History of international sustainable finance

The Brundtland Report and the Definition of Sustainable Development

In 1987, the Brundtland Report, entitled ‘Our Common Future’, was published by the UN World Commission on Environment and Development. This seminal document introduced and defined the concept of ‘sustainable development’ as ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’. This definition lays the foundations for sustainable finance, emphasizing the importance of reconciling economic growth, social progress and environmental protection.

Creation of the IPCC, a milestone in climate research

The Intergovernmental Panel on Climate Change (IPCC) was established in 1988 under the aegis of the World Meteorological Organization (WMO) and the United Nations Environment Programme (UNEP). The aim of this international initiative was to provide detailed scientific assessments of climate change, its causes, potential impacts and adaptation and mitigation strategies. Since its creation, the IPCC has published six major assessment reports, the first in 1990 and the most recent in 2021-2023. These reports, drawn up by hundreds of scientists from all over the world, synthesize the most recent knowledge on climate and serve as the basis for international political decisions in the fight against climate change.

The Rio Summit and the Three Pillars of Sustainable Development

The 1992 Rio Earth Summit marked a decisive turning point in the conceptualization of sustainable development. At this United Nations conference on the environment and development, 182 countries came together to discuss the future of the planet. It was on this occasion that sustainable development took on its current definition, articulated around three fundamental pillars:

1. Economic progress
2. Social justice
3. Preservation of the environment

This tripartite approach aims to reconcile economic growth, social equity and environmental protection. The summit also established key principles, such as ‘Think globally, act locally’ and the precautionary principle. The Rio Declaration, adopted at the end of the summit, stresses that environmental protection must be an integral part of the development process and cannot be considered in isolation.

First COP Climate in Berlin, a Milestone for International Climate Action

The first Conference of the Parties (COP1) on climate change was held in Berlin from March 28 to April 7, 1995. This event marked the start of a series of annual conferences aimed at coordinating global efforts to combat global warming. Organized under the aegis of the United Nations, COP1 brought together 197 nations and territories signatory to the United Nations Framework Convention on Climate Change (UNFCCC).

Chaired by Angela Merkel, then German Environment Minister, the conference laid the foundations for future international climate negotiations. Although it did not result in any concrete measures, COP1 enabled the 120 governments present to acknowledge the seriousness of the climate situation and the need to reduce greenhouse gas emissions.

A major outcome of the conference was the adoption of the ‘Berlin Mandate’, which recognized the inadequacy of existing commitments and launched discussions on more ambitious targets. This mandate paved the way for the negotiations that would lead two years later to the Kyoto Protocol.

The Kyoto Protocol, Pioneer of Climate Finance Mechanisms

On December 11, 1997, the Kyoto Protocol was adopted at the 3rd Conference of the Parties (COP3) in Kyoto, Japan. This international agreement marked a decisive turning point in the fight against climate change and laid the foundations for modern climate finance. For the first time, the Kyoto Protocol introduces binding greenhouse gas emission reduction targets for industrialized countries. It also establishes innovative financial mechanisms linked to the reduction of carbon emissions, including :

1. The carbon market, enabling emissions trading between countries.

2. The Clean Development Mechanism (CDM), promoting investment in emission reduction projects in developing countries.

3. Joint Implementation (JI), facilitating emission reduction projects between developed countries.

Although signed in 1997, the Kyoto Protocol only came into force in 2005, following ratification by Russia. This late implementation underlines the political and economic challenges involved in adopting binding climate measures on a global scale.

Carbon Disclosure Project, Pioneer in Environmental Transparency

In 2000, the Carbon Disclosure Project (CDP) was born, marking a crucial step in the evolution of sustainable finance and corporate environmental responsibility. This British non-governmental organization quickly established itself as a major player in the promotion of transparency in environmental impact.

The CDP ‘s mission is to collect, analyze and disseminate information on the environmental footprint of companies and governments, with a particular focus on greenhouse gas (GHG) emissions. Its innovative approach consists of :

• Encouraging companies and governments to voluntarily disclose their environmental data.
• Develop standardized methodologies for measuring and reporting environmental impacts.
• Provide this information to investors, policy-makers and the general public.

By centralizing this data and making it accessible, the CDP plays a crucial role in raising awareness of climate issues and guiding investment decisions towards more sustainable practices. Its work contributes significantly to the integration of environmental criteria into corporate strategies and public policies.

Launch of the UNPRI, a turning point for Responsible Investment

In April 2006, the United Nations Principles for Responsible Investment (UNPRI) were officially launched on the New York Stock Exchange, marking a crucial step in the evolution of sustainable finance.
This UN-backed initiative aims to encourage the financial sector to integrate Environmental, Social and Governance (ESG) criteria into their investment and management practices.

