1、INNOVATIVE FINANCE TOWARDS LOW GREEN HOUSE GAS(GHG)EMISSION AND CLIMATE RESILIENCE FUTURECLIMATE SUSTAINABILITY WORKING GROUP(CSWG)G20 2022Final ReportSeptember 2022iiiClimate Sustainability Working Group(CSWG)G20 2022Contributors:Authors:INNOVATIVE FINANCE TOWARDS LOW GREEN HOUSE GAS(GHG)EMISSION A

2、ND CLIMATE RESILIENCE FUTURE STUDY 3.1Indonesia,September 2022Recover Together,Recover StrongervClimate Sustainability Working Group(CSWG)G20 2022AcknowledgmentsAuthorsThis report is a joint publication led through the United Nations Development Programme(UNDP),and supported by the United Nations Ch

3、ildrens Fund(UNICEF).The researchers and experts1 from those institutions are working together through research,policy assistance,and support.ContributorsWe thank the Ministry of Environment and Forestry of the Republic of Indonesia for its pivotal framing perspectives and all delegates of G20 CSWG

4、for their detailed comments on the content of the report as well as all G20 members who provided valuable insights in virtual workshops and through a written survey in coordination with Global Green Growth Institute(GGGI)and NDC Partnership.This project is funded by UNDP Governance of Climate Change

5、 Finance(GCCF)and Climate Finance Network(CFN),in coordination with Global Green Growth Institute(GGGI)and NDC Partnership(NDCP)._Copyright 2022This publication may be reproduced in whole or in part for educational or non-profit purposes without special permission from the copyright holder,provided

6、that the source is acknowledged.DisclaimerThe authors do not make any warranty,either express or implied,or assume any legal liability or responsibility for the accuracy,completeness,or any third partys use or the results of such use of any information,apparatus,product,or process disclosed of the i

7、nformation contained herein or represents that its use would not infringe privately owned rights.The views and opinions of the authors expressed herein do not necessarily state or reflect those of the Government of Indonesia or project funders.1 The paper was written by Dr.Christoph Nedopil viClimat

8、e Sustainability Working Group(CSWG)G20 2022Executive SummaryTo put the world on track with the objectives of the Paris Agreement and the 2030 Agenda and truly achieve this transition,the world needs a systemic transformation of finance involving all public and private stakeholders in government,bus

9、iness,and society with no easy silver bullet of a single finance instrument.G20 members representing over 85%of the worlds GDP,around two thirds of its population and responsible for about 75%of greenhouse gas emissions,have a key role to play in addressing these challenges holistically and provide

10、direction for leaders,regulators,business executives,investors,non-governmental organizations,and all societies.Finance from both public and private sources needs to be mobilized and shifted from unsustainable to green activities.The G20 members need to scale up climate-friendly finance and investme

11、nts,reduce counterproductive subsidies,create barriers for non-aligned investments through broader key policy actions,and benefit by accelerating technology solutions and industrial development programs of green energy,food systems,social infrastructure,sustainable trade and resilient infrastructure

12、,etc.Scaling up investments in sustainable activities will yield and boost productivity and generate powerful co-benefits such as protecting ecosystems and biodiversity in both the short and long runs.Therefore,advancing enablers and solutions of climate finance that leverage all kinds of existing a

13、nd innovative finance instruments and mechanisms is critical to financing green and sustainable transition.Finance will have to be invested smartly,with focused rigor in terms of the climate benefits whilst also maximizing socio-economic co-benefits to achieve a just transition addressing particular

14、ly vulnerable groups.The study is developed for the G20 Climate Sustainability Working Group(CSWG)and addresses actions within the areas of innovative climate finance that drive smart policy-finance interaction for mitigation and adaptation finance,as well as sustainable development more broadly to

15、include social aspects.The study recognizes previous G20 and ongoing work on climate and green finance and is informed by discussions within related working groups e.g.,Sustainable Finance Working Group(SFWG),Development Working Group(DWG),and other studies within CSWG e.g.,Study 3.2 on carbon econo

16、mic value and adds distinct content.This study further benefited from consultation meetings and responses to a questionnaire sent from G20 members2.2 The study received survey response from Indonesia,Japan,Mexico,Russia,Saudi Arab,UK,and USA.viiClimate Sustainability Working Group(CSWG)G20 2022SFWGD

17、WGCSWG Study on Car-bon Economic ValueCSWG Study on Climate financeTarget audience Financial regulators Development Environmental ministries,market regulators Environmental/climate ministriesKey content Transition finance Improving credibility of financial institutions Scaling of sustainable finance

18、 instruments Development finance instruments Emission Trading Scheme,carbon tax pricing,voluntary carbon markets Public-private finance nexus Policy-finance nexus,e.g.,for harmonized standardsClimate-nature nexusDevelopment and social aspectsThe findings of this study to drive smart climate policy-f

19、inance interaction with a focus on ministries responsible for climate and environment under the premise to race to the top and leave no one behind while recognizing local differences are as follows:Improving interoperability of various standards for private and public finance can help reduce transac

20、tion cost,ensure positive impact,reduce greenwashing,and build trust for green finance by:o Developing a“traffic light classification system”that includes a red finance taxonomy to complete existing green finance taxonomies.This would be applied for public and private finance and includes definition

21、s of counterproductive and hard-to-abate economic activities across sectors that need to be phased out as quickly as possible;o Developing legal standards on environmental thresholds and performance indicators(i.e.,technical screening criteria)that are enforced to minimize environmental risks;o Deve

22、loping standards for measuring,verifying and reporting(MRV)data on environmental performance of investment and spending for better comparison to provide better comparability and reduce green-washing;o Utilizing green technologies and making environmental data publicly and easily available to improve

23、 transparency and trust in green finance and to facilitate informed climate finance decision making;o Improving the foundation for global markets and relevant asset classes to accelerate carbon-negative and nature/climate-positive investments,for example through the accelerated establishment of glob

24、al carbon offset markets,ecosystem solutions,and common understanding of the fair application of carbon border adjustment mechanisms.This can include the use of proceeds from such mechanisms to support the transition in least developed countries.viiiClimate Sustainability Working Group(CSWG)G20 2022

25、Private sector can be mobilized through new and existing climate finance mechanisms by:o Allocation of public finance to support sustainable and green development goals while avoiding significant harm to any SDG,e.g.,fiscal spending,subsidies,state-owned enterprises(SOEs),public funds,and state-owne

26、d financial institutions.This will also provide investment incentives for private sector;o Supporting SOEs and sovereign issuers to scale up green financial instruments(e.g.,green bonds,green sukuk),that in turn supports local green capital markets,particularly in developing countries;o Implementing

27、 ambitious,holistic and tailored green policy targets and supporting regulation(e.g.,climate laws,phase-out of coal,deployment of renewables,sector transition plans,and climate adaptation)to provide clear and reliable policy directions and reduce risks of unclear targets for financial sector engagem

28、ent;o Crowding in private capital for higher risk green projects through accelerated utilization of global infrastructure development facilities(e.g.,GIF,MCDF)and other applicable climate finance instruments(e.g.,green public funds,blended finance,guarantee facilities,public-private partnerships/PPP

29、)that support de-risking of finance;o Supporting scientific based analysis and advocacy to enable facilities and regulatory and financial measures for accelerated phase-out of unsustainable assets and rapid scaling of pilots;Development and social transition aspects can be better integrated in clima

30、te finance by:o Ensuring a globally just transition through responsibilities of different economies that particularly supports children and vulnerable groups through mitigation and adaptation financing and capacity building;o Enhancing analysis of environment assets and evidence-based approaches to

31、reduce COVID-19 related debt impacts particularly in developing countries including through smart and green sovereign debt collaboration(e.g.,debt-for-SDG,debt-for-nature,debt-for-climate,sustainability-linked debt swaps).o Providing further climate finance support(e.g.,USD100 billion commitment)and

32、 technical capacity for developing countries green transition and capital mobilization(e.g.,green capital market development,green facilities)for both mitigation and adaptation measures.The report first gives an introduction on the transition journey ahead for climate finance in G20 members.It then

33、provides a background on the current stage of climate finance,current ambitions of G20 members for smart policy-finance interaction.The recommendations build on the analysis and provide practices on how to improve policy-finance action to shift finance from polluting to green,to mobilize both public

34、 and private finance,and to improve climate finance in developing countries.ixClimate Sustainability Working Group(CSWG)G20 2022Table of ContentsAcknowledgments iiiExecutive Summary ivTable of Contents viiList of Figures ixList of Abbreviations x1.Introduction 12.Climate Finance Landscape Background

35、 32.1 Climate finance flows and gaps 32.2 Counterproductive public and private finance 52.3 The cost and risk of failing in climate action 62.3.1 Social and economic risk of climate change 62.3.2 Climate-biodiversity nexus 72.4 Responsibilities for development and social considerations 83.Experience

36、sinG20memberstocatalyzeandpromoteclimatefinance 93.1 Climate finance governance 103.2 Climate laws 113.3 Climate-finance regulatory tools 123.3.1 Definitions of green finance through taxonomies 123.3.2 Selected risk management,reporting and disclosure standards 143.3.3 Ecosystem solutions 153.3.4 Ca

37、rbon pricing 163.4 Climate financing sources 173.5 Climate finance instruments 183.6 Climate finance in developing countries 193.6.1 Development finance commitments 203.6.2 Local green capital market development 203.6.3 Sovereign debt in developing countries 20 xClimate Sustainability Working Group(

38、CSWG)G20 20224.The Way Forward 224.1 A transformative effort 224.2 Integration of climate factors into finance system 234.3 Technologies for climate and green finance 245.Actions to be taken:Stop counterproductive,mobilize green public and privatefinancethroughsmart,coherent,andtailoredpolicytools 2

39、65.1.1 Improving standardization to shift from unsustainable to green 265.1.2 Private sector mobilization 285.1.3 Just and development finance 286.Appendix 306.1 Appendix 1:Overview of relevant taxonomies 306.2 Appendix 2:Overview of Sustainable financial instruments 326.3 Appendix 3:Selected report

40、ing standards 386.4 Appendix 4:Selected sustainable finance initiatives and standard setters 447.The List of Reference and further reading 46xiClimate Sustainability Working Group(CSWG)G20 2022List of FiguresFigure 1 Trends in Atmospheric CO2 concentration and political agreements(Source:Sustenio3)F

41、igure 2 Landscape of Climate Finance in 2019-2020 (Source:Climate Policy Initiative 4,2021)Figure 3 Destination region of climate finance,by public/private (US$billion,2019/2020 annual average)(Source:Climate Policy Initiative)Figure 4 Climate finance source to developing nations(Source:Timperley,20

42、21 8)Figure 5 Impacts of climate change on children-Global Childrens Climate Risk Index(UNICEF 24)Figure 6 Green financial frameworks(Source:Author)Figure 7 The EUs Sustainable Finance Strategy(Source:Intereconomics 33)Figure 8 Climate targets in G20(EU has 2050 climate-neutral target in law but was

