The financial sector has a crucial role to play in shifting capital allocation towards investments consistent with the Sustainable Development Goals and the Paris Climate Agreement. The direction set in recent years has been positive, but we need to continue raising the bar and level of ambition in sustainable finance, both in developed economies and in rapidly growing emerging markets.
Foto: Ylva Rylander, SEI
As world leaders gather this week at the One Planet Summit to discuss how to finance low carbon development, the Government of Sweden, the Stockholm Environment Institute (SEI) and the Stockholm School of Economics (SSE) are launching the Stockholm Sustainable Finance Centre, a collaboration for research, innovation and education on sustainable finance.
The Stockholm Sustainable Finance Centre will tap into the knowledge, experience and participation of a wide network of actors in the financial sector. With financial institutions that are committed to sustainability, world-class research programs and ambitious public policies, Sweden is well-equipped to take a leading role on sustainable finance and Stockholm can become a “Silicon Valley” for sustainable finance.
The Paris Agreement and the SDGs
“The implementation of the Paris Climate Agreement and the Sustainable Development Goals are expected to require tens of trillions of dollars of investments over the next two decades in developed and developing countries. Though some of the money will come from governments, the financial sector will have to play a crucial role in linking the financial flows necessary to finance this global agenda. This new centre will provide the knowledge and, in collaboration with the financial sector, the know-how to direct financial investments towards a sustainable and prosperous future for all,” said Isabella Lövin, Sweden’s Deputy Prime Minister and Minister for International Development Cooperation and Climate.
The Stockholm Sustainable Finance Centre will carry out research about risks and opportunities for the sustainable finance sector, developing research evidence and experience to guide financial institutions and policy makers in their pursuit to acquire sustainable finance. It will work closely with financial stakeholders to identify solutions that shift capital allocation to support the transition to sustainable societies, particularly in developing countries.
Making sustainable finance successful
“We have to understand what makes sustainable finance successful and how to mainstream it. The new centre will carry out research into the current practices of sustainable finance. It will develop research evidence for financial institutions and policy makers to create conditions for sustainable finance to expand and allow green financial markets to continue to grow. We need to close the gap between the current pace of change and the necessary level of ambition,” said Luca De Lorenzo, Head of Climate, Energy and Society Unit at the Stockholm Environment Institute.
Kommuninvest, a municipality investment body, has been developing a green bonds framework for local government, an initiative which recently received the prestigious Momentum for Change Award from the UN Climate Change Secretariat. The Centre will also work with the Swedish International Development Cooperation Agency, Sida, to explore public-private partnerships for sustainable investments in developing countries, and for poverty reduction. The Centre will also draw upon the work of the Green Finance Study Group (GFSG), launched by the G20 Finance and Central Bank Deputies in 2016 and continued during the German presidency in 2017.
Sweden – a global frontrunner
“Sweden is a frontrunner in sustainable finance with many Swedish financial institutions already engaged in the green bond market and sustainable asset management. There are several research programs on the topic of sustainable finance hosted by Mistra Center for Sustainable Markets at SSE. Based on cutting edge research, recommendations for financial institutions and decision makers will be developed, to create conditions for a sustainable financial market to continue to grow,” said Lars Strannegård, President of the Stockholm School of Economics (SSE).
The Stockholm Sustainable Finance Centre will combine research competence in sustainability, governance and financial markets held by the SSE and the impact and policy engagement in sustainable development issues held by SEI. This combination of expertise creates a unique and novel platform for research and dialogue between key actors.
After an initial pilot phase of a few months, the Centre’s first research programmes are expected to launch throughout 2018, followed by educational events and programmes for policy makers and executives in the financial sector.