UNPRI is based on six key principles to which signatories commit themselves:

1. Integrate ESG issues into investment analysis and decision-making processes.
2. Be active investors and take ESG issues into account in their shareholder policies and practices.
3. Require invested entities to publish appropriate information on ESG issues.
4. Promote acceptance and application of the Principles among asset management stakeholders.
5. Work together to increase efficiency in applying the Principles.
6. Report individually on their activities and progress in implementing the Principles.

Since its creation, UNPRI has grown steadily. By 2023, UNPRI signatories are responsible for over $100,000 billion in assets worldwide, including some of the world’s largest and most influential investors. This massive membership demonstrates the growing importance of ESG criteria in the financial sector, and the central role played by UNPRI in promoting responsible investment on a global scale.

The Montreal Carbon Pledge, a pioneering commitment to climate finance

In September 2014, at the annual Principles for Responsible Investment (PRI) Conference in Montreal, a groundbreaking initiative was born: the Montreal Carbon Pledge. This initiative marks a turning point in the financial sector’s commitment to the fight against climate change.

The Montreal Carbon Pledge represents an unprecedented voluntary commitment by institutional investors. For the first time, 120 major investors have made a formal commitment to measure and publicly disclose the carbon footprint of their investment portfolios. This commitment aims to :

• Increase transparency on the climate impact of investments
• Encourage better management of carbon-related risks
• Facilitate the transition to a low-carbon economy

The initiative quickly gained in popularity, attracting signatories representing over $10,000 billion in assets under management in the years that followed. It played a crucial role in raising the financial sector’s awareness of climate issues, and paved the way for more ambitious commitments.

Although the Montreal Carbon Pledge officially came to an end in 2019, its impact endures. It has been a catalyst for other climate initiatives in the financial sector, such as the Net Zero Asset Managers Initiative and the Net Zero Asset Owner Alliance, which continue and deepen the financial sector’s commitment to the fight against climate change.

The Green Bond Principles, a Framework for Green Bonds

In 2014, a crucial step was taken in the development of green finance with the establishment of the Green Bond Principles (GBP). These principles, initially drawn up by a consortium of leading investment banks, lay the foundations for best practice in green bond issuance.

The Green Bond Principles are built around four key components:

1. Use of funds
2. Project selection and evaluation process
3. Fund management
4. Reporting

These voluntary guidelines aim to promote the integrity of the green bond market by recommending transparency, disclosure and standardization of practices. They provide a flexible framework for issuers to design credible green bonds, and for investors to assess the environmental impact of their investments.

Since their creation, responsibility for the updating and ongoing development of the GBPs has been transferred to theInternational Capital Market Association (ICMA). This independent organization ensures that the principles remain relevant and adapted to the rapidly evolving green finance market.

The impact of the Green Bond Principles has been considerable. They have contributed to the exponential growth of the green bond market by providing a common structure and clear guidelines for issuers and investors. In 2021, the GBPs were updated to reflect the latest market developments and reinforce their role in promoting a net zero emissions economy.

COP21 and the Paris Agreement, a Turning Point for Climate Finance

The 21st Conference of the Parties (COP21) in Paris in 2015 marked a historic moment in the fight against climate change, culminating in the adoption of the Paris Agreement on December 12. This agreement, ratified by 195 countries, establishes a global framework for international climate efforts.

The Paris Agreement sets three main objectives:

• Limiting the global temperature increase to ‘well below’ 2°C above pre-industrial levels, with efforts to limit it to 1.5°C.
• Strengthen capacities to adapt to the impacts of climate change.
• Align financial flows with development that is low in greenhouse gas emissions and resilient to climate change.

Article 2.1.c of the Paris Agreement is particularly innovative, explicitly calling for financial flows to be aligned with climate objectives. This provision recognizes the crucial role of the financial sector in the transition to a low-carbon, climate-resilient economy.

The Agreement also provides for:

• An upward revision of national commitments (NDCs) every five years.
• A target of mobilizing $100 billion a year from 2020 to support developing countries.
• A transparency mechanism to monitor countries’ progress.

The Paris Agreement thus represents a major turning point in the integration of climate considerations into global financial and economic decisions, laying the foundations for a profound transformation of the global financial system towards sustainability.

The SDGs, a Global Framework for Sustainable Development

In September 2015, the United Nations reached a historic milestone by adopting the 17 Sustainable Development Goals (SDGs), establishing an ambitious and universal reference framework for global action up to 2030.

The SDGs, an integral part of theAgenda 2030, represent a global action plan aimed at eradicating poverty, protecting the planet and ensuring prosperity for all. These goals are distinguished by their universal scope, addressing all countries and players, whether public or private.

Key features of the SDGs :

• Universality: Unlike the Millennium Development Goals that preceded them, the SDGs apply to all countries, developed and developing alike.
• Integration: The 17 goals are interconnected, covering the economic, social and environmental dimensions of sustainable development.
• Measurability: 169 specific targets and 244 indicators have been defined to monitor progress in concrete terms.
• Inclusivity: The process of developing the SDGs involved a wide range of stakeholders, including businesses via the UN Global Compact.

