Rome, October 20, 2021
Today, in the context of the 2nd edition of the Finance in Common Summit, a coalition of major networks and associations of Public Development Banks (PDBs) and Investors discussed how to fully tap their cooperation potential to make inherent contributions to the alignment of finance with the Paris Agreement on climate and the Sustainable Development Goals (SDGs).
Joining forces for the first time at the global level, both groups shared ideas on a collaborative framework for better and quicker convergence of approaches, action and impact towards a sustainable world.
Finance is a both a trigger and enabler for change. Solutions are urgently needed to unlock the potential of all financial assets and flows, public and private, to help shift current development pathways towards more sustainable, just and resilient economies and societies. The time has come for consistent action of all global finance players to integrate longer-term goals in their short-term decisions and actions, and align their activities with the Paris Agreement and the SDGs. Such is the call of Finance in Common Summit (www.financeincommon.org).
The call reflects increasing policy changes, modern regulation, and societal demand that are shifting investments and assets away from non-SDG-compatible business, and for which there are growing expectations and scrutiny from investors, consumers, employees and other stakeholders. Financing of the 2030 Agenda hence entails minimizing the negative impact of investments and maximizing the positive impact. Lenders and investors that adopt strong SDG frameworks increase their capacity to identify opportunities. Public and private investors have also an opportunity to help counterparties implement stronger sustainable practices, and provide value over and above supplying capital and financial resources.
In this context, major networks and associations of PDBs and Investors discussed how to join forces during the 2nd edition of the Finance in Common Summit, hosted by Cassa Depositi e Prestiti in Rome on October 19-20, 2021, in order to foster climate and SDG-aligned action and impact.
Such collaborative effort takes place for the first time at the global level. While some experience of cooperation exists between selected PDBs and investors on reorientation of investments towards the SDGs, a more comprehensive and strategic PDB-Investor dialogue was still missing. It is about paving the way for a more ambitious regime, targeting the climate and SDG-alignment of the US$20 Tn of annual global financial flows for new investment, as well as that of the US$380 Tn stock of existing assets.
Today, both PDBs and Investors discussed potential areas of collaboration as follows:
- Development of common language around the definition, tracking and accounting of climate and SDG-aligned finance and investment, including data collation and processing, standards and frameworks, assessment, as well as monitoring and reporting tools.
Common approaches to characterize what is aligned with climate and the SDGs, and what is not, are essential to ensure all types of investors, public and private, local and international, are working in the direction of sustainability. To determine how to align, all parties must speak the same “language” or at least have the adequate “dictionary” to understand each other. The absence of such overall guidance represents a major challenge to coherence of action.
Recognizing the existence of multiple initiatives in this area, and that partnerships around common language is a process involving a multiplicity of consultations, PDBs and Investors will:
- work towards strengthening the correspondence between existing practices and better and quicker convergence wherever possible, in particular via the classification of assets as aligned or not through various methods including sector criteria, alignment approaches with trajectories and target setting methodologies at the investment portfolio level.
- collaborate to develop and consolidate approaches, wherever possible, regarding the alignment of counterparts and whole financial chains, in particular how engagement strategies and related tools can accompany the invested counterpart towards a credible transition strategy.
Such work will be undertaken in partnership with all other relevant stakeholders, including from the multilateral system as well as governments and policy makers, regulators, other private sector entities, think tanks and civil society organizations.
- Strengthening of financial collaboration and innovation.
PDBs and Investors will discuss what they can do more of and better together regarding financial instruments and investment structures and approaches involving both groups. The collaboration will explore areas such as co-investment, blended finance, climate and SDG bonds, syndication and asset recycling, securitization and other de-risking tools.
Both groups will also explore concrete ways and means to foster innovative products and platforms to fully tap PDBs’ potential as a “visible hand” to help catalyze sustainable markets and investments.
Last but not least, the exchanges will cover the reinforcement of first-mile and last-mile collaboration to improve enabling policies, regulations and environments and the generation of SGD-aligned investable projects, taking into account the need for just and equitable transitions.
- Outreach and calls to action.
The fundamental nature of business is changing in response to the demands for new models of sustainability. More and more PDBs and Investors are evolving in contexts that incentivize them to develop and mainstream investment strategies compatible with the objectives of the Paris Agreement and the SDGs. In parallel, such institutions increasingly recognize their particular role, influence and, ultimately, societal responsibility as financial actors that play a major role in shaping the future.
On this basis, PDBs and Investors will seek to identify concrete actions to jointly promote their shared vision and foster a community of practice on how best to reach sustainability goals. This could be achieved inter alia via coordinated operations with common clients and counterparts; by reaching out to key stakeholders of the climate and SDG financing system (policy makers, regulators, other private sector entities, civil society, think tanks, and academia); and/or through joint publications, events, calls to action and other activities including in connection with international fora on sustainable finance.
As alignment requires collaboration, we call on all interested PDBs and Investors as well as relevant stakeholders to join forces with us in this endeavor to make of sustainability the new norm of finance.
List of participants to the PDBs-Investors dialogue session co-organized by LTIIA (Long Term Infrastructure Investors Association) and IDFC (International Development Finance Club), Allianz Global Investor, Caisse des Dépôts et Consignations (CDC), Global Impact Investment Network (GIIN), Japanese International Cooperation Agency (JICA), United Nations Environment Programme Finance Initiative (UNEP-FI).