43、 not included in the graph)(Data:Net Zero Tracker,Graphic:author)Figure 9 Global Greenhouse Gas Emissions by Sector in 2016 (Source:Our World in Data 2020 71)xiiClimate Sustainability Working Group(CSWG)G20 2022List of Abbreviations AbbreviationNameACTAccelerating Coal TransitionADBAsian Development

44、 BankASEANAssociation of Southeast Asian NationsBRIGCBelt and Road Initiative International Green Development Coalition CBAMCarbon Border Adjustment MechanismCBDConvention on Biological DiversityCBDCCentral Bank Digital CurrenciesCBIClimate Bonds InitiativeCCUSCarbon Capture,Utilisation and StorageC

45、DPCarbon Disclosure ProjectCfDContracts for DifferenceCGTCommon Ground TaxonomyCIFClimate Investment FundsCOPConference of the PartiesCSRDCorporate Sustainability Reporting DirectiveCSWGClimate Sustainability Working GroupDACDevelopment Assistance CommitteeDFIDDepartment for International Developmen

46、tDFIsDevelopment Finance InstitutionsDNSDebt-for-Nature SwapsDSSIDebt Service Suspension InitiativeDWGDevelopment Working Group ESGEnvironmental,Social,and GovernanceESIEnergy Savings InsuranceETMEnergy Transition MechanismETSEmission Trading SystemEUEuropean UnionFAsFinancial AdvisorsFASTFinance to

47、Accelerate theSustainableTransitionFFFoundation FrameworkxiiiClimate Sustainability Working Group(CSWG)G20 2022FMPsFinancial Market Participants FSAFinancial Services AgencyG20Group of TwentyGCCFGovernance of Climate Change FinanceGCFGreen Climate FundGEFGlobal Environmental FacilityGFANZGlasgow Fin

48、ancial Alliance for Net-ZeroGFITGreen Finance Industry TaskforceGHGGreen House GasGIFGlobalInfrastructureFacilityGIINGlobal Impact Investing NetworkGRIGlobal Reporting InitiativeHKMAHong Kong Monetary AuthorityIBPESIntergovernmental Science-Policy Platform on Biodiversity and Ecosystem ServicesICMAI

49、nternationalCapitalMarket AssociationIDBInter-American Development BankIDFCInternational Development Finance Club IFCInternational Finance CorporationIMFInternational Monetary FundINFFsIntegrated National Finance FrameworksIPCCIntergovernmental Panel on Climate ChangeISSBInternational Sustainability

50、 Standards BoardITMOsInternationally Transferable Mitigation Outcomes JSEJohannesburg Stock ExchangeLACLatin America and the CaribbeanLLPsLimited Liability Partnerships MASMonetary Authority of SingaporeMCDFMultilateral Cooperation Center for Development FinanceMDBsMultilateral Development Banks MFF

51、Multiannual Financial Framework MRVMeasuring,Validating and Reporting NDCsNationallydetermined contributionsNFRDNon-Financial Reporting DirectiveNGEUNext-Generation-EUxivClimate Sustainability Working Group(CSWG)G20 2022NGFSNetwork for Greening the Financial SystemODAOverseas Development AssistanceO

52、ECDOrganization for Economic Co-operation and DevelopmentOJKFinancial Services AuthorityPPPPublic-Private PartnershipsPRBPrinciples for Responsible Banking PRIPrinciples of Responsible InvestmentPSIPrinciples for Sustainable InsuranceSASBSustainability Accounting Standards BoardSBFNSustainable Banki

53、ng and Finance NetworkSBNSustainable Banking NetworkSDGSustainable Development GoalsSDRsSpecial Drawing RightsSECSecurities and Exchange CommissionSFDRSustainable Finance Disclosure RegulationSFWGSustainable Finance Working GroupSGXSingapore ExchangeSISustainable InfrastructureSMEsSmall and Medium E

54、nterprises SOEsState-owned EnterprisesTCFDTask Force on Climate-Related Financial DisclosuresTNFDTaskforce on Nature-related Financial DisclosuresUKUnited KingdomUNUnited NationsUNDPUnited Nations Development ProgrammeUNEPUnited Nations Environment ProgrammeUNEP FIUnited Nations Environment Programm

55、e Finance InitiativeUNFCCCUnited Nations Framework Convention on Climate ChangeUNICEFUnited Nations Childrens FundUSUnited StatesVCMVoluntary carbon markets1Climate Sustainability Working Group(CSWG)G20 20221.IntroductionMajor crises,from COVID-19 to conflicts and fragilities,have set back the achie

56、vement of sustainable development goals,and even worse,risk undermining sustainable development trajectories:policy makers need to tackle the urgent crises and provide economic and social resilience.This must not come at the expense of long-term climate and biodiversity crises.According to Save the

57、Children 2 a child born in 2020 will be exposed to twice as many wildfires,2.8 times as many crop failures,2.6 times as many drought events,2.8 times as many river floods,and 6.8 times more heatwaves over their lifetime than a person born in 1960.In addition,limiting global warming to 1.5C above pre

58、-industrial levels reduces the risk of additional lifetime exposure to heatwaves by 45 percent,drought by 39 percent,river floods by 38 percent,crop failures by 28 percent,and wildfires by 10 percent for children born in 2020.To put the world on track with the objectives of the Paris Agreement and t

59、he 2030 Agenda,G20 members representing over 85%of the worlds GDP,around two thirds of its population and responsible for about 75%of greenhouse gas emissions 1,have a key role to play.They can address these challenges holistically and provide a sustainable direction for leaders,regulators,business

60、executives,investors,non-governmental organizations and all societies.It is critical that governments accelerate their commitments to the Paris Agreements next five-year cycle to limit global warming.They also can provide inclusive climate financing as well as social protection and support for vulne

61、rable groups and their communities such as child and/or gender responsive financing,so that they can adapt to and recover from climate shocks more effectively.More G20 members are working on developing and implementing core climate policies and much more needs to be done to reduce greenhouse gas(GHG

62、)emissions(see Figure 1).By scaling up climate friendly finance and investments,reducing counterproductive subsidies,creating barriers for non-aligned investments through smart key policy actions,G20 members can accelerate technology solutions and industrial development programs of green energy,food

63、 systems,sustainable infrastructure,and trade.2Climate Sustainability Working Group(CSWG)G20 2022Figure 1:Trends in Atmospheric CO2 concentration and political agreements(Source:Sustenio3)Investments in low-carbon technologies,ecosystem solutions,and sustainable and resilient infrastructure can spur

64、 green growth and economic recovery,address inequalities,and accelerate the transformation towards climate-resilient economies.In contrast,a continuation of current policy with public and private financial flows supporting non-aligned economic activities,is akintopouringoilontothefiresofclimatechang

65、e.In the Article 2.1c,Parties commit to“making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.”Now is the time to deliver on this commitment by converging post-COVID economic recovery programs with the transition to a low carbon climate

66、-resilient global economy.By aligning all components of innovative finance,all kinds of funding opportunities can be seized bilateral,multilateral climate funds,multilateral development banks(MDBs),other development finance institutions(DFIs),as well as domestic finance.By fully aligning public fina

67、nce with sustainable development goals,much larger volumes of private investment can be mobilized.3Climate Sustainability Working Group(CSWG)G20 20222.Climate Finance Landscape BackgroundAddressing climate change and building a sustainable future for now and the worlds future generations requires sm

68、art,tailored,and urgent policy action to drive an unprecedented global transformation of infrastructure,ecosystem resilience,food system and industrial development.The basis for this transformation is a massive shift of investments in technologies for low-carbon energy development,environmental and

69、ecology protection,sustainable production and consumption,risk-informed and resilient infrastructure development.2.1 ClimatefinanceflowsandgapsGlobal climate finance 4 flows of US$632 billion were recorded in 2019-2020(which doubled from US$365 billion in 2013-2014)with equal contributions from the

70、public and private sectors(see Figure 2).Figure 2:Landscape of Climate Finance in 2019-2020(Source:Climate Policy Initiative 4,2021)Almost half of global climate finance in 2019-2020 was spent in East Asia&Pacific(US$292 billion),followed by Western Europe(US$105 billion)and US&Canada(US$83 billion)

71、.Latin America,South Asia,Middle East and African countries together accounted for about US$100 billion in climate finance(see Figure 3).4Climate Sustainability Working Group(CSWG)G20 2022Figure 3:Destination region of climate finance,by public/private(US$billion,2019/2020 annual average)(Source:Cli

72、mate Policy Initiative)For climate protection alone,Climate Policy Initiative(2021)4 estimates a global climate finance gap of US$3.6 to$4.1 trillion annually.McKinsey(2022)5 estimates that investment needs to increase by US$3.5 trillion yearly to US$9.2 trillion to achieve net zero transition goals

73、.Finance for adaptation falls short.The Paris Agreement lays out a goal to balance finance between adaptation and mitigation.International community has called for50%of the total share of climate finance to be spent on adaptation projects that help people adapt to climate change,especially for devel

74、oping nations.Adaptation currently only receives 21%of all international climate finance only$16.8billion in 2018,compared to an estimated need of$70 billion annually and upwards of$140-300 billion dollars by 2030 and$280-500 billion by 2050(see Figure 4).5Climate Sustainability Working Group(CSWG)G

75、20 2022Figure 4:Climate finance source to developing nations(Source:Timperley,2021 8)Within the G20 members in their 2021 Leaders Statement,the UNFCC and IPBES,as well as during COP26 in Glasgow,global recognition of the need to integrate biodiversity and climate considerations has been accelerating

76、.Both aspects should ideally be tackled together to generate co-benefits(e.g.,through ecosystem solutions,nature-climate solutions),utilize green financing more efficiently,and avoid further harm to either through insufficient integration.Taking this integration into consideration,biodiversity finan

77、ce can promote climate protection,yet global biodiversity finance6 flows in 2019 amounted to only US$143 billion compared to US$536 billion financing need for ecosystem solutions7,according to UNEP(2021).Similarly,the 2020 Financing Nature report6 estimates a biodiversity financing gap of US$598 to

78、US$824 billion per year.2.2 Counterproductive public and private financeThelackoffinancestandsforclimateactionandenvironmentalprotectionisexacerbatedbycontinuedpublicandprivatefinanceflowingintounsustainablesectors.Public finance contributes to climate change through state-owned enterprises,state-ow

79、ned financial institutions,and public spending.While the G20 has committed to phasing out inefficient and counterproductive fossil fuel subsidies in 20099,global governments spent US$5.9 trillion(or 6.8%of GDP)on fossil fuel subsidies in 2020 according to a 2022 IMF study,and fossil fuel subsidies w

80、ere expected to rise,according to a 2021 OECD study10.Similarly,with the agricultural sector being the second most important contributor to greenhouse gas emissions(when including land use change)it is also important to note that among the Aichi Target 3 of phasing out incentives including subsidies