The SDGs offer a common language and shared vision of sustainable development, serving as a guide for governments, businesses, financial institutions and civil society in their efforts to create a more equitable and sustainable world by 2030.

This initiative marks a decisive turning point in the global approach to development, recognizing the interdependence of global challenges and the need for concerted action at all levels of society.

First Financial Commitments for Coal Phase-out

2015 marked a decisive turning point in the financial sector’s commitment to the fight against climate change, notably through the first concrete coal divestment initiatives.

Several major financial players are making pioneering commitments:

• AXA announced its intention to divest 500 million euros of investments in the coal industry.
• Norway’s sovereign wealth fund, the world’s largest, decides to withdraw from companies with more than 30% of their activities linked to coal.
• Allianz declares that it will stop financing coal-related projects and will gradually divest from companies with high exposure to this sector.

These decisions mark the start of a trend that will gather momentum in the years ahead. They reflect a growing awareness of the financial risks associated with carbon assets, as well as a desire to contribute to the energy transition.

Although limited at the time, these initiatives laid the foundations for a broader movement to divest from fossil fuels in the financial sector, in line with the objectives of the Paris Agreement signed the same year.

The One Planet Summit, a Global Climate Initiative

On December 12, 2017, two years to the day after the adoption of the Paris Agreement, the first One Planet Summit is being held in Paris. This initiative, launched by French President Emmanuel Macron in collaboration with theUN and the World Bank, marks a milestone in international mobilization to combat climate change.

Key features of the summit :

• Participation of over 50 heads of state and government, as well as numerous non-state actors.
• Main objective: to accelerate implementation of the Paris Agreement and mobilize financing for climate action.
• Adoption of 12 concrete international commitments, covering various aspects of the fight against climate change.

Among the major commitments made at the summit:

1. Mobilization of research and young people in favor of the climate, notably through the One Planet Laureates Program and scholarships for young researchers.
2. Creation of a Space Climate Observatory to improve monitoring and understanding of climate change.
3. Commitments by several financial institutionsto divest from coal and other fossil fuels.
4. Launch of initiatives to green the financial sector and direct financial flows towards sustainable projects.

The One Planet Summit established a new model for international cooperation, bringing together public and private players aroundcommon climate objectives. It gave rise to concrete commitments and launched a momentum that has continued with subsequent editions in New York (2018), Nairobi (2019) and again Paris (2021).

Launch of FC4S, a Sustainable Finance Network

In September 2017, the international network of Financial Centres for Sustainability ( FC4S) was officially launched in Casablanca, Morocco. This initiative marks an important milestone in the global coordination of efforts to promote sustainable finance.

Key features of FC4S at launch:

1. Origin: Born out of the Italian presidency of the G7 in 2017, where green finance was a central theme.
2. Initial objective: To answer the question ‘How can financial centers contribute to achieving the Sustainable Development Goals and the Paris Climate Agreement?’
3. Founding members: 11 financial centers adopted the Casablanca Declaration on Financial Centers for Sustainability, including Astana, Casablanca, Dublin, Hong Kong, Milan, London, Luxembourg, Paris, Shanghai and Stockholm.
4. Mission: to accelerate the expansion of sustainable finance by enabling financial centers to assess their current state and provide the tools needed to engage local institutions and inform policy.
5. Rapid growth: The network has grown rapidly, from 11 members in 2017 to 41 members today, demonstrating the increasing interest in sustainable finance on a global scale.

FC4S plays a crucial role in promoting international cooperation and sharing best practices in sustainable finance, contributing to the alignment of financial flows with climate and sustainable development goals.

Creation of the International Sustainability Standards Board (ISSB)

COP15 Biodiversity and the Kunming-Montreal Agreements

COP15 on biodiversity will be held in December 2022 in Montreal, Canada. It will result in the adoption of the Kunming-Montreal Agreements, a global framework for biodiversity protection. Its main objective is to halt and reverse biodiversity loss by 2030.

Key targets :

• Protect 30% of land and sea

• Restore 30% of degraded ecosystems

Implications for business :

• Target 15: Assessment and disclosure of impacts on biodiversity

• Target 19: Mobilize financial resources

Financial commitments :

• Mobilize $200 billion per year for biodiversity

• Redirect $500 billion in harmful subsidies

These agreements mark a turning point in the global commitment to nature conservation, directly involving private players.

Adoption of IFRS S1 and S2 by ISSB

In June 2023, the International Sustainability Standards Board (ISSB) will adopt its first sustainability reporting standards: IFRS S1 and S2. The aim is to establish a global benchmark for sustainability reporting.

Key features :

• Voluntary application by jurisdictions

• Equivalent to technical advice

• Initial focus on climate

Standards adopted :

• IFRS S1: General sustainability disclosures

• IFRS S2: Climate-specific disclosures

Future developments :

• Biodiversity and ecosystems research project

• Research project on human capital

These standards mark an important step towards global harmonization of sustainability reporting, with planned expansion to other environmental and social issues.