World Investment Report 2022 – Chapter 4: Capital Markets and Sustainable Finance
During the pandemic, and partly as a result of pandemic recovery plans, sustainable finance saw strong growth across equities, fixed income products and alternative assets, and in both public and private markets. This is related to several factors. The accelerating and cascading impacts of climate change are rapidly revealing the physical and transition risks of non-sustainable investments. More recently, the war in Ukraine has also provoked reflection on the energy transition and its consequences for investors. Inflationary pressures and supply chain resilience, for example in energy, are adding further impetus to sustainability concerns. At the same time, the regulatory response to environmental and other sustainability-related issues, including climate change commitments, has accelerated and will support moves towards more sustainable financial markets in both developed and developing countries.
This chapter presents findings from a new UNCTAD project on national sustainable finance regulations. The findings are based on data from 35 economies, accounting for about 93 per cent of the world’s gross domestic product (GDP), and show the accelerating efforts of major economies to introduce regulatory frameworks as well as standards and other policies in support of sustainable finance. The proliferation of regulations and standards by national governments (and regional groupings) relates both to country commitments, for example on climate change, and to the need to regulate financial markets in this space and mitigate problems such as greenwashing.
While it is a truism that investors face uncertainty and risk in many guises, one risk is foreseen and even financially quantifiable: climate change. As the world tries to move on from the pandemic while dealing with inflation, supply chain disruptions and the impact of war, investors, governments and international organizations should remain focused on the physical and transition risks of climate change.