Opening Remarks by Angel Gurría
29 October 2019 - Paris, France
(As prepared for delivery)
Distinguished Guests, Ladies and Gentlemen:
It is my pleasure to welcome you to the OECD’s sixth annual Forum on Green Finance and Investment. I would like to thank Ms. Brune Poirson, France’s Secretary of State to the Minister for the Ecological and Inclusive Transition, and Mr. Satoru Morishita, Japan’s Vice-Minister for Global Environmental Affairs, for joining these important discussions.
We have a lot of ground to cover! Over the next two days, we will be discussing crucial challenges: sustainable finance initiatives and taxonomies; clean energy and biodiversity finance; and the role of central banks and monetary policy in aligning the financial system with environmental objectives, to name a few. We will also be launching a new OECD paper, Due Diligence for Responsible Business Conduct in General Corporate Lending and Underwriting Transactions.
But before we roll up our sleeves and get to work, let me share a few reflections on the context where green finance must bloom.
We are facing myriad environmental challenges. Global temperatures have risen by almost one degree relative to pre industrial levels. Extreme weather events such as record breaking heatwaves, wildfires, heavy rains and major tropical storms are intensifying. Land degradation and deforestation are putting ecosystems under extreme pressure. And we are grappling with the planet’s sixth mass extinction of biodiversity. The UN Intergovernmental Panel on Climate Change (IPCC) has warned that if temperatures rise by just half a degree more, between 70-90% of coral reefs will be lost; at 2 degrees they will almost be wiped out.
To contain global warming to 1.5 degrees, global net anthropogenic CO2 emissions must decline by about 45% from 2010 levels by 2030, reaching zero on a net basis around 2050. But we are running out of time. As outlined in the OECD-UN Environment-World Bank initiative, Financing Climate Futures: Rethinking Infrastructure, we need to embrace a much more transformative agenda to align finance and investment with the goals of the Paris Agreement, and ensure a low emission, resilient future.
Green finance is vital to save our planet. At the OECD, we are working on multiple fronts to champion the green finance agenda. We are doing this through our analyses and flagship reports including, Investing in Climate, Investing in Growth, our Global Outlook on Financing for Sustainable Development, and the work of the OECD Centre on Green Finance and Investment.
This work has allowed us to identify several priorities. Let me briefly introduce two which are particularly important.
First, we need to be much smarter in managing the political economy of the transition. Our recent report, Taxing Energy Use 2019, finds that the average effective carbon tax rate on coal is close to zero in 44 OECD countries and selected partner economies. Even if emissions trading systems had been included in the analysis, carbon price signals for coal would still be very low almost everywhere. Furthermore, our report shows that while 85% of energy related CO2 emissions take place outside the road sector, less than one fifth are covered by carbon taxes. In 2019, these figures are shocking.
To mobilise political and public support for more decisive climate policy action, we must anticipate, manage, and minimise concerns about energy affordability, jobs and competitiveness that lie behind these low tax rates. We also need to leverage synergies between mitigation policy and broader well-being goals, such as improved health from better air quality.
And this is why the OECD’s report, Accelerating Climate Action: Refocusing Policies Through a Well-Being Lens, is so important. The report argues that we can increase incentives for mitigation action if we systematically take account of the synergies and trade offs with broader development goals, such as health, education, jobs, as well as wider environmental quality and the resources needed to sustain our livelihoods through time.
Using the OECD’s Well-Being Framework, the report identifies the low-emissions transitions needed across five economic sectors: electricity, heavy industry, residential, surface transport, and agriculture. These sectors are collectively responsible for more than 60% of global greenhouse gas emissions. For example, in the transport sector, the report recommends prioritising the accessibility of sustainable transport over physical movement, which too often leads to car-dominated cities, congestion, and air pollution.
Second, supporting private sector action. Business leaders are increasingly recognising the physical, transition and liability risks of inaction on climate change. The Task Force on Climate-related Financial Disclosures (TCFD) has made recommendations for voluntary climate-related financial disclosures that provide useful information to lenders, insurers, and investors. As of the start of this month, the number of organisations supporting the TCFD recommendations stood at 855 worldwide. This includes 194 organisations from Japan, making it the world’s biggest TCFD supporting consortium.
Moreover, the OECD is fully committed to supporting initiatives that help businesses act against climate change. Our paper, Responsible Business Conduct for Institutional Investors, help institutional investors implement the recommendations of the OECD Guidelines for Multinational Enterprises. These guidelines are an important mechanism that can be used to monitor companies’ climate change action, calling on businesses to carry out due diligence to respond to environmental and social risks.
Another one of our priorities is to increase the role of business in financing climate-resilient infrastructure needs, which we estimate at USD 6.9 trillion annually to 2030. Harnessing the financial muscle of institutional investors – around 55 trillion US dollars in OECD countries alone – would make a real difference! Today, however, a very small proportion actually flows towards sustainable infrastructure investment.
Last but not least, the OECD’s Centre for Green Finance and Investment is working with both policymakers and the private sector to facilitate the transition to a green, low emissions and climate-resilient economy. We are also supporting, among other areas, the acceleration of sustainable investment in water and biodiversity and extending the discussion to a very important and increasingly prominent set of investors – ESG investors.
Ladies and Gentlemen:
Last month, Greta Thunberg urged countries to unite behind the science, to take action, to do the impossible and protect the planet, its people, animals, flora and ecosystems. Green finance must be at the top of our agendas. As we prepare for COP25 in Chile later this year, please count on the OECD to work with and for you in fighting climate change. Together can we design, develop and deliver better, and greener, policies for better lives. Thank you.