A new working group has been launched to research the effectiveness of different types of policy and regulatory measures for green and sustainable finance.

Comprised of experts from academia, financial think tanks and international organisations, the group has its aim to support financial policymakers in the design of finance measures that will create positive impact in the real economy and facilitate the transition to sustainability.

According to the initiators, members of the working group will assess policy and regulatory effectiveness in terms of efficiency and equity in different markets, as well as across environmental, financial and economic variables.

“Policymakers are introducing an increasing number of green finance measures,” said Nick Robins, co-chair of INSPIRE* and professor in practice sustainable finance at the Grantham Research Institute of the London School of Economics.

“The question is how to make sure that these are as effective as possible in terms of aligning the financial system with sustainable development. Tackling this is what the new working group is all about.”

According to the Principles for Responsible Investment, last year saw more than 120 new or revised responsible investment policy instruments established, the highest number ever recorded and over 30% more than in 2019. Investor-related ESG disclosure regulations grew by 74%.

“It is critical to understand and assess the empirical environmental impacts of green finance measures”

Benjamin Simmons, head of the Green Growth Knowledge Partnership

According to the initiators of the new working group, the significant acceleration in policy and regulatory action on green finance has been closely correlated with market growth, but “it is not clear which regulatory actions are most effective in aligning finance with sustainability goals”.

Benjamin Simmons, head of the Green Growth Knowledge Partnership (GGKP), said: “It is critical to understand and assess the empirical environmental impacts of green finance measures to ensure both existing and future policies and regulations contribute to achieving governments’ long term net zero emissions goals.”

The working group has been established under the auspices of the Green Finance Platform (part of GGKP), INSPIRE, and the Grantham Research Institute. It has received funding from the Swiss Federal Office for the Environment (FOEN).

Research outcomes are to be brought to governments and financial regulatory authorities to help them improve their policy frameworks for green finance, strengthen policy incentives and encourage innovation in green finance products.

“In addition,” the initiators said, “it will support countries in achieving rapid (efficiency of measures), just (fairness of measures) and comprehensive (effectiveness of measures) decarbonisation in line with their climate commitments and aspiration.”

*International Network for Sustainable Finance Policy Insights, Research, and Exchange

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