Aligning the Financial Systems in the Asia Pacific Region to Sustainable Development
ASIA-PACIFIC HIGH-LEVEL CONSULTATION ON FINANCING FOR DEVELOPMENT
UN Environment Programme (UNEP)
April 2015 ::36 pages
Pdf: http://www.unep.org/inquiry/Portals/50215/Documents/Unep-Inquiry_Asia_Finance_Final.pdf
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Summary
Adequate, appropriate finance is crucial for sustainable development in the Asia-Pacific region.
The United Nations Economic and Social Commission for Asia and the Pacific UN (ESCAP) estimates that the region needs to invest around US$2.5 trillion a year between 2013 and 2030 to achieve key sustainable development goals:
:: US$500-800 billion to close gaps in education, health, employment, social protection and basic access to energy services.
:: US$800-$900 billion for developing infrastructure for energy, transport, telecommunications and water and sanitation.
:: US$500-800 billion for climate change mitigation and renewable energy.

The region’s developing financial and capital markets provide a unique opportunity for innovative financial and capital market policies, regulations and standards that can align private capital flows to the financing needs of sustainable development. Notably, the region’s savings, US$8.4 trillion in 2012, represents more than half of the world’s total savings, the channeling of which will make a significant difference to regional and international progress towards sustainable development.

Sustainable finance in Asia, as well as elsewhere, has to date mainly concerned the actions of individual financial institutions, sometimes encouraged and supported by voluntary associations and principles. But sustainable finance is more than a set of individual actions. Work has now entered the next phase of designing the key parameters for the financial system as a whole.

Advancing sustainable financial systems can enhance the efficiency, effectiveness and resilience of the region’s financial and capital markets.
Placing sustainable development at the heart of financial markets does not represent an ‘additional’ performance measure. Quite the contrary, it improves the availability of material information, enhances the all-important task of risk-pricing and advances the efficiency of credit and capital allocation. Moreover, by increasing the flow of finance into the enablers of a healthy dynamic, inclusive and sustainable economy, it secures higher, long-term, risk adjusted returns, and improves the resilience of the financial system itself.

The UNEP Inquiry into the Design of a Sustainable Financial System has identified clear potential roles of central bankers, financial regulators and financial policy makers in delivering financing for sustainable development, including specific examples from several countries in the region such as Bangladesh, China, Indonesia and Singapore.

Establishing national coordination mechanisms for ambitious, collective action is a critical enabler for advancing a sustainable financial system.
National strategies and pathways for reform and innovation need to reflect particular needs and challenges. The region includes some of the world’s largest and smallest, and wealthiest and poorest nations. Similarly its financial systems range from countries with small, under-developed banking communities to those with mature, internationalized capital markets and diversified, sophisticated financial actors. National coordination mechanisms include Indonesia’s ‘Roadmap for Sustainable Finance’, China’s recently established Green Finance Committee, overseen by the People’s Bank of China, and Japan’s working groups on Principles for 21st Century Finance.

International cooperation and coordinated action is key to advancing national and regional action for establishing sustainable financial systems.
International financial governance remains fragmented, although the response to the global financial crisis demonstrated the will and capacity of the international community to act collectively and ambitiously. Shaping a sustainable financial system presents another opportunity for strong collective international action—action that could yield essential long-term sustainability benefits.

The UN’s Financing for Development process offers one means for enhanced international cooperation, to support the achievement of sustainable development goals. Beyond this, however, are a number of relevant international institutions responsible for macro-economic guidance and financial market development, which should be involved in setting the direction, pace and overall ambition and in establishing standards.