81、 harming biodiversity by 2020 was only met by 25 out of 196 nations while about 90%of subsidies11 given to farmers tend to damage nature and fuel the climate crisis according to a 2021 UN report.6Climate Sustainability Working Group(CSWG)G20 2022In addition,SOEs are among the worlds largest corporat

82、e emitters of greenhouse gases,often due to a focus on traditional energy and transport assets:according to a 2022 joint Oxford and Columbia University study 12,SOEs in the power,industry and transport sectors alone emit at least an aggregate of 6.2 gigatons of CO2e annually(Scope 1),making them cum

83、ulatively larger emitters than any other single country except China.Similarly,CDP estimates 13 that the largest global SOEs are responsible for 42%of global greenhouse gas emissions.On the private side,the worlds 60 biggest banks have provided US$3.8 trillion 14 of financingforfossilfuelcompanies b

84、etween 2015 and 2020 with US$751 billion alone in 2020.By October 2021,Bloomberg 15 reported US$459 billion fossil finance organized by the largest banks in the first 9 months of 2021.At the same time,improving green capital markets based on regulatory guidance,supervision strategies,and voluntary b

85、anking sector approaches have significantly expanded green finance instrument issuance16(e.g.,loans,bonds)in many developed and some emerging G20 members17.Yet,green finance only constitutes less than 10%of the market,even in the EU 18,while many developing economies(green)capital markets 19 are in

86、need for further regulatory support,capacity and development to attract more issuances and investors.2.3 The cost and risk of failing in climate action2.3.1 Social and economic risk of climate changeA low level of addressing climate change risks up to 25%of global GDP by 2100,according to the NGFS(2

87、020)20.Particularly,less developed countries would experience a higher relative economic loss relevant for peoples livelihoods,according to the IMF(2021)21 and the number of affected nations,according to S&P Global(2022)22.This risks exacerbating global inequalities and driving 68 to 135 million peo

88、ple into poverty by 2030,according to the World Bank(2020)23.The climate crisis also affects childrens rights,who risk being locked into poverty without strong adaptation policy,particularly in countries that are risk of natural disasters,according to UNICEF(2021)24(see Figure 5).Extreme climate cri

89、ses increase social inequality because women and girls are more likely to live in poverty(70%of total global poor population)25,depend more on access to natural resources and bear a disproportionate responsibility for securing food,and fuel yet have less access to essential services,and face systema

90、tic violence that escalates during periods of instability.7Climate Sustainability Working Group(CSWG)G20 2022Figure 5:Impacts of climate change on children-Global Childrens Climate Risk Index(UNICEF 24)Urgent action is advised with costs rising exponentially the later action is taken:The cost of cli

91、mate change mitigation and adaptation tends to rise exponentially the later climate change is mitigated:the UN estimates annual adaptation costs 26 in developing countries at US$70 billion should decisive actions be taken in 2021;this figure is expected to reach US$140-300 billion for decisive actio

92、ns delayed to 2030 and US$280-500 billion in 2050.Contrary,by investing in climate change mitigation and adaptation net-gains of 15 million jobs could be achieved by 2050,according to a 2022 McKinsey 5 study.It would require re-training and possibly re-location of workforce to development,production

93、,and operation site of new industries.2.3.2 Climate-biodiversity nexusA particular opportunity and necessity to address the climate crisis is to tackle it together with the biodiversity crisis,according to a 2021 statement by IBPES and IPCC 27.Climate change and biodiversity loss are mutually linked

94、,with climate change leading to biodiversity loss and biodiversity loss leading to climate change.Increasing net-zero and nature-positive investments to address the biodiversity and climate challenges has been reflected intheGlobal Biodiversity Frameworks Target 19 28ofthe UN Biodiversity Conference

95、(COP15)29,the Glasgow Climate Pact 30 of theUNClimateChange Conference(COP26).Some climate-positive actions for mitigation and adaptation might exacerbate biodiversity loss(e.g.,grey infrastructure,some technological solutions,and single-crop carbon offsets),which further exacerbates social and econ

96、omic risks(e.g.,loss of ecosystem services such as water,pollination,soil quality).8Climate Sustainability Working Group(CSWG)G20 2022Attention is necessary,as some supposed biodiversity investments harm both biodiversity and climate(e.g.,planting trees in ecosystems that have not historically been

97、forests,or reforestation with monocultures).Accordingly,investment in carbon-and species-rich ecosystems on land and in the ocean(e.g.,forests,wetlands,peatlands,grasslands,mangroves),increase of sustainable agriculture and forestry practices(e.g.,diversification of plants),and protection of existin

98、g ecosystems are areas that best combine climate-,nature-,and social benefits.2.4 Responsibilities for development and social considerationsAchieving the sustainable transition requires action from all countries.To reduce carbon emissions,particularly developed countries and countries with growing a

99、bsolute emissions need to accelerate finance for the low-carbon and green transformation.Least developed countries and developing countries need to utilize received financial support in achieving the physical and social transformation to adapt to climate change,while protecting and restoring natural

100、 resources and ecosystem services.The pledge of providing US$100 billion per year from developed to developing countries in climate finance needs to be upheld and efficiently used to accelerate the reduction of greenhouse gas emissions based on the NDCs.Lastbutnotleast,asolutiontofinancingtheglobalc

101、limatecrisiscannotworkwithoutaddressing the debt crisis for many low-income countries,where sovereign debt levels reached US$860 billion in 2020 31.9Climate Sustainability Working Group(CSWG)G20 20223.Experiences in G20 members to catalyze and promote climatefinanceRegulators,law makers,financial as

102、sociations,and private organizations in G20 members and beyond have proposed,developed,and applied policies,systems,and instrument to accelerate finance for the green transition,that can serve as a role model for accelerating climate and green finance application.These ongoing practices are highly c

103、ontext specific and often cannot be easily compared or standardized.The ambition is therefore to ensure relevant impact,while it is important to harmonize where possible to ensure comparability,cross-border facilitation,and capital flows.Figure 6:Green financial frameworks(Source:Author)10Climate Su

104、stainability Working Group(CSWG)G20 2022Key elements of a structured climate finance system are supposed to include(see Figure 6):Climate finance governance top-down(e.g.,China);bottom-up systems(e.g.,through voluntary standards),and mixed-systems(e.g.,EU);Dual goal of emission reduction and scaling

105、 of green opportunities;Climate related laws and regulations impacting climate finance(e.g.,climate laws);Climate-finance related regulatory tools,e.g.,o central bank and financial regulatory measures;o common definitions of real economy activities that need to be financed(e.g.,through green finance

106、 and sustainable finance taxonomies);o climate risk evaluation and management(e.g.,TCFD,TNFD),and disclosure standards to provide transparency in reporting and avoiding greenwashing(e.g.,the EUs Non-Financial Reporting Directive on corporate sustainability disclosure);o carbon pricing.Climate financ

107、e sources(e.g.,public,private,development finance);Climate finance instruments(e.g.,green bond,green credit,green sukuk,green fund);Integration of green financial system.3.1 Climate finance governance The policy environment of climate finance of the G20 members are organized depending on different i

108、nstitutional settings and development phases,which determine the power of the various players and the levers to influence development paths of climate finance.Broadly,they can be distinguished between top-down systems driven by governments(e.g.,China),cooperative systems(e.g.,EU)or bottom-up systems

109、 driven by market-players(e.g.,United States).A top-down governance system of green finance in China is rooted in its underlying political economy model labelled as Grand Steerage of the economy 32.For green finance,the state takes an active role in providing guidance,regulations,and financial backi

110、ng through various line ministries.This allows for rapid growth of the green financial system with support from state-owned enterprises and state-owned financial institutions:after the establishment of the Green Financial System in 2015,China became one of the largest green bond markets with SOEs ac

111、counting for 42%of the green bond issuances volume.While Chinas green financial volume is among the largest in the world,its different regulators are responsible for various aspects of the green financial system with gradual integration of the different instruments and rules.The EUs multi-layered gr

112、een financial system(see Figure 7)is a hybrid model.The system is based on multilateral framework(e.g.,Paris Agreement),EU frameworks(e.g.,EU Taxonomy,Fit-for-55),EU regulations(e.g.,Sustainable Finance Disclosure Regulation,EU Taxonomy),national ambitions of EU member states and financial markets,a

113、s well as voluntary approaches of financial institutions and other stakeholders(e.g.,Glasgow Financial Alliance for Net-Zero,GFANZ)or independent commitments by financial institutions.11Climate Sustainability Working Group(CSWG)G20 2022Figure 7:The EUs Sustainable Finance Strategy(Source:Intereconom

114、ics 33)The bottom-up system,meanwhile,is driven by industry associations,individual organizations,and initiatives.These aim to drive ambitions,share capacity and knowledge,as well as to provide transparency and accountability among its members and possibly to the public.These initiatives are often s

115、upported by multilateral or international organizations,including private organizations(see Appendix 4 for selected initiatives).For example,At COP26 in 2021,the Glasgow Financial Alliance for Net Zero(GFANZ)established a global network for different types of financial institutions to commit and sha

116、re climate ambitions publicly,and to provide knowledge to its members.3.2 Climate lawsThe climate finance architectures and/or approaches in G20 members are to different extend geared toward the dual ambition of reducing harmful activities(e.g.,through carbon pricing and climate laws)and acceleratin

117、g green activities(e.g.,through growth of green finance and relevant fiscal/monetary support measures).A basis for all green financial systems is the overwriting climate ambitions of the country that determines investors appetites and financial and technological innovation.The G20 members have mostl

118、y increased their climate ambition,but their climate targets are not sufficient to meet the Paris goals with multiple G20 members having non-binding and non-climate neutral targets beyond 2050(see Figure 8).12Climate Sustainability Working Group(CSWG)G20 2022Figure 8:Climate targets in G20(EU has 20

119、50 climate-neutral target in law but was not included in the graph)(Data:Net Zero Tracker,Graphic:author)A number of G20 members have also issued specific laws to accelerate either the phase-out of specific polluting sectors(e.g.,Germanys coal exit law),or to accelerate the use of greener technologi

120、es(e.g.,EUs energy plan,Chinas national renewable energy targets).3.3 Climate-finance regulatory tools3.3.1 Definitions of green finance through taxonomiesMany G20 members and other global economies have developed green finance taxonomies as part of their green finance systems as a standard to defin

121、e green economic activities(see Figure 7 and Appendix 1).Taxonomies and standards provide shared definitions for investors and policy makers,and reduce transaction cost 34 for investors aiming to invest in endorsed assets.Particularly market-driven standards allow for cross-border finance.Taxonomies

122、 have been issued by national and supra-national(e.g.,EU)governments,as well as private institutions,such as the Climate Bonds Initiative(CBI),ASEAN Green Bond Standard,ICMA Green Bond Principles.13Climate Sustainability Working Group(CSWG)G20 2022Figure 7:Global green Taxonomies(Source:Climate Bond

123、s Initiative,2022 35)To further allow for cross-border finance,efforts to harmonize green taxonomies are ongoing.Progress has been made through the IPFS under the leadership of the EU and China in 2022 through the Common Ground Taxonomy 36 and as well as through the G20 SFWG.Nevertheless,harmonizati

124、on continues to be challenging 37 due to different development status of countries,different approaches to green finance in terms of the financial system and definitions of green activities.Apart from providing“green standards”,a new,and promising,approach to shift finance is to define counterproduc

125、tive economic activities.Amongst others,Indonesia 38,Singapore and China for its overseas investments 39,have issued such“red”taxonomies as part of“traffic light systems”.In these taxonomies,fossil fuel finance,for example,would be labelled red as a signal for investors and policy makers to restrict

126、 financing.With challenges on agreeing particularly on transition taxonomies,agreeing on economic activities that need rapid phase-out can be a viable pathway.An important aspect of applying green taxonomies are external reviews.Currently,private sector solutions dominate the green external review m

127、arket offering different approaches,such as second-party opinions,third-party certifications,ratings for environmental,social and governance performance(ESG rating),assurance,and audit,etc.As concerns have arisen regarding the reliability and comparability of green labels,countries have started to p

128、ut in place,or have upgraded,regulatory frameworks to guide private external review activities(EU,China).Chinas Green Bond Assessment and Verification Guidelines 40 provide an example how a central bank can support qualification of external institutions assessments and certifications of green bonds.

