REVIEW OF FINANCIAL MARKETS


SUSTAINABLE FINANCE: THE WORLD IN 2023


AT THE CISI’S FIRST EVENT OF 2023, CHRIS HAYWARD, POLICY CHAIR OF THE CITY OF LONDON CORPORATION, OFFERED A TOUR D’HORIZON OF THE CHALLENGES WE FACE


Collectively, markets from London to Los Angeles, Singapore to San Francisco, need better transparency, comparability, and credibility in the


sustainable finance agenda. We need to position the UK as a one-stop shop: the go-to partner for countries and companies looking for capital and expertise, to help them meet their sustainability goals. The City Corporation is working to


facilitate this shift because it knows that sustainable finance is one of the best tools available to policymakers in the urgent race to meet climate targets.


Looking back on the world in 2022, it was unquestionably a year of challenge and change. The economy struggled to cope with successive crises precipitated by Russia’s illegal invasion of Ukraine, post-pandemic supply chain shocks, and political upheaval just a couple of miles away in Westminster. Earth continued to warm with disastrous consequences for humans and animals alike. Mass flooding devastated 33 million people in Pakistan, while the western United States experienced severe droughts, and the United Kingdom’s average temperature passed the 10°C threshold for the first time in recorded history. These aren’t the records to which we


should be aspiring. It’s no surprise that the Collins Dictionary’s word of the year for 2022 was ‘permacrisis’. But this suggests that we are resigned to the status quo, that our problems are entrenched, that we find ourselves in a hole so deep that it is inescapable. We must not accept that defeatism.


Collectively, just as humans have been the problem, so too we can and must be the solution. That starts with shifting the paradigm that has held sway for too long: that finance and sustainability are unrelated at best and opposing forces at their worst. The Green Horizon Summit at COP26 in Glasgow, our own Net Zero Delivery Summit in May 2022, and the


CISI.ORG/REVIEW


launch of the Glasgow Financial Alliance for Net Zero (GFANZ) showcased that finance and sustainability are connected. Green action can lie at the heart of financial services, and financial services can lie at the heart of green action. I realise that 2022 provided immense


challenges to the sustainable finance agenda. The war in Ukraine prompted discussions in some quarters of retrenching to outdated, carbon- intensive fuel sources. Such short- termism would only saddle future generations with a planetary debt that they would struggle to repay. Together, we must ensure that we keep our eyes fixed beyond the immediate horizon, rather than looking down at our feet. That means looking for global


solutions to this global problem. We need a four-pronged approach. First, we need to reduce frictions. This


means strengthening UK policy and regulation with an effective and coherent sustainable finance framework. Second, we need to nurture innovation. More creativity in the market will create better products for green and impact finance and services from the UK. Third, we need to attract capital, firms, and exports. With better products for the market, we then need the customers to ensure a greater uptake of green and impact finance and services from the UK to the world. And fourth, we need to retain size and scale, encouraging firms to prioritise strategic skills planning to enable effective engagement with the sustainable growth markets of today and tomorrow. The City Corporation supports the


International Regulatory Strategy Group, which is providing the joint secretariat with the International Capital Market Association for a new industry working group with a mandate from the FCA to develop a voluntary code of conduct for ESG data and rating providers. The group met for the first time in December 2022 and will produce a Code of Conduct by June 2023. A comprehensive, proportionate, and globally consistent voluntary Code of Conduct for ESG ratings and data will


help ensure the market is fit for purpose, supporting practitioners to assess risk more accurately. It is a valuable opportunity to contribute to the sustainable finance regulatory agenda as the UK becomes the second country in the world to develop a code of conduct for ESG ratings. The City Corporation is also


harnessing the powers of its brand and reach to lead the debate on the wider challenges the net zero imperative presents. Having previously identified that the ‘COP circuit’ lacked a defined mid-point, an opportunity for business to look both back and forward, we stepped into that void. In 2022, the City Corporation hosted the inaugural Net Zero Delivery Summit together with the UK COP presidency and GFANZ. That summit brought together nearly 200 international guests, including prominent business and public sector leaders in climate finance, such as Special Presidential Envoy on Climate John Kerry, COP26 President Alok Sharma, and GFANZ Co-chair Mark Carney.


FOCUS ON DELIVERY On 24 May 2023, we will host our second Net Zero Delivery Summit at the Mansion House in partnership with the Egyptian COP27 presidency. This year’s focus will be on delivery, promoting examples of best practice from the different sub-sectors of financial services in emerging markets, so that no community, no city, and no country is left behind. We know that sustainable finance is


one of the best tools available to policymakers in the urgent race to meet climate targets. We also understand that good growth and good regulation are two sides of the same coin. If we make sustainable finance an integral cog in the engine of our economic system, we will have more enduring, less harmful growth that is better for the bottom line and better for the planet. This year is our chance to convert green soundbites of aspiration into a symphony of action, and to convert the fear of ‘permacrisis’ into the hope of ‘permachange’.


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