G20 finance group to turn its attention to the UN SDGs

G20 Study Group on Green Finance is rebranded to address social issues too

The G20 Study Group on Green Finance has changed its name to the G20 Study Group on Sustainable Finance, signalling its intention to broaden its focus to cover the UN Sustainable Development Goals, and in response to US political hostility towards the word ‘green’.
The group was launched in 2016, and is led by the UK and China, with UN Environment as Secretariat. Speaking at an event in London recently, Michael Sheren, Co-Chair of the group and Senior Advisor at the Bank of England, said “we changed it to sustainability because sustainability captures all of the SDGs,” adding: “We’re mapping to all the different ones throughout this that we’re touching – above and beyond just environmental”.
He also pointed out the political challenges with the US, which – at federal level – has been open about its objection to the Paris Accord and other initiatives to tackle climate change, saying it will harm employment and industry. In its latest budget document, the Trump administration proposes cuts to national research programmes for clean energy and climate change, and to the Department of Energy’s Office of Energy Efficiency and Renewable Energy. It also calls for an end to some voluntary emissions trading schemes in the country, as well as the US State Department’s Global Climate Change Initiative, which focuses on helping poorer countries protect themselves against the impacts of climate change.
An insider at the G20 Study Group on Sustainable Finance confirmed to RI that “the US was certainly an influencing factor, based on G7 experience where the term ‘green’ was not well received.” But, he added: “this was not the main reason for transitioning from green to sustainable finance”.
“Sustainable finance captures better the influence/change that the group wants to pursue. This is a better alignment between the financial sector and a sustainable real economy. Social cannot be left aside.”
The insider noted that the “emerging trend is for initiatives to consider more and more the social aspects”. He pointed to the European Commission’s High Level Expert Group on Sustainable Finance, which focused on climate resilience, but also addresses broader issues such as social responsibility and long-termism; and the development of the International Capital Markets Association’s Social Bond Principles, created last year to broaden out the focus of the Green Bond Principles – both of which come under a new umbrella of ‘sustainability bonds’.The G20 already has a Sustainability Working Group – not dedicated to finance. However, that comprises the G20 Energy Sustainability Working Group and the G20 Climate Sustainability Working Group, so the focus is still primarily on the ‘green’ aspect of sustainability. The first meeting of the Climate Sustainability Working Group is in April.
The further reason for the shift, the insider said, is that Argentina – which took presidency of the G20 in November, for one year – wants the initiative to reflect challenges in Latin America. Of the two Latin American countries to be part of the G20, Argentina is the first to host a summit.
“Argentina itself has about 30% poverty. You cannot have an honest conversation about sustainability and finance without acknowledging this fact, hence a transition from green to sustainable finance was the proper thing to do,” he told RI.
The year’s first G20 Meeting of Finance Ministers and Central Bank Governors is due to take place in Argentina next week. Climate change and social issues are not explicitly mentioned in the agenda, but the group will discuss the need to bolster infrastructure investment, inclusive taxation and the need for a “strong and sustainable financial system”. They will also have discussions on the biggest global economic challenges.
The SDGs are steadily becoming a bigger focus for many institutional investors – particularly pension funds. This week two US bodies, the Investment Integration Project and The Investor Responsibility Research Center Institute, launched an SDG ‘roadmap’ report. It seeks to help investors gauge their contribution to the “system level” changes needed to realise the UN’s ambitious goals.
The report, Measuring Effectiveness: Roadmap to Assessing System-level and SDG Investing, urges investors to go beyond simply “aligning” a portion of their investments to address one or more of the goals but also seek to influence “related system-level change”.
It calls on investors to evaluate “the bigger-picture context of their investment selection and portfolio construction decisions” to catalyse “overall progress toward achievement of the goals”. A webinar on the report’s findings will be held on the 26 March 2018.