129、14Climate Sustainability Working Group(CSWG)G20 20223.3.2 Selected risk management,reporting and disclosure standardsVarious G20 members and others have introduced standards to improve non-financial disclosure on the national,market and sector level(see Appendix 3 for an overview)-also referred to a

130、s“ESG”disclosure.These standards aim to provide more transparency on environmental impacts and environmental risk exposure to financial and commercial actors and thus provide both incentives for improving environmental performance and reducing environmental risks,as well as transparency for informed

131、 financial decision-making.In G20 members,these standards are driven by various entities,such as governments(e.g.,EU Sustainable Finance Disclosure Regulation),markets(e.g.,Shenzhen Stock exchange),member organizations with support from multilateral institutions(e.g.,Global Reporting Initiative),as

132、well as by NGOs in collaboration with market players and governments(e.g.,TNFD,CDP).These standards provide frameworks for different aspects of disclosure(e.g.,climate,biodiversity risks and impacts),and address different types of market players(e.g.,financial institutions,broader economy).As variou

133、s reporting standards are often in competition or co-opetition and therefore not standardized,an increasingly complex network of reporting standards has become available.This allows companies and financial institutions to choose ambitious or less ambitious standards,and thus increases the risk of gr

134、eenwashing.National risk management and disclosure frameworks are therefore being developed.For example,the Japanese Financial Services Agency(FSA)in April 2022,released draft Supervisory Guidance on Climate-related Risk Management and Client Engagement.This guidance documents viewpoints of supervis

135、ory dialogues regarding financial institutions climate-related risk management and engagement with their clients to support the clients responses to climate-related opportunities and risks.Similarly,the EU provided various frameworks for non-financial disclosure(see Table 1Table 1).15Climate Sustain

136、ability Working Group(CSWG)G20 2022Table 1:Non-financial disclosure in the EU(Source:European Union 41)ScopeLarge corporations and all listed companiesFinancial market participantsofferinginvestment products,andfinancialadvisersFinancial market participants;all companies subject to Corporate Sustain

137、ability Reporting InitiativeInstrumentCorporate Sustainability Reporting Directive(CSRD)proposalSustainable Finance Disclosure Regulation(SFDR)Taxonomy RegulationDisclosureReport based on formal reporting standards and subject to external auditEntity and product lev-el disclosure on sustain-ability

138、risks and princi-pal adverse impactsTurnover,capital,and operating expenditures in the reporting year from products or activities associated with TaxonomyStatusUnder negotiation,expected to apply from 2023Applies from 10 March 2021Applies from January 2022In May 2021,the Ministry of Economic Develop

139、ment of Russian Federation approved methodological recommendations for adoption climate change that consists of four documents,including recommendations for climate risk assessment.These recommendations are the basis for creating a national climate risk management system in Russia.3.3.3 Ecosystem so

140、lutionsEcosystem solutions play an important role for carbon sequestration which could result in carbon credits.China has also underscored the importance of carbon sequestration linked to nature-based solutions 48.The February 2022 UNEA-5 49 resolution marks the first time a multilateral body has ad

141、opted by consensus a universal definition of such ecosystem services.The recent State of Nature in the G20 report 50 of UNEP and others underscores the importance of making the financial case for ecosystem services.Greater engagement by private investors is needed to close financing gaps in this dom

142、ain.Estimates by the 2021 State of Finance for Nature report 7 suggest US$133 billion is invested annually in ecosystem solutions.Of this total,86 percent or US$115 billion is public financing related to conservation,regeneration of forests,peat lands,agriculture,water conservation,and natural pollu

143、tion control systems.The report estimates that private sector ecosystem solution financing is much lower,at 14 percent of total annual financing or US$18 billion per year with investments dominated by biodiversity offsets,sustainable supply chains,impact investment and private philanthropy investmen

144、ts.The report identifies five priorities to increase financing for ecosystem solutions:Increase Overseas Development Assistance(ODA);Reform agricultural subsidies;Mandate Multilateral Development Banks(MDBs)to increase ecosystem solutions financing;16Climate Sustainability Working Group(CSWG)G20 202

145、2 Link developing country debt relief with ecosystem solutions investments;Support results-based ecosystem solutions public financing linked to green bonds.3.3.4 Carbon pricingPricing the environmental rights including carbon emission is an increasingly relevant tool to incentivize de-carbonization

146、and nature-positive outcomes,and simultaneously to disincentivize emissions and natural exploitation.For detailed analysis relevant to this topic,please also refer to CSWG Study 3.2Emission trading systems(ETS)By 2021,65 carbon pricing schemes were applied in 45 national jurisdictions and 34 subnati

147、onal jurisdictions,covering about 21.5%of global GHG emissions.As can be seen in Figure 8,The EU emission trading system(EU ETS)(and similarly the UK ETS after separating from the EU ETS)is the most mature with relatively high prices of above EUR100 per ton of CO2e.Figure 8:Carbon prices(USD/ton)in

148、EU,California,and China(Source:ICAP)Voluntary carbon markets(VCM)that allow companies(and individuals)to reach their pledges of carbon neutrality by buying carbon offsets also in lieu of regulated carbon markets.In 2021,VCM for airlines have grown by 900%and corporate carbon offsets by 170%42.McKins

149、ey together with the International Institute of Finance estimates 43 that voluntary carbon markets could increase by a factor of 15 or more by 2030 and by a factor of 100 by 2050.Carbon credits could come from four categories:avoided nature loss(including 17Climate Sustainability Working Group(CSWG)

150、G20 2022deforestation);nature-based sequestration,such as reforestation;avoidance or reduction of emissions such as methane from landfills;and technology-based removal of carbon dioxide from the atmosphere Paying for importing carbonPaying for“importing”carbon is another concept to price carbon emis

151、sions.In March 2022,the EU Council agreed on the Carbon Border Adjustment Mechanism(CBAM)44.Also other countries,notably the US in July 2021 45 and the UK in September 2021 46 introduced plans or evaluations of carbon border adjustment mechanisms.The ambition is to reduce carbon leakage and price co

152、nsumption-based rather than production-based carbon emissions.This has been a source of contention from some developing countries with high exports into developed countries over who should be accountable for emissions.At the same time,some developing countries have expressed fears of such mechanisms

153、 adding costs to exports 47 and the idea that revenues from pricing carbon could flow back into developing economies in supporting a green transition.International carbon marketsCarbon markets and carbon offsets have been further strengthened by the agreement on Article 6 of the Paris Agreement at C

154、OP26 in Glasgow in 2021.Through the introduction of internationally transferable mitigation outcomes(ITMOs)and Article 6,paragraph 4,emission reductions(A6.4ER)with governance to avoid double-counting of carbon reduction credits and providing more flexibility than previous CDTM.However,implementatio

155、n of Article 6 and international carbon markets rests on complex governance structures,pricing issues and technical capacity challenges 42,not only in developing economies.Furthermore,ensuring additionality of ITMOs continues to be a challenge with risks in under-ambitious NDC(i.e.,overperforming on

156、 NDCs and generating ITMOs)and perpetuity(e.g.,afforestation projects).3.4 Climate financing sourcesG20 members have access or have developed various public and private sources of climate finance.These include,for example:-public fiscal spending(e.g.,through subsidies in renewable energy);-green pub

157、lic funds through development banks or national green funds(e.g.,Chi-nas National Green Development Fund 51,or UKs Green Investment Bank);-development finance institutions,such as bilateral or multilateral development banks including their facilities(e.g.,World Banks Climate Support Facility or the

158、Green Climate Fund);-private financial institutions,including o microfinance institutions particularly in developing economies(e.g.,UNEPs microfinance for ecosystem-based adaptation MEBA 26 supported by the German government);18Climate Sustainability Working Group(CSWG)G20 2022o commercial financial

159、 institutions issuing green loans and insurances(and micro-insurances as supported e.g.,by the ADB)for environmental insurances.-public capital markets:o green bond markets;o equity markets with a focus on environmental,social and governance performance(such as the EU green capital markets union 18)

160、.-private equity,including impact funds.The appropriate source of climate and green finance is contingent on factors,including availability of funds(e.g.,capital markets tend to be more developed in developed countries,while microfinance is applied more widely in developing countries,bank credit is

161、applied across the world in different degrees),risk and return requirements of investors(e.g.,public finance can provide negative return financing,while private equity would expect high returns),and scalability of finance(e.g.,very unique or small projects require specialized sources of finance,whil

162、e scalable infrastructure finance is more standardized).3.5 Climate finance instrumentsClimate and green finance instruments aim to provide asset classes or tools to finance aligned projects.G20 members have developed and applied numerous instruments tailored to accelerate public and private financi

163、ng for sustainable activities for different asset classes(see Appendix 2 for a more comprehensive list of climate and green finance instruments).These address individual,public,private and public-private finance(see Table 2).Table 2:Examples of climate and green finance instrumentsIndividual/micro e

164、nterprisesCommercial debtCommercial equityPublicPublic-private/development Green credit support Green microfi-nance Green mort-gageGreen credit/green loans Green bonds Sustainabil-ity-linked loans Transition bonds ESG funds Impact finance Green sovereign bonds(e.g.,Germany,China,Indonesia)Sustainabi

165、li-ty-linked sover-eign debt(e.g.,Indonesia)Debt-for-nature swaps(USA)Guarantees Subsidies National green funds Blended finance Guarantees Project de-velopment facilities Credit en-hancement facilitiesFurther instruments are tailored at specific environmental goals,for example through“payment for ec

166、osystem services”to scale up financing for ecosystems,or national or subnational“carbon markets”to price carbon or more broadly climate emissions(e.g.,in Germany,South Korea,parts of the US,subnational in Japan etc.).19Climate Sustainability Working Group(CSWG)G20 2022A particular set of financial i

167、nstruments and strategies that is gaining prominence are related to early retirement of heavy polluting assets,such as coal-fired power plants.Indonesia,as one country,is preparing Energy Transition Mechanism to retire coal power plant and transition it to new and renewable energy.Various private,pu

168、blic and development financial instruments 52 are being explored and have been applied(e.g.,in Germany)to accelerate the retirement of such assets.As part of this,Just Transition Mechanisms have been devised,e.g.,South Africas International Just Energy Transition Partnership 53 with the support of F

169、rance,Germany,UK,US and EU.Climate finance instruments are ideally matching specific risk-return profiles of projects,investor preferences and market conditions.Accordingly,the relevance of the application of specific climate finance instruments is context dependent(e.g.,green bonds are more applica

170、ble in developed capital markets,while microfinance is more relevant to provide finance in informal markets).Particularly in emerging markets,green capital markets are often in need for further development 19 and specific financial market-based instruments are less applicable or need more support(e.

