic, Sustainable Development Goals (SDGs) and transition to low carbon and climate resilient future.
Encourage MDBs to raise their ambition on climate action, including via:
- taking concrete steps to ensure alignment of their operations to the goals of Paris Agreement and the 2030 Agenda, promote transparent reporting, and analyze their own progress toward alignment. The G20 encourages MDBs to pursue alignment of their operations to the goals of the Paris Agreement within ambitious timeframes, while continuing to support the 2030 Agenda;
- expanding MDB de-risking facilities for crowding in private sector investments;
- devoting efforts to capacity building for greening the financial systems in emerging markets and developing economies, including to SMEs, while taking into account the varying country contexts in terms of development levels and needs as well as market maturity;
- supporting just climate transition of their clients via enhanced efforts for capacity building, while facilitating demonstration projects; and
- assisting country authorities in developing sustainable recovery strategies and delivering against their Nationally Determined Contributions (NDC) and SDG and biodiversity goals.
Encourage IFIs, including MDBs, other relevant IOs, and public funds more broadly to mobilize private finance. This can be done through assisting developing country partners in helping domestic financial systems align with the goals of the Paris Agreement and national SDGs plans, developing blended financial instruments and mechanisms, engineering de-risking facilities, and taking other actions to eliminate barriers to sustainable investments with the objectives of promoting private sector investment in sustainability.
The SFWG will work with other G20 groups, relevant international organizations, networks and initiatives as appropriate, to analyze the implications of public policy levers on market signals that could influence sustainable investment decisions. These policy levers could include mechanisms to support clean energy sources, schemes for rationalizing and phasing out inefficient subsidies for fossil fuels that encourage wasteful consumption and, if appropriate, the use of carbon pricing mechanisms and incentives to reduce greenhouse gas emissions and promote green transitions and the achievement of the 2030 Agenda, while providing targeted support for the poorest and the most vulnerable and in accordance to each country's circumstances.
05. Cross-cutting issues.
Reported Progress Summary: Aiming to address cross cutting issues, International Organizations have worked identifying barriers to achieve a coherent system of norms for impact management. Additionally, investments in funds that apply technologies to improve the sustainability of infrastructure and related sectors have been made. Moreover, to explore how sustainable finance alignment approaches may integrate transition considerations, working groups have been established and frameworks about how to leverage private sector participation to scale up sustainable infrastructure have been developed. Furthermore, some IOs have been closely collaborating with technical assistance providers to work with governments with the identification of projects and the preparation of presentations to investors
Appropriate IOs or international initiatives to develop a stock-take of emerging digital solutions supporting the mobilization of sustainable investments, covering environment, climate, and other sustainability goals, and identify ways to foster coordination and interoperability on those digital solutions. Key areas of focus could include digital applications in sustainability reporting (such as the use of structured data, where feasible and appropriate), identification and labelling of products and assets, as well as transactions of sustainable assets.
SFWG to work with appropriate IOs to develop high-level principles for a credible and consistent framework for financing a just climate transition. This work could map and review existing and emerging approaches, as appropriate, to:
- enable transitions towards a low greenhouse gas emission economy;
- explore options to incorporate transition considerations in sustainable finance alignment approaches (e.g., taxonomies, labels, portfolio alignment tools such as forward looking metrics);
- identify and develop credible transition metrics, pathways, targets, and low greenhouse gas emission development strategies;
- improve disclosure requirements;
- develop and expand tools to finance climate transition; and
- explore best practices for mitigating negative economic and social impact of climate transition on local communities and SMEs.
IOs and other technical assistance providers should coordinate and align their capacity building efforts with the priorities identified in the Roadmap.