How can we create the financial system the world needs?
The Summit on the Global Agenda 2015 takes place at a moment of extremes. Conflicts are raging across the region where the Summit is taking place. Meanwhile, 2015 is in other respects an uplifting year; the international community has launched an ambitious set of Sustainable Development Goals and hopes to strike a global deal on climate change in Paris later in the year.
The economic crisis is broadly behind us, but Europe`s sluggishness, and the slowdown in China and across much of the developing world, threatens a new round of economic distress. Poverty, globally, is at an all-time low by most measures, but growing inequality is destabilizing the social and political consensus in many countries, over-turning moderates in favour of a more extreme, and often xenophobic, politics.
Can the Summit make a difference in a world of such extremes? Restating the obvious can be helpful. We know in many instances what needs to be done, and equally know what actions should be mitigated or ignored. New, good ideas are always welcome, such as building out new technologies or creating new business models and fresh approaches to governance.
Less is more – we must avoid speaking about everything and instead focus on two or three things that could lead to significant progress in the years to come. This last prospect is, for my part, what I would like to see the Summit deliver, and so in that spirit here are the three things I would like to see achieved.
Firstly, the Summit takes place on the eve of the climate negotiations in Paris, and it is the responsibility of everyone to help make these negotiations a success. The Summit`s participants will include hundreds of opinion leaders from most countries and every region, and often people who are either one-click removed from relevant decision-makers. We need to ensure that a surgically clear voice about the need for an ambitious climate deal is heard in every quarter across the world by trusted policy advisors gathered at the Summit.
Secondly, if 2015 is about sustainable development and climate, then 2016 needs to be the “year of green finance”. It is time to move beyond patching up the financial system in the wake of the crisis, and looking forward to designing and then shaping “the financial system we want” – the title of the UNEP Inquiry report recently released at the IMF/World Bank Annual Meetings in Lima. The People`s Bank of China Deputy Governor Yi Gang announced in Lima a plan to launch a green finance work stream under China`s presidency of the G20 in 2016. Meanwhile, Bank of England Governor, Mark Carney, has recently remarked that “green finance cannot remain a niche activity” given the massive resource reallocation that is needed to make the global economy “green”.
Measuring real progress is the logical third leg of a focused policy agenda coming out of the Summit. Both the climate and green finance lens point towards the need to account for real progress against sustainable development goals, not just standard measures of GDP and economic growth. Global Agenda Council on New Growth Models, of which I am a member, has focused its efforts on the need to build a balanced sheet approach to economic growth modelling and accounting that acknowledges the social and environmental effects of different possible growth paths.
Often talked about, but rarely achieved, now is the right time to drive home the practice of green and more broadly sustainable development accounting, and to push for the adoption of a truly balanced scorecard of how we are doing.
Author: Simon Zadek is the co-Director of the UNEP Inquiry into Design Options for a Sustainable Financial System, and a member of the Global Agenda Council on New Growth Models. You can follow him on Twitter at @SimonZadek.
Image: A model of a planned new capital for Egypt is displayed for investors during the final day of Egypt Economic Development Conference (EEDC) in Sharm el-Sheikh, in the South Sinai governorate, south of Cairo, March 28, 2015. REUTERS/Amr Abdallah Dalsh
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