The Coalition of Finance Ministers for Climate Action took center stage on Finance Day at COP26 (November 3, 2021) and showcased the crucial role Ministers of Finance have to play, working together across all regions, to keep an average global warming limit of 1.5 degrees Celsius within reach.

On this occasion, the Chairs of the Coalition and the NGFS released a Chairs Joint COP26 Statement expressing support for the COP26 process and highlighting key areas where Ministries of Finance, Central Banks, and financial sector supervisors can help shift the trajectory towards net-zero.

The statement can be downloaded here ( PDF | Word ).

The full text is below:

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Coalition of Finance Ministers for Climate Action and Network of Central Banks and Supervisors for Greening the Financial System

Chairs Joint COP26 Statement

November 3, 2021

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On the occasion of the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26), we, the Co-Chairs of the Coalition of Finance Ministers for Climate Action (the Coalition), and the Chair of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), reaffirm our commitment to mobilizing our organizations to achieve the goals of the Paris Agreement.

Our two entities recognized from the start that achieving the goals of the Paris Agreement requires ambitious climate actions from all Parties, and, from the public sector, stepped-up climate engagements and broader alignment of economic policies. Against this background, finance ministries, central banks and financial supervisors need to take action within their respective fields of responsibility to implement appropriate economic policies and promote financial flows “consistent with a pathway towards low greenhouse gas emissions and climate-resilient development” as set out in the Paris Agreement.

To that end, we have fostered close dialogue and collaborative action, at both national and international levels, between finance ministries and the community of central banks and supervisors. Joint events and workshops have enabled members from both organizations to discuss, learn, and identify areas for collaboration. Over the past few years, we have pushed the idea of building back better as well as looking forward, in the context of a robust post-covid green recovery, calling for the incorporation of climate considerations in recovery plans. We have also identified the importance of training and capacity building among our members and look forward to cooperating in these areas.

We recognize the potential to work together more closely on key priority areas, including the assessment and analysis of the economic and financial impacts of climate change (such as forward-looking scenario analyses and prudential stress tests), as well as the implications for the conduct of economic policy and the preservation of financial stability. We believe that a transition consistent with the Paris Agreement goal of limiting average global warming to 1.5°C is within our collective reach, provided we take strong action without delay and implement well-designed policies that will together create the incentives needed to enable an orderly transition.

Given the urgency to achieve net-zero and climate-resilient economies, we will work within our respective fields of responsibility to help ensure the readiness and resiliency of the financial sector and drive change in the real sector. Action by central banks, supervisors, finance ministries, as well as line ministries, can play a key role in mitigating climate-related risks for enhanced investment, especially the private sector. We recognize the importance of private capital mobilization. Success hinges on our collective ability to address climate change in a comprehensive manner through ambitious mitigation efforts, investments in adaptation and resilience, and policy measures that ensure a just, inclusive and equitable transition.

We acknowledge that beyond the potentially significant economic and financial implications directly associated with nature loss, global climate and nature goals are closely intertwined and the loss of biodiversity and ecosystem services could undermine climate change mitigation and adaptation efforts, while exacerbating climate risks. Addressing these issues will be critical for a successful transition to net zero. Conserving and restoring forests and other critical ecosystems, as well as transitioning to more sustainable agricultural and land-use practices, can help substantially reduce greenhouse gas emissions and increase sequestering of atmospheric carbon. Against this background, we will strive to better reflect cross-cutting issues related to agriculture, forests and other land uses in our work.

Finally, we recognize that our strength is rooted in our diverse and committed membership. We proudly chair global organizations comprised of low-, middle- and high-income countries that all resolve to urgently scale-up efforts to ensure a smooth transition toward a net-zero, climate-resilient and nature-positive economy. We will continue to work closely together to raise ambition and accelerate action.

On the occasion of the Coalition meeting at COP26, the Coalition published a short paper titled Mainstreaming Climate into Economic and Financial Policies. The report draws on the work of the Coalition’s six workstreams and the priorities set forth by its Members at the Ministerial meeting held on 12 October 2021, and highlights the deepening engagement of Finance Ministries on the climate change agenda.

The report can be downloaded here.

The Coalition of Finance Ministers for Climate Action met today with the World Bank and the International Monetary Fund to advance efforts to align economic and financial decision-making with the goals of the Paris Agreement. The Chair of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) participated in the meeting as a key partner of the Coalition.

The meeting—one of the central events of Finance Day at COP26—was hosted by UK Chancellor Rishi Sunak, and brought together Finance Ministers committed to addressing climate change. In line with the Coalition Ministerial meeting on October 12, 2021, they recognized that their Ministries need to step up action to accelerate the decarbonization of their economies and ensure a just and orderly transition that is positive for jobs, growth, and competitiveness.

The Chairs of the Coalition and the NGFS released a Chairs' Joint COP26 Statement expressing support for the COP26 process and highlighting key areas where Ministries of Finance, Central Banks, and financial sector supervisors can help shift the trajectory towards net-zero. The Coalition also published a Press Release ( PDF | Word ).

