International Network of Financial Centres for Sustainability (FC4S) : The implications of the COVID-19 pandemic on sustainable finance.

The FC4S which we co-chair, has launched a discussion paper on the implications of the COVID-19 pandemic on sustainable finance. This document, which is intended to be updated regularly, contributes to the reflection on how to respond to the pandemic by integrating sustainable finance issues.

“If there is one thing that COVID-19 has emphasized, it is that natural capital underpins our economies. The health of people and the planet are one and the same. The 90% decline in green bond issuance is a matter of concern. If we aim to rebuild more green and resilient economies, we need to maintain healthy debt ratios and encourage all debt to be aligned with the Sustainable Development Goals,”

Marcos Mancini, Head of International Partnerships, UNEP Inquiry.

This document presents two objectives: The first is to set out what we know about the ways in which the many different components of our sustainable financial system – market actors, policymakers, regulators, and international institutions – are thinking, planning and reacting to the pandemic, with a focus on implications for sustainable finance markets. The second objective is to set out a framework for assessing what levers may exist to strengthen the role of the financial system in supporting a low-carbon recovery, and the prospective roles for different communities of actors.

The working paper looks at four major sections: Financial and Capital Markets; Policy Action; Regulation and Supervision; and International Networks covering recent developments in response to COVID-19.

Some takeaways from the report include: 

• Pipelines of new greenfield low-carbon projects (e.g. renewable energy) are likely to be significantly reduced for the foreseeable future, both in developed and emerging markets.
• Capital raising to fund the stimulus will need to take many forms – and green securities could play a major role.
• Financial supervisors are likely to strengthen focus on long-term risks with exponential characteristics – potentially leading to a more granular assessment of climate risks.

Importantly, the paper it is a work in progress and will be updated and refined every quarter as new information and new ideas come to our attention. This allows us to continuously gather information and insights to refine our analysis as we try to be as fluid as the global response to the pandemic is.