Remarks by Angel Gurría
6 October 2020 - OECD, France
Dear Ministers, Ladies and Gentlemen,
Welcome to the 7th OECD Forum on Green Finance and Investment.
Let me thank our main sponsor, the Government of Japan, for their continuing support for the Forum and OECD work on green finance and investment. I would also like to thank Iberdrola and our other sponsors for their support for this year’s Forum, as well as media sponsor Responsible Investor.com and its Co-founder, Hugh Wheelan, who joins us again as Chair.
This year’s Forum inevitably focuses on perspectives for green finance and investment in a COVID-19 and post-COVID-19 world. The pandemic has triggered a health and economic crisis of a magnitude never seen before.
Every single OECD economy suffered a sharp drop in economic activity in the second quarter of 2020, with the annualised rate of decline ranging from 12% to as much as 60%.
Although the initial rebound from that drop will generally be rapid, it will be only partial. For the full year, our Interim Economic Outlook last month projected that global GDP will fall by 4.5%, by far the worst annual outcome since the creation of the OECD 60 years ago. Moreover, after the initial partial rebound, we expect the rest of the recovery to be a hard slog, at least until an effective vaccine or treatment is found. Many countries will have a prolonged period of high unemployment and widespread hardship.
The economic impact of the pandemic means that CO2 emissions are expected to drop by around 8% this year. But the IPCC says that they must continue to decline at that rate every year until 2030 if we are to stand a good chance of limiting warming to 1.5 degrees. That is much harder to do once growth has resumed, but we need to make it happen.
We are also destroying biodiversity and ecosystem services at an unprecedented rate. We have already altered three quarters of the world’s terrestrial surface and two-thirds of the marine environment, while the populations of mammals, birds, fish, amphibians and reptiles have declined on average by 68% since 1970.
Moreover, policies are often exacerbating this situation. For example, OECD analysis shows that, pre-crisis, spending to protect biodiversity was about USD 70-90 billion a year, while government support to activities harmful to biodiversity exceeded USD 500 billion a year. Meanwhile, 70% of energy-related CO2 emissions from advanced and emerging economies are entirely untaxed, and some of the most polluting fuels remain among the least taxed.
Some governments have recognised the urgency of these challenges by including “green” measures in their recovery policy packages, as you can see on the Green Recovery page of the OECD’s website. These measures include grants, loans and tax relief directed towards green transport and the circular economy, financial support for energy efficiency improvements and renewable energy, and many others.
Unfortunately, some countries are implementing measures that are likely to have a negative impact on the environment, such as rolling back existing environmental regulations, unconditional bailouts of emissions-intensive companies and increased subsidies to fossil fuel intensive infrastructure.
We need to do much more to address these challenges. Public resources committed to green measures must be used strategically to mobilise private capital. Leveraging private investment for infrastructure, for example, is a critical pillar of the transition to a low-carbon, resilient economy, as reflected by the OECD-wide initiative on sustainable infrastructure. But to do this, we need a detailed understanding of where and how investment is taking place today.
For the first time, we can offer a granular mapping. A new report, Green Infrastructure in the Decade for Delivery: Assessing Institutional Investment, which is being launched at this Forum, shows that institutional investors hold an estimated USD 1 trillion in infrastructure assets. This may sound like a lot, but it amounts to only 4% of the theoretical limit, given current regulations. Furthermore, only 30% of the one trillion can be attributed to green infrastructure. Much more institutional investment – and within that a big shift to investing in green infrastructure – is needed. OECD work has identified several things that policy-makers can do to mobilise green and sustainable finance and investment. Let me highlight three:
First, improving market clarity: Policymakers need to give assurance to investors by providing precise and consistent definitions of “green” and “sustainable” investments. Another new report, Developing sustainable finance definitions and taxonomies, which we are launching at this Forum, maps sustainable finance definitions and taxonomies in the EU, China, Japan, France and the Netherlands. Building on this work, the OECD will develop good practice guidance for the design of taxonomies, other sustainable finance definitions, and related international co-ordination.
Second, focusing on transparency to unlock supply of financing, as highlighted in the OECD Business and Finance Outlook that we launched last week. Despite progress to establish standards, such as the OECD’s Guidelines for Multinational Enterprises, there continues to be a risk of “green washing”. To meet environmental objectives, policymakers and standard-setters should ensure that sustainable finance contributes positively to the environment.
And third, helping the financial sector better assess climate and biodiversity risks, including through scenario analysis; and identifying options to manage those environmental risks across asset classes and investment mandates.
Ladies and Gentlemen,
The environmental crises that are gathering will not pause while we battle the pandemic. We need to ensure that the way we recover from this crisis does not make the next one worse.
We count on you, the policymakers, regulators, investors, experts and civil society representatives, to move this agenda forward. And you can count on the OECD to support you in your efforts. Only by working together can we ‘build back better’ and achieve a green recovery. Thank you.