How can the financial system mobilize more private capital for investments in green sectors? The G20 has established the Green Finance Study Group (GFSG) to address this question. In their Communiqué on September 5, world leaders meeting at the G20 Summit in Hangzhou for the first time recognized the importance of increasing investment in green finance. They also welcomed the voluntary options put forward by the Green Finance Study Group.
The world leaders published a Green Finance Synthesis Report that examines the necessity and challenges of developing green finance. It provides seven voluntary options to overcome these challenges, including one recommendation derived from UZH Professor Kern Alexander’s report Greening Banking Policy.
Kern Alexander holds the Chair for Banking and Financial Market Regulation at UZH. He was invited to serve as an Adviser and Knowledge Partner to the G20 Green Finance Study Group. In his recommendation he claims to increase country disclosure and knowledge sharing on environmental and financial risks and to use international organizations and the private sector to develop, improve and implement voluntary principles to evaluate progress on sustainable banking.
Specifically, Kern Alexander was asked to review the banking policy and regulatory practices of the G20 countries to determine to what extent they are integrating environmental risks into banking policy and regulation, and what role international policy coordination can play in enhancing green banking. Professor Alexander and his research team at the UZH Faculty of Law conducted cross-disciplinary research on regulatory, legal, and empirical data analysis of bank regulatory practices across G20 states, drawing on multiple fields of expertise, and engaging with a global network of institutions and agencies across the financial system.
“My report analyzes the important policy and regulatory innovations taken by G20 countries in addressing environmental sustainability risks. However, banking policy and regulation have not yet fully integrated these risks into regulatory practices. More work needs to be done to achieve a truly green financial system,” says Alexander.
Statement on Green Finance by G20 Hangzhou Summit
“We recognize that, in order to support environmentally sustainable growth globally, it is necessary to scale up green financing. The development of green finance faces a number of challenges, including, among others, difficulties in internalizing environmental externalities, maturity mismatch, lack of clarity in green definitions, information asymmetry and inadequate analytical capacity, but many of these challenges can be addressed by options developed in collaboration with the private sector. We welcome the G20 Green Finance Synthesis Report submitted by the Green Finance Study Group (GFSG) and the voluntary options developed by the GFSG to enhance the ability of the financial system to mobilize private capital for green investment. We believe efforts could be made to provide clear strategic policy signals and frameworks, promote voluntary principles for green finance, expand learning networks for capacity building, support the development of local green bond markets, promote international collaboration to facilitate cross-border investment in green bonds, encourage and facilitate knowledge sharing on environmental and financial risks, and improve the measurement of green finance activities and their impacts.”
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