Policy that takes environmental issues fully into account would improve the stability of the global financial system, explains Achim Steiner, Executive Director, United Nations Environment Programme
Inaugurated in 1999, the G20 is a forum through which 19 countries and the European Union – making up 85 per cent of global gross domestic product and two thirds of the world’s population – discuss, build consensus on and decide collectively to address major international challenges.
Climate risks and the financial system
The quality of the environment is not just a matter for environmental ministers and policies. A growing number of financial regulators and central bankers are responding to the simple fact that the working of the financial system produces effects on the environment that can impact the health and, ultimately, the stability of the financial system. Brazil’s central bank has a host of environmental regulations, and the China Banking Regulatory Commission’s Green Credit Guidelines provide increasingly stringent directions regarding environmental risk management. While most central banks today remain ambivalent that climate represents a systemic risk to the financial system, the Bank of England has recently commenced a review of the relationship between insurance regulation and climate change. Governor Mark Carney signalled his growing conviction that the future of the financial system and our management of climate were closely interwoven at the recent IMF/World Bank Annual Meeting in Washington DC, declaring that the “vast majority of [fossil fuel] reserves are unburnable”, and by implication of less value than markets currently think, if global temperature increases are to be contained to two degrees as recommended by the world’s leading scientists. The United States Securities and Exchange Commission provides guidance to investors in assessing and reporting on climate risks. Indeed, hosted by the United Nations Conference on Trade and Development, the Sustainable Stock Exchange initiative currently has 16 stock exchange members, including London and New York, all of which are advancing new sustainability-focused disclosure requirements and, in some cases, indexes.