Green finance and investment

Achieving the Sustainable Development Goals (SDGs) and longterm climate objectives requires substantial investment globally. Given limited public budget, leveraging private capital will be crucial for addressing climate change and broader nature and sustainability challenges.

The OECD Centre on Green Finance and Investment helps catalyse and support the transition to a green, low-emissions and climateresilient economy through the development of effective policies, institutions and instruments for green finance and investment. The Centre provides cross-cutting analysis at the intersection of environment, sustainability and finance.

A number of countries have created official definitions of sustainable finance as well as more comprehensive classification systems, referred to as sustainable finance taxonomies. The OECD report on Developing Sustainable Finance Definitions and Taxonomies finds that, if appropriately designed, taxonomies can improve market clarity, bring confidence and assurance to investors, and facilitate the measurement and tracking of sustainable finance flows.

Scaling-up investment for the low-carbon transition will require mobilising both domestic and international private capital. The OECD 2021 Progress Update on De-risking institutional investment in green infrastructure catalogues tools and techniques used by public actors to mitigate project-level risks and attract private investment in infrastructure. The Green Infrastructure in the Decade for Delivery report provides guidance on policy levers and priorities to scale-up institutional investment in green infrastructure in OECD and G20 countries

Climate is also at the core of work on the Future of Investment Treaties initiative. The project is considering the Paris Agreement alignment of 2500+ investment treaties (including investment provisions in trade agreements) with regard their insurance-type coverage of finance flows (art. 2.1(c) Paris) and treaty impact on policy space for government climate policies.

Biodiversity and ecosystem services, and their related risks, impacts and dependencies are currently not integrated into financial valuations. In collaboration with the European Commission (DG REFORM) and the Hungarian Central Bank, the OECD has just launched a project on Developing a Supervisory Framework for Financial Risks Stemming from Biodiversity-related Losses. The project will develop a supervisory framework to help the Hungarian Central Bank and other central banks assess biodiversity-related financial risks in the financial system, including transmission channels for physical and transition risks.

Regions and cities can use their budget to bridge climate funding on financial gaps. The OECD Subnational Government Climate Finance Hub provides evidence and support along three main areas: climate-significant expenditure and investment, revenue for climate action, and green budgeting practices. The Hub aims to guide policymakers and their partners in enhancing international and national frameworks, programmes, and fiscal instruments that support subnational climate action, and to build the capacity of subnational governments to develop and implement their own climate action plans and policies.

The Clean Energy Finance and Investment Mobilisation (CEFIM) programme activities are designed to support finance and investment in clean energy according to the specific needs of each partner country. This includes the CEFIM Clean Energy Finance and Investment Review and Roadmap, various implementation support activities, investor dialogues and best practice sharing.

To provide a bridge across transition finance initiatives and frameworks in the private sector, and to increase transparency and help avoid greenwashing, the OECD Guidance on Transition Finance presents elements of credible corporate climate transition plans based on analysis, an industry survey and good practices.

The OECD also monitors developments in Environmental, Social and Governance (ESG) rating. A growing number of institutional investors and funds now incorporate various Environmental, Social and Governance (ESG) investing systems but challenges remain that hinder the efficacy of such approaches, including data inconsistencies and unclear ESG criteria.

The

OECD Guidelines for Multinational Enterprises and OECD

Due Diligence guidance for Responsible Business Conduct (RBC) are government backed recommendations to businesses on how to address environmental threats - both in their activities and supply chains - while also contributing to a just transition. The OECD is developing a number of tools to support the implementation of OECD due diligence recommendations in the context of climate change and other key environmental threats.