For the third year in a row, the world faces major destabilising crises whose impacts are compounded by the climate emergency. As a result, these crises are creating fragilities in the global financial system for G7 countries and developing and emerging economies. Strengthening the resilience and preparedness of the financial system to deal with transitory and physical risks from climate change will be key to ensuring financial and economic stability. The G7 economies will need to show leadership in driving continued international collaboration on financial standards in 2022.
The German G7 presidency has outlined sustainable finance priorities. The objective is to “ensure economic and financial stability and resilience against future crises, and shape the transformation processes in the context of digitalisation and climate neutrality”.
Now it’s the time to build on these priorities and previous progress made by the G7 last year. G7 finance ministers and central banks should pursue the following four policy solutions in 2022 to advance towards a sustainable, resilient system.
Priority actions for the G7 in 2022 for a sustainable, resilient financial system:
- Accelerate the clean energy transition by committing to a rapid phase-out of subsidies and investments relating to fossil fuels.
- Commit to narrowing the trillion-dollar sustainable infrastructure investment gap.
- Outline specific next steps towards establishing net-zero financial systems and supporting international convergence.
- Commit to implementing reforms which will reduce climate-related financial instability.