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Emerging Markets Accelerate Sustainable Finance to Address Climate Change and the SDGs

WASHINGTON D.C., October 28, 2021 — A new report from the IFC-facilitated Sustainable Banking and Finance Network (SBFN) highlights the efforts of forty-three emerging economies to accelerate national sustainable finance policies and prepare the financial sector to address climate change. Collective action between regulators and industry associations across the financial sector has emerged as an essential strategy to harmonize good practice expectations, disclosure requirements, and definitions of sustainability-focused activities that help address environmental, social and governance (ESG) risks and opportunities in all financial sector activities.

Addressing ESG risks, including climate change, is a key theme captured in the report. Twenty-eight SBFN countries (65 percent) are leveraging existing ESG risk management frameworks for financial institutions to raise awareness and take initial steps to address the financial sector's exposure to physical and transition risks from climate change. Four countries (10 percent) are leading the way with additional robust policy actions specifically focused on climate risk management and disclosure by financial institutions and aligning with latest global practices and tools, such as the Task Force on Climate-related Financial Disclosures (TCFD).

"In the past two years, SBFN members have ramped up collaboration to unlock capital and build resilience through sustainable finance," said Alfonso Garcia Mora, IFC Vice President and Chair of SBFN Secretariat. "These efforts are critical to helping countries rebuild after COVID-19 and be better prepared for other crises, including climate change, that threaten the stability of financial systems."

The report recommends that countries fast-track the development of climate risk guidance and tools to enable regulators, industry associations, and financial institutions to assess, monitor, and report on climate risk and financial impacts in line with international practice.

Members are also promoting sustainability-focused finance to guide capital flows to achieve the Sustainable Development Goals (SDGs). Over half of SBFN countries have launched green, social, and/or sustainability bond guidelines, resulting in total green bond issuance of $177.2 billion by member countries up to December 2020. This represents 18 percent of cumulative global green bond issuance according to data from the Climate Bonds Initiative. The report highlights the trend in national sustainable finance taxonomies as one of the key ways for countries to unlock more of this type of finance.

SBFN – formerly the Sustainable Banking Network – represents 63 financial sector regulators, ministries, and industry associations from 43 countries, covering more than $43 trillion (86 percent) of the total banking assets in emerging markets. Over a third of SBFN member institutions also represent or oversee capital markets, asset management, insurance, or asset owners. Thirty-three member countries (over 75 percent) have launched over 200 policies, principles, guidelines, and tools that enable sustainable finance.

"SBFN provides a unique and essential platform for financial sector regulators and industry associations to work together," says Nezha Hayat, Chairperson and CEO of Morocco's Capital Market Authority (AMMC) and Co-Chair of the SBFN Measurement Working Group. "As sustainable finance systems mature, collaboration between these different actors becomes critical to moving forward. This work should be extended to include capital markets, insurance, pension funds, and asset management."

Most SBFN member countries have some form of practical cooperation between government agencies or between the regulator and industry associations — including ten countries that report inter-agency data sharing on sustainable finance. A growing number of multi-stakeholder initiatives are also helping to drive progress at national levels by enabling public-private dialogue, and several regional bodies of regulators and banking associations are fostering common approaches at the regional level in Asia and Latin America.

SBFN's Global Progress Report is the most comprehensive benchmarking of national sustainable finance initiatives globally. It uses a measurement framework developed by members to benchmark national policies and principles across three thematic pillars: ESG Integration, Climate Risk Management and Financing Sustainability. Report development was guided by the SBFN Measurement Working Group Co-Chairs: Financial Superintendence of Colombia, Mongolian Sustainable Finance Association, and the Moroccan Capital Market Authority.

About IFC
IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2021, IFC committed a record $31.5 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of the COVID-19 pandemic. For more information, visit www.ifc.org

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About SBFN
Establishing in 2012, the Sustainable Banking and Finance Network (SBFN) (formerly SBN) is a voluntary community of financial sector regulatory agencies and industry associations from emerging markets committed to advancing sustainable finance. The first global network of its kind focused on sustainable finance at market level, SBFN represents 43 countries and US$43 trillion (86 percent) of the total banking assets in emerging markets. SBFN members are committed to moving their financial sectors towards sustainability, with the twin goals of improved ESG risk management, including climate risks, and increased capital flows to activities with positive climate, environmental, and social impact. IFC is Secretariat and technical partner, assisting members to share knowledge and access capacity building that helps them design and implement national sustainable finance initiatives. For more information, visit https://www.sbfnetwork.org/