This high-level symposium, jointly organized by the UNEP Inquiry and AXA in Paris, gathered participants from various backgrounds, from across the five continents. The discussion acknowledged the numerous regulatory achievements accomplished since 2008 and then focuseds on a range of open issues regarding financial regulation and its efficient, impactful and necessary contribution to sustainable development.
As we look towards the convening of the Climate Change Conference in Paris this December, we are reminded that our ability to invest in new resource-efficient technologies and infrastructure will require enormous investments that will go beyond public finance. That is why UNEP initiated an inquiry into the design of sustainable financial systems to examine how best to align financial systems to sustainable development needs. (...) The AXA-UNEP high level symposium in Paris is, therefore, a milestone on the path to discovering where opportunities lie and where innovations are already making a difference towards the transition to an inclusive, resource-efficient global economy.
Participants focused on five key "warning signals" that are all impacting the financial system's ability to support a sustainable and inclusive economic development model:
The leadership role taken by some emerging economies in better aligning finance and sustainability requirements was also stressed during the event with Luiz Avazu Pereira da Silva.
Brazil has focused its efforts on delivering better access to financial services, especially to those with a low level of income, by means of financial education in order to limit excess debt. The country also included environmental criteria in the distribution of loans in regions ecologically at risk. All these efforts aim at better linking credit supply and social responsibility as well as promoting financial stability.
The discussion led to the preliminary conclusion that the notion of risk in finance should be widened to take into better account the new and expanding nature of the major challenges societies and economies face today, starting with climate change. This move would aim at incorporating social, environmental and long-term sustainability questions into regulatory and prudential frameworks and guiding the decision-making processes of large financial institutions through the use of revised risk pricing methods.
Potential long-term investors are increasingly constrained in their ability to provide long-term financing. Pension funds, sovereign wealth funds and insurance companies are ideal candidates to provide long-term financing. Policy makers need to address regulatory barriers and restrictions on portfolio allocations that currently limit the ability of these key long-term investors to provide the finance economies will need in the future.
These five "warning signals" and their consequences show that much remains to be done. The next steps need not, however, be driven by the rush of short-term crises and a culture of blame. Discussions steered around several imperatives, such as the necessity to drive the governance of rulemaking so as to include more political vision and less institutional fragmentation.
As John Lipsky, senior fellow, School of International Studies Johns Hopkins University & former First Deputy Managing Director of the IMF, said: "In the long run we will need a multilateral treaty-based financial regulation authority if we really want to efficiently tackle global sustainability challenges."
Was also debated the fact that as many a sustainable issue is local, both cities and regions need to be brought into the debate - on climate and beyond. These are just examples, but they illustrate that policy makers and regulators, with financial institutions and broader interests and expertise, can work together internationally in designing and implementing a financial system fit to serve 21st century economies.
A video of the key highlights of the day will be available from the 6th of July on.