To meet the temperature goals of the Paris Agreement, decarbonisation measures will need to be financed across all sectors of the economy and most importantly in energy-intensive and hard-to-abate sectors, and in particular in emerging markets and developing economies. As governments and the private sector are ramping up their net zero pledges and developing transition finance approaches, robust corporate transition plans and strategies will be crucial to ensure a credible and meaningful transition towards net zero. Building on recent OECD work on transition finance, this high-level plenary will bring together influential actors to discuss key priorities and policy measures urgently needed to incentivise action to shift financing towards climate and environmental policy objectives in hard-to-abate sectors.

Financial markets have a critical role to play in facilitating a climate transition by helping to assess the net benefits, channelling capital to entities that are transitioning to renewables, and providing appropriate surveillance and verification to support an orderly transition to net zero. While noteworthy progress has been made, considerable challenges hinder the efficient mobilisation of capital. This session will discuss the launch of OECD Policy Recommendations to promote greater comparability of climate transition metrics, as well as transparency and interoperability of climate finance and ESG approaches to support the orderly transition to low-carbon economies.

COP26 and the Glasgow Climate Pact highlighted the urgency of scaling up action and support to enhance adaptive capacity, strengthen resilience and reduce vulnerability to climate change. This raises the need to ensure that infrastructure investments mitigate the impacts of climate change while also building adaptation capacity and resilience. This session will bring together governments to discuss the need to scale up financing for infrastructure resilience. This session will focus on how governments are taking into consideration the long-term value and costs of adaptation in infrastructure planning and investment. The session seeks to shed light on how governments integrate such considerations into their financial planning to establish an integrated approach to adaptation and resilience of infrastructure.

In order to meet the temperature goals of the Paris Agreement, the IPCC estimates that emissions have to peak at the latest before 2025 and radically reduce thereafter. At the moment, the projected emissions of existing and planned fossil fuel infrastructure are likely to exceed net emissions of 1.5C pathways. Beyond retrofitting and decarbonising existing infrastructure through the use of renewable fuels and gases, this raises the question of how to incentivise the early retirement of polluting assets, where existing price signals are insufficient to mobilise private capital and therefore additional intervention is required. The purpose of this session is to discuss the challenges of early retirement and potential solutions to the problem.

This Fireside Chat will discuss the role that central banks, financial regulators and finance ministries in the ASEAN+3 region play to enhance environment and climate risk management in the financial sector and ultimately mobilise capital for green and low-carbon investments to advance the transition to net-zero. Co-organised with the ASEAN+3 Macroeconomic Research Office (AMRO), this Fireside Chat will highlight approaches and instruments that central banks and financial regulators in the region are designing or implementing to improve the integration of environment and climate risks.

Investment is chasing dark green assets. However, not all countries have adequate reporting capacities – green investment opportunities might be missed. Over 97% of sustainable capital is invested in high-income countries. At the same time, emerging markets need investment to help transition assets to green. How to avoid that some countries are left behind, and unequal access to finance is magnified? Investment products structured to support transition and the right policy incentives are needed to draw capital to low-income countries. This Fireside Chat will discuss the risks of green finance inequity and solutions to mitigate them.

Regions and cities have a powerful tool at their disposal to use in leveraging private and public climate finance: their budgets. Subnational governments across the OECD are increasingly adopting green budgeting in order to better align their budgets with their climate and environmental objectives and to make better use of their budgets to bridge climate funding and financing gaps. This session will convene representatives of international organisations, national and subnational governments and institutional and private finance practitioners to highlight ongoing collaboration between these actors to leverage public budgets to increase private climate finance, namely green bonds, green loans and other innovative instruments. It will also explore the challenges and opportunities that exist in scaling up this collaboration and disseminating best practices within the OECD and beyond.

The extent to which index funds support asset managers’ net-zero targets is coming under greater scrutiny. Current methodologies for green and Paris Agreement (PA)-aligned indices can differ widely. While green indices use benchmarks based on companies’ past emissions, which can result in low levels of diversification; transition and PA-aligned indices, which include a wider range of assets, require forward looking metrics for their development and quality monitoring over time. This session will discuss the benefits and challenges with a range of indices to support a low-carbon transition, and explore options to improve methodological aspects, such as index composition and forward looking considerations. Speakers will also address the changing landscape of reporting requirements and potential scope for a consolidation of standards, which would in turn support a stronger role for providers and index funds in the low-carbon transition.

Carbon prices are a key element among the range of policy instruments that countries can use to reduce greenhouse gas emissions. They often take the form of prices of tradeable emission permits or carbon taxes. Tax policy can contribute to mitigation policies in other ways, for example through personal and corporate income taxation, which can influence the carbon-intensity of consumption, production and investment choices. Tax and fiscal policy can also help shape distributional outcomes. This session will focus on the role of carbon pricing and will address potential corporate income tax perspectives.

In guiding responsible action on climate by the private sector, lessons can be drawn from the OECD Guidelines for Multinational Enterprises and Due Diligence Guidance for Responsible Business Conduct, that enshrine recommendations on how businesses can contribute to sustainable development while addressing adverse impacts on the environment and society. Part 1 of this session will discuss how these OECD instruments can be used to enable consistency and comparability across jurisdictions and embed just transition priorities into business’ decision making processes.

An increasing number of financial and non-financial corporates are adopting climate transition plans, in order to ensure alignment with the Paris Agreement temperature goal of limiting global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels. But even those levels of warming will have profound impacts, including increased crop losses, water shortages and natural disasters. Up until now, most regulators have largely focused on physical risk disclosure, but it is becoming increasingly clear that businesses will also need to have a credible plan for future resilience in place. Are today’s businesses prepared for tomorrow’s transition to a new climate? How can investors engage to enhance resilience to physical climate impacts?

