AGENDA

Meeting the Paris goals requires a major, transformational shift in global finance flows. Though efforts to this end are underway, and have accelerated in recent years, too much finance is still flowing towards business-as-usual, and not enough towards climate action. Existing efforts of international collaboration to date have been fragmented, and limited to a relatively small number of issues and tools that will not shift the dial. This imbalance can only be redressed through accelerated, sustained, systematic action by governments. This session will explore how policymakers can close this gap, including by developing an overarching vision for a climate-aligned global financial system. It will discuss the fundamental blockages to climate-aligned finance, and the frontier fiscal, regulatory, monetary, and other policy levers that can be deployed to accelerate the shift in finance.

There is no shortage of globally available capital. OECD and G20 institutional investors alone have at least USD 64 trillion of assets under management (OECD, 2020). Yet these institutional investors hold only USD 1.04 trillion in infrastructure assets, of which only USD 314 billion are green infrastructure assets, mostly in OECD countries. Cross-border private investment into green sectors will be essential to achieve net-zero objectives, as fiscal constraints from COVID-19 and other current geopolitical shifts necessitate increased mobilisation of private finance. The trillion-dollar question is how to mobilise private capital, especially from OECD institutional investors, in support of climate action, in emerging markets and developing economies. Despite the sustainable finance boom, there is evidence that little funding is currently flowing from investment funds to green assets in emerging markets. The session will discuss the drivers of green investment allocation and what is hindering further allocation towards green assets by private investment funds. It will also discuss other out-standing barriers to institutional investment flowing in EMDEs in support of climate action, especially in clean energy.

To achieve the Paris Agreement goals, all sectors of the global economy, and in particular hard-to-abate industries, must rapidly decarbonise. Transition finance focuses on the decarbonisation pathways of all sectors of the economy, including high-emitting ones. The OECD Guidance on Transition Finance emphasises that, in order for transition finance to have environmental integrity, it must be backed by robust, credible corporate transition plans. While there is no single, universally endorsed standard, there has been significant convergence with respect to key elements of a credible corporate transition plan. Given the increasing focus on corporate transition plans, including in the G20, this session will consider the state of play of implementation efforts. To what extent are corporates developing transition plans, and to what extent are those plans credible? What further developments could lead to significant increases in the development and issuance of credible transition plans?

Public fiscal, budgeting and expenditure policies can be a major lever to prevent or address environmental challenges, be it through taxation, cash transfers, or supporting public and public-private investment. Fiscal frameworks should be designed to incentivise businesses to meet environment and net-zero objectives. It is equally important that these objectives are included into medium-term public budget management and into the design and implementation of specific public expenditure and investment programmes. Ensuring that public environmental expenditure programmes are well-managed is an essential element of effective and efficient economic policies. This session will discuss good practices and remaining challenges in designing fiscal incentives for environmental and climate actions and managing public environmental finance transparently and effectively, including through budget planning, public procurement and prudent expenditure management.

Mobilising private capital will be essential to realise the massive scale-up needed in investments in decarbonisation of the manufacturing industry where emerging markets and developing economies (EMDEs) can play a leading role. To advance on this, Climate Club, with the OECD and the IEA being its secretariat, fulfils an important role to enhance multi- and bilateral cooperation with a focus on leveraging public and in particular private finance as well as the necessary complementary technical assistance to EMDEs. This session brings together speakers from international finance institutions, philanthropies, institutional investors, and international organisations to explore the necessary enabling conditions and financing mechanisms required for advancing on industry decarbonisation, and explores success stories from different countries, sectors, and technologies with a focus on EMDEs.

Climate ambition has ramped up in the financial sector, but data and knowledge gaps remain to understand the extent to which such ambitions are turned into impactful actions. A range of complementary metrics are needed to assess the credibility of net-zero commitments and transition plans. At the same time, more data on real-economy decarbonisation impacts allow further analyses of effectiveness in aligning finance with climate goals. Against this backdrop, this session will bring together senior-level policy makers and market participants to discuss progress in regulatory and voluntary guidance on climate-related disclosure and assessments, the extent to which such efforts are generating the information needed to conduct robust assessments, and whether they result in actual GHG reductions. The session will then reflect on what combination of further policies and actions are needed to contribute to making finance consistent with climate policy goals.