171、g.,through government-led green bond issuance,such as in Indonesia,China).Other instruments are more applicable,such as green micro-finance,bank lending and blended finance,as well as support through guarantees or other green facilities.Also,sovereign lenders(e.g.,government,state-owned enterprises,

172、state-owned financial institutions)can utilize green capital markets(e.g.,through the issuance of green sovereign bonds).Many G20 members have issued green sovereign bonds(or green sukuk)on the national and sub-national level,as well as through SOEs,including France,Germany,Mexico,China,Indonesia.If

173、 issued on local capital markets,these green sovereign bonds have strong potential to support local green capital market development 54.The availability of the instruments is dependent on regulatory approvals and support(e.g.,Japan is providing financial support for issuing green bonds,Chinas scalin

174、g of green bond and green credit markets is based on strong policy support and application through SOEs).The scalability of the instruments depends on available project pipelines and market conditions.Many of these instruments have been utilized without“green”aspects for decades,and thus need to be

175、tailored to integrate effective climate aspects.Some innovative instruments,particularly on the derivatives markets,such as green asset-backed securities,still require more market discovery for proper pricing.3.6 Climate finance in developing countries Providing finance for infrastructure and capaci

176、ty development from developed G20 members to developing countries for climate mitigation and adaptation,ideally integrated with nature protection and ecosystem solutions in developing countries,has been an important pillar in the protection and restoration of the global nature and climate.20Climate

177、Sustainability Working Group(CSWG)G20 20223.6.1 Development finance commitmentsDevelopedcountriesatCOP26havereaffirmedtheircommitmenttoprovideUSD100billionperyearinclimatefinanceindevelopingcountries.Global funds have also been supported,such as the Global Environmental Facility(GEF)having provided

178、more than USD139 billion in finance for nature in developing countries,and similarly the Green Climate Fund(GCF)that had provided USD10 billion in finance for climate-related projects.Bilateral engagements from G20 members through development banks,many of which are organized through the Internation

179、al Development Finance Club(IDFC),also committed to improve climate-finance and SDG implementation,e.g.,through its five voluntary principles.By September 2020,over 48 financial institutions,including 23 bilateral,regional,and national development banks,as well as 13 commercial financial institution

180、s were part of the Initiative.3.6.2 Local green capital market developmentGreen capital market development in developing countries has been supported by G20 members,and multilateral financial institutions to catalyze private and public finance for green development.Support has been given for design

181、and capacity building(e.g.,IFCs Sustainable Banking and Finance Network)and through underwriting green bond issuances in developing countries(e.g.,ADBs US$20 million investment in Georgias railway green bond)54.Local green capital markets have also been developed by green bond issuances from state-o

182、wned or state-backed companies and financial institutions based on their lower risk profile and larger issuance size,e.g.,in China and Indonesia.3.6.3 Sovereign debt in developing countriesAs COVID-19 continues to interrupt economic activities,induce higher public spending,and decrease tax revenues,

183、sovereign debt issues in certain countries have become more challenging.Sovereign debt risks have further been exacerbated by recent disturbance of supply chain and geopolitical tensions.In 2020 it has noted that the debt burden 55 of low-income countries rose 12 per cent 31 to a record US$860 billi

184、on in 2020.The International Monetary Fund(IMF)sounded alarm bells in December 2021,warning that 60 per cent 56 of low-income countries are at high risk or already in debt distress,up from 30 per cent in 2015.Sovereign debt ratings 57 in 2021 and 2022 have fallen particularly in developing countries

185、.The sovereign debt crisis has strained the availability of resources for conservation,while social considerations,such as the provision of jobs and job security,have led to stimulus efforts that potentially result in unsustainable economic growth(e.g.,by focusing on grey infrastructure,brown energy

186、).In response to the sovereign debt issue,several initiatives have been launched since the pandemic:21Climate Sustainability Working Group(CSWG)G20 2022 The G20 Debt Service Suspension Initiative(DSSI)provided US$10.3 billion in debt-service relief to 40 countries.DSSI was available to 73 low-income

187、 countries,and was not extended beyond December 2021.The IMF-World Bank“Common Framework,”intended to coordinate debt restructuring among Paris Club and non-Paris club creditors,currently involves only three countries(Chad,Ethiopia,and Zambia).The IMF agreed to release US$650 billion in Special Draw

188、ing Rights 58 to help countries during the crisis.In November 2021 at the China-Africa FOCA summit,China pledged US$10 billion 59(of its share of US$40 billion in new SDRs)to help African countries recover from the pandemic.On 18 April 2022,the IMF approved a new,Resilience and Sustainability Trust

189、60 to help countries manage structural risks linked to climate change and the ongoing pandemic:roughly three-quarters of countries are eligible to apply for support through the new fund,which has initial pledges of US$40 billion.While welcomed,recent initiatives are likely insufficient in the face o

190、f sharplyworsening debt sustainability conditions.Among the suggestions is to turn to more comprehensive lessons of the past,notably the Highly Indebted Poor Countries Initiative and HIPC+,or updating a new version of Brady Bonds 61.The Tackling the Triple Crisis Proposal 62 proposes using debt swap

191、s to help debtor countries meet climate,nature,and other goals.Debt-for-nature swaps(DNS)have been discussed as a concept to ameliorate multiple of these problems at the same time:it could reduce debt burdens,particularly in developing countries with high external public debt,and direct funds to con

192、servation or restoration in these countries to create employment.DNS are a financial tool initially developed and applied in the 1980s to deal with this dual problem of nature loss and sovereign debt by exchanging sovereign debt for the conservation or restoration of nature.Accelerating environmenta

193、l destruction and the accompanying need to mobilize billions to finance nature protection led to a resurgence of calls to apply DNS,including from large creditor regions,such as in September 2021 from the European Commission and the OECD.The US through the Development Finance Corporation(DFC)togethe

194、r with The Nature Conservancy has supported the government of Belize at the end of 2021 in a US$364 million financial transaction 63 that will enable the country to reduce its debt burden and generate an estimated US$180M for marine conservation.China,as the largest bilateral creditor in developing

195、countries 64,is also evaluating the application of various forms of debt restructuring,including debt forgiveness on non-interest-bearing loans,and debt-for-sustainability swaps 65.Similarly,Indonesia agreed with Germany and Global Fund to a US$50 million debt-for-health swap 66 in 2021.Without solv

196、ing the debt crisis quickly and decisively,sustainable development regarding social,environmental and economic progress will likely regress in many developing countries,particularly in light of accelerating inflation and exchange-rate volatility due to armed conflicts and supply chain issues.22Clima

197、te Sustainability Working Group(CSWG)G20 20224.The Way Forward Taken the current climate and green finance gap,and seeing current climate finance ambitions of G20 members,lessons can be drawn,and challenges can be identified.These can be summarized as:4.1 A transformative effortAs the combined effor

198、t of G20 members shows,transforming finance requires the comprehensive and rapid development and application of fiscal,monetary,regulatory,and voluntary instruments,tools,and systems.Through incentives and disincentives,these tools aim to reduce finance flows into counterproductive activities and ac

199、celerate sustainability-aligned finance by creating commonly accepted standards and reducing transaction costs through interoperability.At the same time,these tools need to ensure a just transition across countries and societies,secure and improve future generations wealth,while minimizing greenwash

200、ing risks to avoid erosion of public and investors trust in green transition.Shiftingawayfromfinancingunsustainableactivitiesiskeywithafocusonsectorsandactivities that currently most contribute to climate change and biodiversity loss which is closely related to climate change ambitions.Many of these

201、 sectors are overlapping for biodiversity and climate issues,in particular,the energy sector(transport,buildings and industry),agriculture and food systems,cement,chemicals,and waste(see Figure 9).Figure 9:Global Greenhouse Gas Emissions by Sector in 2016(Source:Our World in Data 2020 71)Ministries

202、and regulators responsible for climate and environment have an opportunity to set environmental standards and thresholds,data standards,as well as create architectures of carbon markets and environmental rights markets.Close cooperation with related ministries responsible for public finance and SOEs

203、,banking,financial markets,and economy,in addition to private sector stakeholders,promises the most effective results.23Climate Sustainability Working Group(CSWG)G20 2022As institutional settings vary between G20 members,any systematic approach between top-down and bottom-up approaches will be speci

204、fic to each country.The overall approach is ideally harmonized among the G20 members to create lower cross-border financing barriers.Scalingofgreenfinancerequiressynergiesbetweentop-downandbottom-upaction:The top-down action sets policy signals and regulatory frameworks,such as disclosure regulation

205、s,public finance strategies,environmental standards(e.g.,emission standards),or environmental rights trading markets(e.g.,carbon markets),as well as monetary and fiscal incentives.The bottom-up actions set market-driven voluntary green financing instruments like ESG products,private sustainability m

206、arkets for green goods,services and commodities,voluntary carbon offset markets to support corporate targets like net zero or nature positive goals.A key objective is to build synergies between these two green finance sources.4.2 Integration of climate factors into finance systemG20 members have emb

207、arked on the journey to incorporated climate factors into financing frameworks,strategies and mechanismsBased on the Addis Ababa Action Agenda 67,integrated national finance frameworks(INFFs)are envisaged to“align the full range of financing sources-domestic and international sources of public and p

208、rivate finance-and the policies that govern them for sustainable development.”Successful evaluation has been completed,e.g.,for Indonesia and Mexico.The Sustainable Banking and Finance Network 17 tracks progress of frameworks to promote sustainable finance of many developing countries(including rele

209、vant G20 members,such as China,India,Indonesia,Mexico).The UKs 2019 Green Finance Strategy 68 similarly sets out how to harness the strength of the UKs world leading financial sector to catalyze green investment and accelerate delivery of net zero.The Net Zero Strategy 69 outlines measures to transi

