G20 members have adapted, under Argentina’s Presidency, the work of the Green Finance Study Group (GFSG) to the broader concept of sustainable finance, leading to the change of its name to the Sustainable Finance Study Group (SFSG). Sustainable finance can be broadly understood as financing as well as related institutional and market arrangements that contribute to the achievement of strong, sustainable, balanced and inclusive growth, through supporting directly and indirectly the framework of the Sustainable Development Goals (SDGs). A proper framework for sustainable finance development may also improve the stability and efficiency of the financial markets by adequately addressing risks as well as market failures such as externalities.
In 2018, the SFSG seeks to identify voluntary options to expand private investment in sustainable activities that achieve positive environmental impacts and social and economic co-benefits (e.g. job creation, growth enhancement, technological development, poverty reduction, and social inclusion).
Private capital is often an important source of sustainable finance. Public finance alone may not be sufficient to meet the demands for sustainable finance as the global economy continues to grow and poses increasing burdens on our resources and ecosystems. For these reasons, G20 members have sought to introduce and incentivize private investment in projects that are aligned with sustainability objectives.
Over the past years, many countries have introduced new initiatives and financial products to expand sustainable finance. Despite this encouraging momentum, the deployment of private capital for sustainable finance is still constrained due to a variety of institutional and market barriers. These include the limited use of appropriate investment vehicles, and the lack of information or information asymmetry regarding the outcome of sustainable investments. Unleashing this capital more effectively presents an important opportunity that the G20 can contribute to realizing, enabling benefits to its members and others.
Under Argentina’s Presidency, Finance Ministers and Central Bank Governors have mandated the SFSG to develop and assess options for voluntary adoption by members to help deploy financing, including by: creating sustainable assets for capital markets; developing sustainable Private Equity and Venture Capital (PE/VC); exploring potential applications of digital technologies to sustainable finance, taking into account countries’ circumstances, priorities and needs.
The SFSG stocktaking, analysis and layout of voluntary options intend to address specific sustainability-related challenges in these three areas. Key findings from the research are divided into three categories:
a) Creating sustainable assets for capital markets;
b) Developing sustainable Private Equity and Venture Capital;
c) Exploring potential applications of digital technologies to sustainable finance.