G7 Finance Ministers and Central Bank Governors Meeting, 6 April 2021

 

Remarks by Angel Gurría, Secretary-General, OECD

Paris, 6 April 2021

Ministers, Governors,

The clock is ticking. The window to keep global warming within the range of the Paris Agreement is fast closing. The OECD welcomes the resolve of the UK Presidency to accelerate the G7 finance community contributions, not only to net zero but also to reverse the rapid loss of biodiversity. The two are for sure inseparably linked. Without nature storing CO2, no emission effort will suffice to reach net zero. Ecosystems are also indispendable for our countries to adapt, responding to rising heat, droughts, floods and other consequences of global warming.

And of course, ecosystem services delivered by biodiversity, such as crop pollination, water purification, flood protection and carbon sequestration, are vital to human well-being. Globally, these services are worth more than the size of global GDP.

In light of the trillions needed to decarbonize our economies and preserve biodiversity, let me highlight four priority areas where your action can make the difference:

  • First, ensure comparability among different ESG criteria and rating methodologies, in particular regarding the environmental pillar. If you cannot measure it, you cannot manage it.
  • Second, support initiatives focusing on financial materiality and climate-related disclosures but also ensure equal consideration of environmental materiality, so that sustainable finance makes a positive contribution to environmental goals.
  • Third, we welcome the call to develop G7 principles for issuers’ reporting on climate transition. More needs to be done to standardize such reporting, to align it with science-based targets, and to establish credible, third-party verification mechanisms to do so.
  • Fourth, we need to stop financial flows that are harmful to biodiversity, and scale up those in support of biodiversity and natural capital across all sources, aligning it with international commitments. The launch of the Task Force on Nature-related Financial Disclosures (TNFD) is a very encouraging first step to ‘embed” biodiversity in business and investment decisions.

But more needs to be done. Sustainable finance standards and public policy efforts will remain largely ineffective in containing temperature rises to below 2°C without a global carbon price which gradually rises up to USD 75 per tonne of CO2 or more by 2030, with further increases beyond that date. Pricing is the most cost-effective and efficient way to curb emissions, and even the most conservative price can yield 1% of GDP in revenue. Yet, at present, 60% of carbon emissions are not taxed, and across OECD and G20 countries only 17% of emissions are priced at a modest EUR 30 per tonne of CO2 or more. The many versions of ETS don’t seem to reach the desirable targets and BCA are both technically and legally very challenging. In 2019 fossil fuel subsidies rose by 5% year-on-year to USD 178 billion and most certainly continued to grow last year. We are undoing with one hand what we so painfully build with the other. So there is a long way to go. G7 leadership can change the game towards a serious global effort on pricing carbon. Let’s put a big fat tax on carbon.

The OECD is producing policy options to help governments address those challenges and to better understand the multiple links between environmental and financial materiality, an ESG materiality mapping, a report on financial markets and climate transition, a joint IMF/OECD report on climate change and taxation. For the G7, we are working with the UK on delivering to you as well as to G7 Environment and Trade Ministers, a biodiversity policy guide with concrete recommendations on how to mobilize fiscal, trade and financial policy tools to tackle biodiversity loss.

Remember our single, most important intergenerational challenge is to protect and preserve the planet.

 

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