210、tion to a green and sustainable future,including the goal to leverage up to 90 billion of private investment by 2030.The Government of Indonesia works on the Climate Change Fiscal Framework to implement several activities such as green budgeting,a Private Sector Climate Expenditure,and Institutional

211、 Review.Indonesia has developed a more advanced green finance framework than most its peers,being evaluated at the second highest stage in the SBFN 2022 evaluation 70:“its national framework extends beyond the banking sector and promotes ESG integration across the financial sector ecosystem.In addit

212、ion to ongoing activities to raise awareness and build capacity,implementation tools and initiatives are in place”.Indonesia has also used public finance to develop green capital markets(e.g.,issuance of third green sovereign sukuk worth US$750 million in 2020,and the state-owned Bank Mandiri issued

213、 its first US$300 million bond in 2021).24Climate Sustainability Working Group(CSWG)G20 2022The EUs efforts are pooled in the EUs Strategy for Financing the Transition to a Sustainable Economy 41 that includes the 2021-2027 Multiannual Financial Framework(MFF)and Next-Generation-EU(NGEU).Through thi

214、s,the EU aims to mobilize private finance through up to EUR 605 billion on public finance for projects addressing the climate crisis and EUR 100 billion in projects supporting biodiversity.Of the EUR 750 billion allocated for NextGeneration-EU,30%will be raised through issuance of NGEU green bonds,w

215、hich will further develop green capital markets in the EU.Furthermore,through its Just Transition Mechanism,the EU aims to“ensure that the transition towards a climate-neutral economy happens in a fair way,leaving no one behind.It provides targeted support to help mobilize around 55 billion over the

216、 period 2021-2027 in the most affected regions,to alleviate the socio-economic impact of the transition”.Ideally climate factors can be further organized in comprehensive and reinforcing green financial frameworks based on the relevant governance system,laws and regulations,sources of finance and re

217、levant financial instruments.4.3 Technologies for climate and green financeTo advance climate finance,a key bottleneck is informational asymmetry and transaction cost of data disclosure of environmental and climate risk.G20 members can take advantage of emerging technologies through the integration

218、of big data,sensing technologies,enhanced(artificial)intelligence technologies,mobile platforms,blockchain technologies.These“digital finance“technologies make large amounts of data available more quickly at lower costs,increasing transparency and access to information related to sustainable investm

219、ents.They also have the potential to promote greater inclusion and innovation,increase opportunities for citizen participation in the financial value chain and unlock new sustainable business models.Many G20 members have established industry and government competence to utilize technologies to advan

220、ce the provision and efficiency of financial services not least through central bank digital currencies(CBDC)(e.g.,Brazil,Japan,and others).Tech Sprint organized by the Bank for International Settlement(BIS)and G20 in 2021 focused on green and sustainable finance focused on three topics:(1)data coll

221、ection,verification and sharing;(2)analysis and assessment of transition and physical climate-related risks,and(3)better connecting projects and investors.Overall,digitalization or technologies have specific advantages for climate and sustainable finance to improve informed decision-making for regul

222、ators,investors and consumers based on improved data availability,transparency,comparability,as well as better data analyses,e.g.,for climate scenario analyses,understanding of interdependencies(e.g.,of nature-climate nexus risks):Collection of non-financial environmental data through smart technolo

223、gies,sensing and autonomous vehicles(e.g.,drones),e.g.,for climate-related emissions at the source,pollution at the source,land-use change;25Climate Sustainability Working Group(CSWG)G20 2022 Improvement of transparency and consistency through provision of data and infor-mation via openly accessible

224、 platforms,including through mobile platforms;Improvement of comparability of data through utilizing algorithms to interpret data through artificial intelligence,e.g.,in the highly fragmented ESG data space or for multiple frameworks for environmental disclosure and risk management frame-works;Impro

225、vements in intelligence through better scenario analyses and stress testing,as well as risk analyses of interdependencies(e.g.,nature)through higher data availability and improved computing power.Furthermore,technologies can help mobilizing finance for green projects through reduction of transaction

226、 cost and information cost for investors.For example,the BIS Innovation Hub together with Hong Kong Monetary Authority(HKMA)established the Project Genesis in 2021 that allows any investor to invest any amount into safe government green bonds via an app.Over the bonds lifetime,the investor can see a

227、ccrued interest,track in real time how reduction in CO2 emissions linked to the investment are made.Further,the investor can sell the bonds in a transparent market.26Climate Sustainability Working Group(CSWG)G20 20225.Actions to be taken:Stop counterproductive,mobilize greenpublicandprivatefinanceth

228、roughsmart,coherent,and tailored policy toolsBased on the identified developments of climate and green finance in G20 members,the identified gaps and the need for improvements,specific actions that G20 leaders in regulatory bodies responsible for climate change and biodiversity loss can consider hav

229、e been identified.ClimatefinanceactionsconsideredbyG20membersarebasedonfivedimensions:1:With limited resources and time available,G20 members focus efforts on shifting finance away from those economic activities with the highest negative impact.2:Public finance through fiscal spending,tax policy,sta

230、te-owned-enterprises(SOEs)and state-owned financial institutions leads the race to the top in collaboration with the private sector finance.3:Climate finance is fully integrated with biodiversity aspects to maximize effects of the green and sustainable transition for mitigataion and adaptation/resil

231、ience.4:G20 encourages jurisdictions to develop their own green finance approaches based on the 6 principles noted by the SFWGa.SWFG Principle 1:Ensure material positive contributions to sustainability goals and focus on outcomes;b.SWFG Principle 2:Avoid negative contribution to other sustainability

232、 goals(e.g.,through do no significant harm to any sustainability goal requirements);c.SWFG Principle 3:Be dynamic in adjustments reflecting changes in policies,technologies,and state of the transition;d.SWFG Principle 4:Reflect good governance and transparency;e.SWFG Principle 5:Be science-based for

233、 environmental goals and science-or evidence-based for other sustainability issues;andf.SWFG Principle 6:Address transition considerations.5:Climate finance enables a just transition for countries in different development stages,for different sectors and ensure a better life for future generations r

234、ooted in the SDGsSpecific actions that G20 members can consider can be distinguished in(1)harmonized standards for public and private finance,(2)private sector mobilization,and(3)just and development finance.5.1.1 Improving standardization to shift from unsustainable to greenImproving interoperabili

235、ty of various green and sustainable finance standards forprivateandpublicfinance to reduce transaction cost,to ensure positive impact,to reduce greenwashing,to build trust and to shift from dirty to green finance can be developed.While development of green taxonomies with a focus on mitigation has b

236、een increasingly successful and efforts to improve interoperability of green taxonomies are ongoing,27Climate Sustainability Working Group(CSWG)G20 2022definitions of counterproductive and hard-to-abate economic activities through a“traffic light classification system”are paramount.This has the pote

237、ntial to increase economic costs for environmentally harmful activities and shift money to non-harmful and green activities.The classification system of those economic activities should focus on e.g.,fossil fuel energies,transport-related infrastructure and services,agriculture and food systems,and

238、resource extraction.To reduce greenwashing,environmental regulators can support in providing and enforcing legal standards on environmental thresholds and performance indicators(i.e.,technical screening criteria).These thresholds should describe what are maximum emissions and nature-negative outputs

239、 allowable(e.g.,what are emission thresholds or biodiversity loss thresholds for specific activities)and provide performance indicators(e.g.,what is considered a“positive biodiversity contribution”in different ecosystems and sectors).These thresholds are relevant for the inclusion/exclusion of econo

240、mic activities in green finance taxonomies,as well as reporting.Similarly,as a basis for evaluating environmental performance,standards development for measuring,verifying,and reporting(MRV)comparable and standardized data on environmental performance that includes vulnerable groups can be accelerat

241、ed.This should utilize digital technologies available that should provide better access to all stakeholders including regulators,market participants and consumers.Technologies should advance climate and environment data management,to allow financial markets/entities to capture risk and opportunities

242、 of climate friendly investment/business/finance.The data quality should be ensured and enforced through standards supported or issued by competent environmental regulators.The competent environmental regulator can also provide regularly updated baseline environmental data on a granular level as wel

243、l as performance summaries in relation to climate,biodiversity,pollution,and adaptation.The foundation for global markets and relevant instruments to accelerate carbon-positiveandnature-negativeinvestmentsprovidesbroaderbenefitsifitisimproved.This includes a consensus for global and cross-border car

244、bon pricing and carbon leakage avoidance,where the parts of the proceeds can be utilized to support climate mitigation/adaptation/just transition in least developed countries including capacity building and technical assistance.Furthermore,tools for further natural rights trading can be implemented

245、to increase the use of ecosystem-based solutions as carbon offsets within Paris Agreement Article 6 consensus reached at Glasgow 42 and to build resilience.Data that is made publicly and easily available has a greater potential to improve transparency and trust in green finance e.g.,through a shared

246、 data repository,to evaluate relevant incentives and disincentives for aligning flows with sustainable development and climate targets and to facilitate smart climate financing decision making for example,for restructuring debts in developing countries,better standardize labelling of activities(e.g.

247、,green,and red taxonomy).28Climate Sustainability Working Group(CSWG)G20 20225.1.2 Private sector mobilizationThese“traffic light system”standards can be applied for publicfinancethatincludes,e.g.,fiscalspending,subsidies,taxpolicy,state-ownedenterprises(SOEs)andstate-ownedfinancial institutions.Pub

248、lic financial and project engagement in non-SDG aligned or projects doing harm to an SDG can be ended by 2025 while state-owned financial institutions phase-out and divest from harmful projects by 2040.Exceptions can be provided to invest in harmful projects if they accelerate green development goal

249、s,such as when investing in a fund for early retiring coal-fired power plants.Availability of green public finance can be increased through issuance of sovereign or SOE green financial instruments(e.g.,green bonds,green sukuk).With more green public finance,through sovereign or SOE green financial i

250、nstruments(e.g.,green bonds,green sukuk)green private sector spillovers and a mobilization of green private sector finance and businesses can be envisaged.By supporting governments,SOEs and SOFIs to utilize green financial instruments(e.g.,green bonds),local green capital market development with imm

251、ediate benefits for private sector development can be achieved.The global infrastructure development facilities(e.g.,Global Infrastructure Facility(GIF),Global Environment Facility(GEF)and other applicable finance instruments(e.g.,non-sovereign guarantees,blended finance,PPP)can be used for more eff

252、icient crowding in of commercial development finance and private finance in high-risk assets if accelerated,e.g.,through capacity building for application and implementation of these financing mechanisms.As private sector finance requires clear policy directions to understand regulatory risk(rather

253、than uncertain future announcements),clear,ambitious green regulatory and policy targets paired with public finance measures will mobilize private sector finance to support phase-out of dirty assets and deployment of climate-friendly investments.5.1.3 Just and development financeEnsure a globally ju

254、st transition through responsibilities to ensure a just transition and reduce COVID-19 related impacts particularly in developing countries.This should include the fulfillment and ideally increase of the US$100 billion climate finance from developed to developing countries.Furthermore,G20 members ca