A range of commercial services providers and civil society stakeholders have been developing methodologies to assess the alignment of the financial sector holdings and new investments with the Paris Agreement temperature goal. Building on the findings of an OECD stocktake and analysis of such methodologies, Part 2 of this session will discuss current practices, their assumptions, coverage and gaps, as well as strengths and limitations. In turn, this will allow to reflect on the extent to which available evidence is fit for purpose, both to track progress towards making finance consistent with international and national climate policy goals, as well as to contribute to informing climate-proofed investment and financial decisions.

Biodiversity and ecosystem services underpin all economic activities and human well-being. Yet biodiversity is being destroyed at an unprecedented rate, posing significant risks to the economy and financial sector. Biodiversity-related financial risks, impacts and dependencies are pervasive but poorly understood, and they remain almost entirely mispriced and ignored by the financial sector and investee corporations, despite increasing momentum and awareness from financial actors. The session will discuss priorities for financial regulators and supervisors to better assess biodiversity-related risks, impacts and dependencies in the financial sector, with respect to financial stability, banking supervision as well as price stability. The session will discuss next steps for translating impacts and dependencies into risks, including the development and limitations of scenarios. It will also discuss priorities for investors and other financial market participants to unlock investment in nature-positive activities such as sustainable land use. Additionally, the session will explore the potential compounding and alleviating factors presented by the joint challenge of climate change and biodiversity loss.

Green, social and sustainability-linked (GSSS) bonds are rapidly emerging as a tool for both donors and partner countries to finance the SDG financing gap and to tap into new sources of capital, such as from institutional investors. However, In the absence of appropriate regulatory standards, it is challenging to ensure issuers keep their sustainability commitments. Despite developments in some jurisdictions including the EU to clarify and standardise definitions, GSSS bonds are mainly guided by a set of voluntary industry standards and market discipline, which can lead to sustainability washing, especially in developing countries. This session will explore the current status of the GSSS bonds markets, related challenges and opportunities for developing countries, with a specific focus on the role donors can play in supporting their issuance and success.

India has achieved major progress in its energy sector over the last two decades. Still, investment needs to scale up considerably to meet the government’s ambitions to achieve 500 GW of renewable energy capacity and energy-intensity reductions of 45% by 2030. Targeted application of public funds, alongside international climate and development finance, can “crowd in” investors and channel private capital to meet India’s clean energy ambitions. The session will highlight key recommendations for offshore wind, green hydrogen production and energy efficiency measures in micro, small and medium enterprises, emerging from the Clean Energy Finance and Investment Roadmap of India developed by the OECD and the Natural Resources Defense Council (NRDC), under the guidance of diverse ministries across the government of India.

To meet the commitments of the Paris Agreement and contribute to the global net zero goal, an estimated USD 1 trillion are needed annually in developing countries’ energy sectors by 2030 (IEA, 2021). As climate change is increasingly materialising as a development challenge, countries are increasing efforts to transform their financial systems into drivers and enablers of climate action and sustainable development. To align financial flows with the global mitigation and adaptation goals, countries need to trigger systemic change in both allocation and intermediation. This session will discuss the opportunities for developing countries in greening their financial systems, explore remaining challenges and barriers to harness the potential of green finance and outline actual and needed support from development co-operation. An emphasis will be placed on India’s perspective on greening financial systems, given the estimated investment need of USD 2.5 trillion to achieve the country’s NDC targets by 2030, and the country’s 2023 G20 Presidency.

A growing number of jurisdictions have recently adopted ambitious renewable energy and energy efficiency targets, in order to accelerate progress towards achieving the temperature goal of the Paris Agreement. In the context of energy market developments stemming from Russia’s large-scale aggression against Ukraine, both renewable energy and energy efficiency in buildings and industry can play a crucial role in managing the ongoing energy crisis. Renewable energy also can help increase energy security, while energy efficiency can help countries use less imported energy, both for housing and industry. However, soaring raw material prices and supply chain disruptions are putting increasing pressure on renewable energy producers, such as in wind energy. Similarly, pressures on private purchasing power and public budgets are compounding existing downward trends in investments in building energy efficiency. How can countries achieve the ambitious renewable energy and energy efficiency targets they have set, in the face of crisis?

While the recent rapid growth of the sustainable finance market is a positive development, to date, gender- and environment-related considerations have been largely considered in silos, as ‘distinct lenses’ that are integrated separately in a variety of financial instruments. However, gender equality and environmental goals intersect and can be mutually reinforcing. Making the financial system work for people and the planet requires applying an ‘integrated lens’ that draws connections between environmental objectives and gender equality and other social objectives. This session will discuss how sustainable investment approaches and policies can better foster synergies between environmental and gender considerations.

The past decade has seen a significant increase in demand for corporates, investors and financial institutions to measure, disclose and improve their sustainability impacts. Under the Impact Management Platform, the leading international providers of sustainability standards and guidance have been coordinating efforts to advance the practice of impact management. This session will examine the latest developments across the landscape of sustainability standards and guidance, and what is needed to mainstream impact management. It will also reflect on the wider landscape of initiatives supporting sustainability-related financial disclosures (including the International Sustainability Standards Board) and accelerating the transition to a net-zero global economy (e.g. the Glasgow Financial Alliance for Net Zero and Net Zero Banking Alliance).