China and the US to lead rebranded G20 sustainable finance study group

The group, originally headed by Ma Jun and Michael Sheren, was disbanded in 2018

The Chinese central bank and the US Treasury have been appointed co-chairs of a G20 committee on sustainable finance which has been newly reestablished after being left defunct for the past two years. 

The committee, now known as the Sustainable Finance Study Group (SFSG), was first set up in 2016 during China’s G20 Presidency, and was co-chaired by Ma Jun, then-Chief Economist at the People’s Bank of China, and Michael Sheren from the Bank of England. Originally called the Green Finance Study Group, RI understands the change in title came after pressure from the Trump Administration to drop any reference to ‘green’ or ‘climate’ in global groups in which the US was participating. 

The body presented its first report to G20 leaders in 2016, focusing on the banking sector, bonds, institutional investment, risk management and measuring sustainability performance. The group issued three further updates before the suspension of its activities in 2018.

According to a statement from Treasury Secretary Janet Yellen, the rebranded SFSG will coordinate G20 initiatives “to promote transparency around climate-related financial risks, sustainable finance, and a strong, green recovery”.

In addition, Secretary Yellen emphasised the importance of an equitable and just transition to a low-carbon economy. “While we address the difficulties transitioning our own economies, we should also support low-income countries as they pursue their climate goals, balanced with their development objectives,” she said. 

“As policymakers of leading economies, we must have frank, open, and sometimes difficult discussions about how to share the burdens and opportunities of transitioning our economies toward a more sustainable, equitable, and prosperous future.”

Yellen also indicated that the Treasury will back a proposal to elevate the SFSG to Working Group status in the G20 “to reflect its importance”.

Since the release of the first GFSG report in 2016, China has made significant progress domestically on sustainable finance with recent initiatives to assess the environmental performance of banks and update its national green bond standards. The EU has similarly emerged as a frontrunner in the space through its ambitious Sustainable Finance Action Plan, while G20 members Australia, Canada, France, India, Indonesia, Japan and the UK are each in varying stages of deploying a national strategy on sustainable finance.

In contrast, the US had taken a critical view of ESG and climate finance for the past four years, under the Trump Administration. However, there are signs that this will change with the election of President Biden; along with the most recent announcement from the Treasury, market regulator the Securities and Exchange Commission (SEC) indicated last week that it will update previously issued guidance on climate-related corporate disclosure requirements.

The SEC has also created a new role advisory position on climate and ESG issues to which it appointed former SEC counsel Satyam Khanna. And Biden has ordered that more than 100 environmental rules created under Trump are reviewed.