255、n work together to reduce debt-burdens of highly indebted countries that include the evaluation of multilateral and bilateral debt-for-nature and/or debt-for-climate swaps to increase both development finance and fiscal space in highly indebted countries.The development cooperation can also support

256、financial and technical capacity particularly for energy transition(e.g.,grid,energy storage)and adaptation finance possibly through multilateral agencies that would reduce risks of strategic national competition in development support.29Climate Sustainability Working Group(CSWG)G20 2022To further f

257、inance the green transition in G20 members and beyond,the use of global infrastructure development facilities(e.g.,GIF,MCDF)and other applicable financeinstrumentsthatprovideformoreefficientcrowdinginofcommercialdevelopmentfinancecanbeaccelerated.Also,the local(green)capital market development can b

258、e further supported.30Climate Sustainability Working Group(CSWG)G20 20226.Appendix6.1 Appendix 1:Overview of relevant taxonomiesEU taxonomy for sustainable activitiesThe EUtaxonomy is a classification system,establishing a list of environmentally sustainable economic activities.The EUtaxonomy would

259、provide companies,investors,and policymakers with appropriate definitions for which economic activities can be considered environmentally sustainable.China Green Bond Endorsed Projects Catalogue The 2021 Edition Catalogue divides green projects into six major areas:Energy-saving and Environmental Pr

260、otection Industry,Clean Production Industry,Clean Energy Industry,Eco-environment Industry,Green Upgrading of Infrastructure,and Green Services.China“Traffic Light System”for Overseas investmentsIn 2020,Chinas Belt and Road Initiative International Green Development Coalition(BRIGC)backed by multipl

261、e ministries issued the Green Development Guidance for BRI projects with a“Traffic Light System”.Projects are classified in“green”(environmentally beneficial without any significant harm to biodiversity,pollution and/or climate),“yellow”(environmentally neutral),and“red”(significant potential harm t

262、o any environmental dimension of pollution,biodiversity,or climate).Indonesias Green Taxonomy 38In January 2022,Indonesias Financial Services Authority(OJK)completed the first edition of Indonesias green taxonomy.The Green Taxonomy classifies sustainable financing and investment activities into thre

263、e categories,namely:green(do no significant harm,apply minimum safeguard,provide positive Impact to the environment,and align with the environmental objective of the taxonomy,yellow(do no significant harm),and red(harmful activities).The“EU-China Common Ground Taxonomy Climate Change Mitigation(CGT)

264、”.CGT put forward commonalities from the EU and Chinas taxonomiesandprovide generic methodologies for benchmarking taxonomies.As emphasized by the working group,the CGT has no legal implications and does not intend to be formally or legally endorsed by any jurisdictions.It is rathera source of inspi

265、rations and provides analytical toolkitsfor other jurisdictions when developing their own taxonomies.31Climate Sustainability Working Group(CSWG)G20 2022ASEAN TaxonomyThe new taxonomy follows previous ASEAN sustainable finance initiatives,such as the ASEAN Green,Social and Sustainability Bond Standa

266、rds,and the ASEAN Sustainable Banking Principles.The ASEAN Taxonomy is a sustainable finance taxonomy with an initial focus on environmental objectives.It consists of two parts.The base is a Foundation Framework(FF)resting on four environmental objectives and two essential criteria to guide AMS in c

267、lassifying economic activities in 3 tiers(green-amber-red).Singapore“Traffic Light System”73(not a G20 country,but with significance for financial markets in ASEAN and beyond)The Green Finance Industry Taskforce(GFIT),convened by the Monetary Authority of Singapore(MAS),issued a proposed taxonomy fo

268、r Singapore-based financial institutions to identify activities that can be considered green or transitioning towards green.A“traffic-light”system was developed,which sets out how activities can be classified as green,yellow(transition),or red according to their level of alignment with environmental

269、 objectives.Japan Transition Finance TaxonomyThe Basic Guidelines on Climate Transition Finance(Guidelines)is one measure supporting this development strategy through strengthening the position of climate transition finance in Japan,especially in hard-to-abate sectors.In addition to its main objecti

270、ve,the Guidelines aims to introduce more funding contributing to achieving the 2050 carbon-neutral goals of Japan and align with the Paris Agreement.Russian Green Finance TaxonomyThe Russian Green Finance taxonomy covers both green and transition activities.It is compatible with recognized internati

271、onal taxonomies and reflects criteria for sustainable projects.Green taxonomy section covers activities in such areas as waste management,energy sector(including the whole spectrum of low-carbon energy solutions:solar,wind,geothermal power,biofuels,hydropower,nuclear and hydrogen),circular economy p

272、rojects,CCUS,energy efficiency in buildings,industrial processes(steel,aluminum,cement,etc.),transportation fuels,vehicles and infrastructure,green mobility,land use and agriculture.Transitional taxonomy introduces criteria that encourage GHG emissions reduction in hard-to-abate sectors,namely,fossi

273、l fuel and natural resources exploitation and use32Climate Sustainability Working Group(CSWG)G20 20226.2 Appendix 2:Overview of Sustainable financial instrumentsCategoryNameAim/ScopeStatus and scaleExamples in G20Climatefinancepolicies and regu-lations as a basis forclimatefinanceinstrumentsGreen mo

274、netary policyCentral banks and other banking authorities are increasingly using their tools to provide the right price signals and incentives to align finance flows with climate goals 74.G20 central banks generally failing 75European Central Bank 75 etc.Green financial and real-economy policies-Stre

275、ss testing to improve financial institutions resilience-Mandated disclosure of climate risks-Legal requirements for real economy(e.g.the energy,transport,agriculture,or water sectors)Very few G20 members implemented these instru-mentsPeoples Bank of China 76 for stress testing;NDC priority sec-tors;

276、Climate-related financial disclosuresStrategies,voluntary disclosures,standards or frameworks,roadmaps,guidance documents,etc.(nonbinding)Very few G20 members implemented these instru-mentsTCFDCarbon pricing scheme(e.g.,carbon tax,carbon market)Put a price on carbon emissions so that the costs of cl

277、imate impacts and the opportunities for low-carbon energy options are better reflected.-Almost half of all CO2 emissions 77 from energy use in G20 economies are priced as of 2021-Carbon prices have increased across G20 economiesKorea,Canada,Germany,China etc.33Climate Sustainability Working Group(CS

278、WG)G20 2022CategoryNameAim/ScopeStatus and scaleExamples in G20Risk managementEnergy savings insur-ance(ESI)Address investment barriers to energy efficiency upgrades at small and medium enterprises(SMEs).-Secondary replica-tion in Europe led by GCF and IDB-Finance mobilized reached USD 250 million i

279、n 2018 78Mexico,Brazil,Ita-ly,India,TurkeyLong-Term Foreign Exchange Risk Man-agement instrumentAddress currency and interest rate risk for renewable energy finance and cli-mate investment in developingeconomies.-Implemented by TCX(established by a group of multilateral development banks in 2015)-30

280、mn EUR 78 invest-ment from BMU IN 2015-30mn EUR from BMU in 2018-31mn EUR from UK DFID in 2019Germany,UKFinancing mechanisms and instrumentsGreen concessional financing(e.g.,loans)Provide early-stage project develop-ment,construction financing,and refi-nancing to wind,solar,and run-of-river hydro pr

281、ojects in low income,lower-mid-dle-income,and upper-middle income countries-Usually provided by MDBs and DFIs used for climate mitiga-tion purposes-Almost all MDBs and DFIs have a climate portfolio with some concessional loan G2034Climate Sustainability Working Group(CSWG)G20 2022CategoryNameAim/Sco

282、peStatus and scaleExamples in G20Financing mechanisms and instrumentsNational climate fundsCollect,blend,and manage all incoming revenues streams(both international and national)related to climate change into centralized and nationally owned fund to allocate resources to green projects-US$1.4 billio

283、n Am-azon Fund(Brazil)with contributors from Germany,Nor-way,Malaysia-Green Climate Fund South Africa For an overview see the BU nation-al climate fund trackerInternational climate fundsOften funded through international gov-ernments and/or development finance institutions,these funds pool money to

284、provide low-cost,long-term financing to lower the risk and cost of climate financ-ing applying different financing instru-ments(e.g.,grant,concessional debt,guarantees,equity instruments,blended finance)-US$10.3 billion Climate Investment Funds(CIF)estab-lished in 2008-US$10.3 billion,Green Climate

285、Fund(GCF)Green non-concession-al loansProvide green credit for aligned projects through commercial financial institutions at market rates(e.g.,while the financial institution might be able to provide lower financing rates due to re-financing options)-Chinas green credit market reached about US$2.6 t

286、rillion in 2021ChinaGreen/transition bondsSupport specific climate-related or en-vironmental projects(or projects transi-tioning from brown to green)on conces-sional terms-One of the earliest and largest type of climate finance instruments;-volumes included in the Climate Bonds Green Bond Data-base

287、in 1H 2021 period reached USD227.8bn EU,China,USA,etc.35Climate Sustainability Working Group(CSWG)G20 2022CategoryNameAim/ScopeStatus and scaleExamples in G20Financing mechanisms and instrumentsInsurance instruments(e.g.,insurance-linked securities,contingent credit,and loans)Cover risks from weathe

288、r-related disas-ters in a combination of risk prevention and risk transfer mechanism-Swiss Re,The Nature Conservancy and re-gional governments in Mexico in“un-derwriting nature”initiative to protect the Mesoamerican coral reel 79MexicoMultilateral/bilateral/national grantsGrants can be offered by po

289、licy and private institutions to accelerate invest-ments,e.g.,through blended finance,that allows to crowd in private capital even in non-revenue or negative yield projects,including capacity building or technical plans-Multilateral devel-opment banks(ADB,World Bank)provide grants for capacity build

290、ing-KfW provides grants for energy efficient renovation of private houses-Large foundations(e.g.,Gates Founda-tion,CIFF)provide grants for capacity building on climate changeG2036Climate Sustainability Working Group(CSWG)G20 2022CategoryNameAim/ScopeStatus and scaleExamples in G20Financing mechanism

291、s and instrumentsFinancing facilitiesLending facility intended to increase cli-mate-related investments by addressing market constraints and using blended finance to crowd-in private investments,for example in infrastructure,but also provides capacity building and knowl-edge sharing-Green Climate Fa

292、cili-ty by IDB)-Climate Finance Facility South Africa by DBSA-Global Environmen-tal Facility estab-lished in 1992-Global Infrastructure Facility(GIF)estab-lished by G20 with total investments of US$76 billion-MCDF established in 2021 by China and othersGuaranteesGuarantees help mitigate risks from i

293、nvestments to lower the threshold for private investors to invest;guarantees can cover the entire investment or parts thereof;-Performance or credit guarantees to cover the risk of a contracted power off-taker in renew-able energies;-IDB provides guaran-tees for the geother-mal development in Chile

