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Policy Brief 6: Finance after the Paris Agreement – The necessary transformation of the financial system

Filed in Policy briefs

  • Article 2.1(c) of the #ParisAgreement creates a collective responsibility to restructure the entire financial system.
  • The current move on sustainable finance is positive, but is insufficient to result in an alignment with the Paris Agreement climate target, which means full decarbonation of the economy by 2050-2070.
  • Finance cannot limit itself to growing “green” niches. It must simultaneously stop financing and investing in the carbon-intensive assets that are not compatible with Paris pathways
  • Policymakers should challenge the current approach to accelerate the pace and ambition of financial sector transformation, in order to fix its incapacity to deal with common goods such as a stable climate. 
  • Self-regulation and disclosure are principal provisions of sustainable finance frameworks, especially in Europe, but more pivotal propositions target market short-termism, prudential rules, fiduciary duty, or accounting rules.
  • In emerging economies central banks and financial regulation are directly orienting financial flows towards their green economic priorities. 
  • Finance must be reconciled with the long term, and financial regulators must have a clear mandate to do ‘whatever it takes’ to save the climate, in articulation with governmental policies.

Published: 23rd January 2020
Author: Hugues Chenet, Luis Zamarioli, Matthew Winning