UNEP: G20 Green Finance Definitions and Concepts-Background and Note 2016

The Inquiry into the Design of a Sustainable Financial System has been initiated by the United Nations Environment Programme to advance policy options to improve the financial system’s effectiveness in mobilizing capital towards a green and inclusive economy—in other words, sustainable development. This input paper has been prepared by the authors as a contribution to the G20 Green Finance Study Group (GFSG) but has not been endorsed by it nor does it represent the official views or position of the GFSG or any of its members.

This short paper is part of a wider body of work on the GFSG Research Subject: Measuring Progress. It provides an initial mapping of existing practice in G20 and other countries and, where relevant internationally, highlights areas of convergence and difference, as well as distinctions between green, climate, and sustainable finance. It covers:

1. Definitions of green finance’ that countries adopted
2. Thematic typologies of green investment in particular industries
3. Clarification of the scope of ‘green finance’ in comparison with other related concepts such as climate finance and sustainable finance

In summary, its findings are:

1. Increasing use of the term in many countries and internationally, most usually in broad, underdefined ways, but increasingly in the context of market-led standards (e.g. green bond principles), policy/regulatory measures (e.g. environmental risk regulations, reporting requirements, fiscal measures (e.g. tax credits) and ‘development’ financing involving public and private financing.

2. Broad convergence of definitions and some distinct differences, most specific elements/categories are similar across diverse contexts and uses, with a number of divergences, some uncontroversial (e.g. internet infrastructure) and others more contested (e.g. diesel railways, hydropower/nuclear/ultracritical coal).

3. Broad agreement in distinctions between green, climate and sustainable finance, with sustainable finance being the most inclusive including social, environmental and economic aspects, climate including a subset of environmental aspects, and green finance including climate finance but excluding social and economic aspects.

It is intended as an initial framework that can continue to be developed drawing in the results of the ongoing survey undertaken for the study group by the International Finance Corporation (IFC).

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