294、and Mexico 8037Climate Sustainability Working Group(CSWG)G20 2022CategoryNameAim/ScopeStatus and scaleExamples in G20Financing mechanisms and instrumentsClimate finance auc-tionsAn alternative to traditional public cli-mate finance,used to set a price floor for emission reductions which give auction

295、 winners the option of selling emission reductions to a public funder at a fixed price or to the market.-Relatively new in-strument but with a proven track record 81.World Banks Pilot Auction Facility for Methane and Climate Change Mitigation(PAF);UK Contracts for Difference(CfD)programmeCoal exit f

296、inancing mechanismsDevelop tools and incentives to retire coal-fired power plants ahead of sched-ule-Energy Transition Mechanism(ETM)by ADB launched in 2021-Accelerating Coal Transition(ACT)US$2.5 billion fund launched by CIF in Nov 2021-Reverse auctions in Germany Sustainability Linked loans Incent

297、ivize borrowers(not restricted to projects)to improve their overall sustain-ability performance-exponential increase in size and activity in recent years-$40 billion 82 of announced sustain-ability linked loan globally in the first six weeks into 2022Especially USDebt-for-climate/na-ture swapsdebt s

298、wap in which the debtor nation refinances and makes payments in local currency to finance climate/nature pro-tection projects Relatively small at hundreds of million-level per transac-tionParis Club mem-bers38Climate Sustainability Working Group(CSWG)G20 20226.3 Appendix 3:Selected reporting standar

299、dsCategoryNameApply toContentStatus GovernmentEU Sustainable Finance Disclosure Regulation(SFDR)All financial market partici-pants(“FMPs”)and financial advisors(“Fas”)in the EU,FMPs with EU shareholders,and those marketing in the EUIt imposes comprehensive sus-tainability disclosure require-ments co

300、vering a broad range of ESG metrics at both entity-and product-level.Applicable in March 2021;Level 2,which starts in 2023,will require compa-nies to justify their activ-itiesRecommendations to public joint stock compa-nies on the disclosure on non-financial activitiesPublic joint stock compa-nies i

301、n Russia It encourages public companies to disclose information about how they consider ESG factors and how they implement these factors into their business model and development strategy.Launched in July 2021,no recent update Administration Measures of Law-based Disclosure of Environmental Informa-

302、tion by EnterprisesCertain high-polluting en-terprises in ChinaIt requires in-scope enterprises to disclose environment and pollu-tion related information in annual reports.Applicable in Feb 20221.the Companies(Strate-gic Report)(Climate-relat-ed Financial Disclosure)Regulations 2022 2.the Limited L

303、iability Partnerships(Climate-re-lated Financial Disclosure)Regulations 2022All UK registered compa-nies and Limited Liability Partnerships(LLPs)with over 500 employees having annual revenue of more than 500 million.These revised regulations re-quire organizations to disclose climate-related financi

304、al informa-tion and ensure they consider the risks and opportunities they face because of climate change.Regulations passed in January of 2022 with an effective date of 6 April,202239Climate Sustainability Working Group(CSWG)G20 2022CategoryNameApply toContentStatus The US Securities and Ex-change C

305、ommission(SEC)Interpretive Guidance Re-garding Disclosure Relat-ed to Climate Change US public companiesIt provides guidance to public companies regarding theCommissions existing disclosure requirements as they apply to climate change matters.First published in 2010;SEC has proposed rules to enhance

306、 and standardize climate-Related disclo-sures in 2022Disclosure Guidelines for the Financial SectorFinancial sector in ChinaIt puts forward requirements on details to be disclosed by Chinese financial institutions on environ-mental information,and provides guidance for different financial sub-sector

307、s such as commercial banks,asset management,insur-ance.Launched by Peoples Bank of China in Aug 2021MarketNASDAQ ESG Reporting Guide 2.0All Nasdaq marketsIt is a voluntary initiative and aims to help both private and public companies navigate the evolving standards on ESG data disclosure.Published i

308、n 2019 as an up-dated version of the 2017 guide,incorporating new developments(such as TCFD,SDGs,GRI Standards,EU NFR Directive)New York Stock Exchange ESG Guidance and Best Practices NYSE listed companiesIt highlighting key elements of good quality reporting and provides guidance on voluntary susta

309、inability reporting.Provides resources for companies to report in line with frameworks like GRI,SASB,TCFD40Climate Sustainability Working Group(CSWG)G20 2022CategoryNameApply toContentStatus Euronext ESG Reporting Guide:Target 1.5CEuronext issuers and pri-vate companiesIt provides guidance for compa

310、-nies to identify and prioritize ESG opportunities and risks;report efficiently;navigate,comply with and stay ahead of regulations and differentiate themselves in terms of their ESG approach.New edition announced in May 2022Johannesburg Stock Ex-change(JSE)1.Sustainabil-ity Disclosure Guidance 2.Cli

311、mate Change Disclo-sure Guidance Serve as a guidance tool that may be used by JSE issuers on a voluntary basisIt is aligned with global expec-tations and best practice,and specifically tailored to the South African business context,serving as an umbrella fortopic-related guidance as needed.Draft ope

312、n for public com-ment from 9 December 2021 28 February 2022Singapore Exchange(SGX)sustainability reporting guide(not a G20 country,but with significance for financial markets in ASE-AN and beyond)SGX listed companiesSGX-ST requires each issuer to publish an annual sustainability report,describing th

313、e primary components on a comply or explain basis,and in relation to the primary component in Listing Rules.Effect from 1 January 2022,issuers are required to describe their sustain-ability practices on a“com-ply or explain”basis with reference to climate-relat-ed disclosures consistent with the TCF

314、D recommen-dations.41Climate Sustainability Working Group(CSWG)G20 2022CategoryNameApply toContentStatus Shanghai Stock Exchange&Shenzhen Stock Ex-change GuidelinesListed companiesThese guidelines encourage listed companies to disclose informa-tion related to social responsi-bility and environmental

315、 impact,among others.Launched in Jan 2022 by both two exchangesSector-ledTask Force on Climate-re-lated Financial Disclosure(TCFD)All organizations,especially organizations with public debtor equityA voluntary set of guidelines aimed at assessing a companys exposure to climate change risk.It provide

316、s both general and sec-tor-specific guidanceto assist organizations with imple-menting the TCFD recommenda-tions.As of Sep 2021,12 gov-ernments and dozens of centralbanks,supervisors,and regulators have formally expressed support for the TCFD recommendations,and more than 2,600 orga-nizations have n

317、ow en-dorsed them,an increase of over 70%since last year.42Climate Sustainability Working Group(CSWG)G20 2022CategoryNameApply toContentStatus Taskforce on Nature-re-lated Financial Disclosures(TNFD)The TNFD framework is intended for use globally by corporates and financial institutions of all sizes

318、.A risk management and disclo-sure framework for organizations to report and act on evolving na-ture-related risks,which aims to support a shift in global financial flows away from nature-negative outcomes and toward nature-pos-itive outcomes.In March 2022,TNFD released the first beta ver-sion of th

319、e framework for a 18-month market consul-tation.A further three iter-ations of the beta versions are planned June 2022(v0.2),October 2022(v0.3)and February 2023(v0.4)before the release of the final version v1.0 of the framework in Q3 2023.Carbon Disclosure Project(CDP)Global companies or citiesTheCD

320、P(formerly theCarbon Disclosure Project)is an inter-national non-profit organization that aims to makeenvironmental reportingandrisk managementa business norm,driving disclosure,insight,and action towards asustainable economy.Since 2002 over 8,400 companies have publicly disclosed environmental info

321、rmation through CDP.The Sustainability Ac-counting Standards Board(SASB)Global reporting companies and investorsSASB Standards guide the disclo-sure of financially material sus-tainability information by compa-nies to their investors.Available for 77 industries,the Standards identify the subset of E

322、SG issues most relevant to financial perfor-mance in each industry.The number of unique SASB Reporters since 2020 is 1858,with the number of 2022 YTD being 736.The total number of member organizations in SASB Alliance reached 281,representing 28 countries.43Climate Sustainability Working Group(CSWG)

323、G20 2022CategoryNameApply toContentStatus Global Reporting Initiative(GRI)Global companiesGRI is the independent,interna-tional organization that provides GRI standards for sustainability reporting.The GRI Standards include three series of Standards to be used together:Universal Standards,Sector Sta

324、ndards,and Topic StandardsAround three-quarters(73%)of the worlds largest 250 companies and two-thirds(67%)of the N100(5,200 companies comprising the largest 100 firms in 52 countries)now use GRI.IRIS+Impact investors in partic-ularIRIS+is managed by the Global Impact Investing Network(GIIN)and is t

325、he generally accepted system for measuring,managing,and optimizing impact.Over 27,000 users have registered to use IRIS+materials.44Climate Sustainability Working Group(CSWG)G20 20226.4 Appendix 4:Selected sustainable finance initiatives and standard settersLead Organization/NameContentType of organ

326、iza-tionCoalition of Finance Minis-ters for Climate ActionTheCoalitionwill help countries mobilize and align the finance needed to implement their na-tional climate action plans;establish best practices such as climate budgeting and strategies for green investment and procurement;and factor climate

327、risks and vulnerabilities into members economic planning.Govern-mentDevelopment Assistance Committee,OECD(OECD DAC)DAC Principles for Evaluation of Development Assistance.The OECD DAC measures and monitors bilateral development finance targeting climate change objectives using two Rio markers:climat

328、e change mitigation and climate change adaptation.Govern-ment/mul-tilateralFinance toAccelerate theSustainableTransition-In-frastructure initiative(FAST INFRA SI)The FAST-Infra initiative launched theSustainable Infrastructure(SI)Label a consistent,glob-ally applicable labelling system designed to i

329、dentify and evaluate sustainable infrastructure assets.The label aims to facilitate due diligence processes and structuring of investments for sustain-able infrastructure assets,thereby reducing transaction costs.Associa-tionInternational Sustainability Standards Board(ISSB)Established in November 2

330、021 by the International Finance Reporting Standards Foundation(IFRS),the ISSB aims to deliver a comprehensive global baseline of sustainability-related disclo-sure standards that provide investors and other capital market participants with information about companies sustainability-related risks an

331、d opportunities to help them make informed decisions.Associa-tionNetwork of Central Banks and Supervisors for Greening the Financial System(NGFS)The Networks purpose is to help strengthening the global response required to meet the goals of the Paris agreement and to enhance the role of the financia

332、l system to manage risks and to mobilize capital for green and low-carbon investments in the broader context of environmental-ly sustainable development.To this end,the Network defines and promotes best practices to be implemented within and outside of the Membership of the NGFS and conducts or comm

333、issions analytical work on green finance.Govern-ment/reg-ulator45Climate Sustainability Working Group(CSWG)G20 2022Principles of Responsible Investment(PRI)The PRI is the worlds leading proponent of responsible investment.It works:-to understand the investment implications of environmental,social and governance(ESG)factors;-to support its international network of investor signatories in incorporat