There is both an urgent need and opportunity to increase finance and investment for adaptation and resilience. Harnessing private investment will be critical given the scale of the challenge, as a complement to necessary public investment. This session focuses on identifying scalable solutions for unlocking investment in adaptation, from the project level to the enabling environment. The session will showcase the OECD’s forth-coming Climate Adaptation Investment Framework.

Biodiversity underpins all economic activities and human well-being. Yet biodiversity - and the ecosystem services it provides - continue to decline at an alarming rate. Halting and reversing biodiversity loss by 2030 will require urgent action to mobilise finance for biodiversity from all sources, public and private, domestic and international. This session will bring together leaders from the private sector to explore incentives, investment barriers and opportunities for scaling up private biodiversity finance. The session will focus on biodiversity financing instruments, investment projects and financing channels, including blending of public and private finance.

By linking scale with impact, green bonds and SLBs can play a crucial role in mobilising private capital towards climate and development needs. For public sector actors, these instruments hold numerous advantages – including driving financing towards green assets, and signaling a strong commitment to climate, transition, and development goals. They can also set benchmarks for corporate and financial issuers to follow. This session will bring together actors from the development finance ecosystem to discuss the barriers and opportunities to effectively scaling up public sector green bond and SLB issuances in EMDEs.

The session is an opportunity to engage with the work of the Global Commission on the Economics of Water and explore concrete next steps. One important message is that water is an investable asset class, that provides opportunities for a wide range of financiers and investors. The session is designed to share experience with financing water and to characterise the enabling conditions for making water an investable asset. The scope reaches beyond water and covers sectors that address – or compound – water crises, including energy transition, land use change or nature conservation. Particular attention will be paid to Just Water Partnerships, as a tool to mobilise and structure finance across sectors in a given jurisdiction.

Institutional investors are today at the centre of our economies and financial markets. Asset managers alone hold more than 50% of the listed equity in the United States and the United Kingdom, and at least 20% of the listed equity in Brazil, Canada, India and South Africa. The concentration of equity ownership in a small number of large institutional investors may provide an opportunity to address global challenges collectively. For instance, institutional investors own 41% of the shares in the 100 listed companies with the highest disclosed greenhouse gas (GHG) emissions globally. If some of the largest institutional investors can engage effectively with these high-emitting companies, they would be in a position to significantly reduce GHG emissions without an important risk to energy security, therefore reducing systemic risks.

SMEs are critical actors in the green transition given their high environmental footprint- they account for around 40% of business-sector greenhouse gas (GHG) emissions - and their provision of green solutions to the market. Finance is a key enabler of SMEs’ green transition and financial institutions are increasingly offering tailored green and sustainable financing instruments with favourable financing conditions to help SMEs meet their growing greening investment needs. However, SMEs continue to face hurdles, holding back their uptake of these financing instruments. In fact, there is evidence that SMEs currently resort to more expensive financing options rather than taking on the reporting burden associated with sustainable finance. This session will seek to share knowledge and good practices on how public and private financial institutions and other actors are providing end-to-end support packages to incentivise SMEs’ greening investments, and leveraging new tools to reduce the reporting burden for these firms.

Financial regulators and supervisors have a wide range of tools at their disposal to develop green financial markets and align finance and investment flows with climate and other environmental goals. They are also stepping up their efforts to better assess and manage climate and other environmental and sustainability risks, and improve comparability, transparency and integrity of information on environmental considerations. However, the integration of climate-related factors into financial regulation and supervision is still at early stages of development across countries. This session delves into the crucial roles that financial regulators and supervisors play in accelerating the flow of capital towards environmentally sustainable activities across developed countries, emerging markets and developing economies (EMDEs). This session will highlight the importance of enhancing climate-related disclosure requirements, providing supervisory guidance on climate transition planning and setting regulatory incentives for strengthening environmental risk management. The session will also explore how financial regulators can strengthen disclosure standards for securities such as green, transition and sustainability-linked bonds, to avoid and prevent greenwashing risks.