Redirecting Financial Flow To Asia Pacific Crucial For Region’s Sustainable Growth
A new report from the UN Environment Programme has highlighted the need for financial flows to be directed towards the Asia Pacific for the region’s future sustainable growth and prosperity.
As the UN Environment Programme (UNEP) notes, the Asia Pacific region is home to over half of the world’s population, but much less than half its natural resources. Subsequently, “achieving inclusive, sustainable economic prosperity in the Asia Pacific region depends on the health of the environment.”
The main conclusion of the report, therefore, is that an annual investment of $2.5 trillion is required in order to bring basic services to the region, improve infrastructure, and protect the environment, enhance energy efficiency, and respond to climate change.
The report, Aligning the Financial Systems in the Asia Pacific Region to Sustainable Development, was published Wednesday.
“Today less than 1 per cent of assets under management in the region are invested according to sustainability criteria,” said Achim Steiner, UN Under-Secretary-General and Executive Director of UNEP. “The Asia-Pacific region has an enormous potential to use local, national and international finance for sustainable development. As can be seen, there is ample money to invest in ways that produce the highest quality of life without damaging the world’s critical life support systems.”
“Financial systems based on sustainability criteria can enhance the efficiency, effectiveness and resilience with which financial and capital markets channel these resources, delivering both returns to savers and the investment needed for economic growth and transformation.”
The report hasn’t only highlighted the growing need in the region, but also the region’s existing activity:
However, research and engagement by the UNEP Inquiry has found that the Asia-Pacific region is one of the most active in innovating towards a sustainable financial system. New green disclosure requirements are being adopted across banking and capital markets. Green credit guidelines are being introduced by banking regulators. Sustainability indexes and benchmarks are becoming established in securities markets, and credit rating agencies are beginning to incorporate climate risk into their solvency analyses.
Specifically, and as we have seen in numerous reports here at CleanTechnica, China, Indonesia, and Japan are leading the way in attempting to implement green policies to support growing economies and populations.
Other key findings from the report include the identification of potential innovations and actions worth consideration by the Asia Pacific governments, including:
- Sustainable banking and ‘green credit’ risk management and reporting;
- Policy-directed lending and investing blending commercial and policy objectives;
- Green bonds issuance and green infrastructure and enterprise development;
- “Sustainable” stock exchanges with social and environmental performance indexes, benchmarks and tracker funds;
- Lender and investor environmental liability to encourage environmental due diligence and risk management;
- Monetary policy to incentivize longer-term investment in productive infrastructure and enterprises;
- Environmental stress testing at the financial enterprise and macro prudential levels;
- Enhanced sustainability oversight for cross boarder investment.
The full report is available for download here (PDF), and is the result of the UNEP’s Inquiry into the Design of a Sustainable Financial System, “a two-year international initiative examining how central banks, financial regulators, and other policy and rule-makers can contribute to aligning financial markets to the needs of the green economy.”
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