Members shared perspectives on policy options developed in different contexts and regions, and how they can use the levers at their disposal to implement a systemic shift in their policies. To that end, they welcomed four reports:

1. Mainstreaming Climate into Economic and Financial Policies, which highlights the deepening engagement of Finance Ministries on the climate change agenda.
2. Strategies for Mainstreaming Climate Action in Ministries of Finance: Governance, Capacities, and Research Practices, which emphasizes key challenges and best practices in building capacity and mainstreaming climate, informed by the findings of two Member surveys.
3. An Analysis of Sustainable Finance Roadmaps: Charting the Path to Financial System Transformation, which examines international experience and draws lessons to inform the design and implementation of effective sustainable finance roadmaps.
4. Building Momentum for Strong Recovery and Sustainable Transformation, which assesses progress on recovery and emphasizes the need for sustainable investment, reinforced by policies and the effective use of all pools of finance, to accelerate a just transition and deliver on climate goals.

Members resolved to continue working together on aligning their economies with the goals of the Paris Agreement and developing common approaches, concepts, tools, and practices, through the Helsinki Principles. Looking ahead, as part of the Coalition and the NGFS’s objective to support the green transition and help reach net-zero targets, representatives recognized the need to facilitate adaptation and address climate risks in all their forms, including risks associated with biodiversity loss.

“Finance Ministries cannot ignore climate change, and no solution can be achieved without Finance Ministries. The Coalition is an invaluable forum for sharing knowledge and building our collective capacity to tackle this global issue together. I’m delighted that we, as a Coalition, are rising to the challenge,” said Chancellor Rishi Sunak, host of the CO26 Finance Day.

“Addressing climate change is increasingly about economic policy. This is why we are here in Glasgow” said Annika Saarikko, Finance Minister of Finland and Co-Chair of the Coalition of Finance Ministers for Climate Action.

“Climate action should not be rhetoric. It should be about action and making sure there is a just and affordable transition," said Sri Mulyani Indrawati, Finance Minister of Indonesia and Co-Chair of the Coalition of Finance Ministers for Climate Action.

“We, the members of the central banks and supervisors Network for Greening the Financial System, firmly believe that the contribution of the financial sector to the net zero transition would be greatly facilitated by clear, predictable and effective economic policies addressing climate change," said Frank Elderson, Member of the Executive Board of the European Central Bank and Chair of the Network for Greening the Financial System.

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Coalition Members and Institutional Partners provide statements in support of COP26

Image credit: Chris Henry (via Unsplash.com)

As governments around the world strive to combat the burgeoning threat posed by climate change, policy makers are engaged in a groundbreaking effort to realign their national financial systems to support the objectives of sustainable development. Having long viewed their institutional objectives as either ancillary or irrelevant to climate policy, finance ministers increasingly recognize the financial system’s vital crosscutting role in promoting climate change mitigation and adaptation, as well as sustainable development more broadly. To organize the different range of actors involved in the transition to sustainable finance around a common conception of their roles and responsibilities, national authorities have deployed sustainable finance roadmaps.

These roadmaps can help prioritize actions and coordinate activities among stakeholders, including policymakers, supervisors, regulators, associations, corporations, and other financial sector participants to accelerate the expansion of sustainable finance. These documents generally provide recommendations, i.e., suggested actions for various stakeholders to enhance sustainable finance within financial systems. Furthermore, these reports have served as important inputs to the development of actionable sustainable finance strategies, along with several other inputs and agreements, including those from international forums, networks, and organizations.

The Helsinki Principle 5 Workstream has produced a report assessing a sample of roadmaps from various countries to identify commonalities and differences across them. This research was led by the UN-convened Financial Centers for Sustainability (FC4S) network, in collaboration with the World Bank, under the direction of the Coalition. The roadmaps from 30 countries have been analyzed, including the experiences of the following Coalition Member countries: Canada, Japan, Luxembourg, Mexico, Nigeria, Switzerland, Germany, and Ireland.

Download the report here.

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The following criteria for developing an effective roadmap were identified in the report:

On Thursday, September 30, the Coalition hosted a workshop under Helsinki Principle 2 on Finance Ministries’ Mainstreaming Strategies and Research Practices in Climate Action.

The virtual seminar was the second in the series of workshops, and built on the outcome of the first seminar that was held in May 2021. This event focused on how Ministries of Finance have incorporated mainstreaming practices—plans, structures, research, training, etc.—as part of the governance and implementation of their climate strategies.

The event was divided into two parts. The first part featured presentations from Korea, Ireland, Finland, and Grantham Research Institute. Each presentation demonstrated a facet of climate action mainstreaming impact through economic transformation, research, and sustainability aspects.

The second part focused on the role of Institutional Partners in enabling research and evidence-based policy advice. Institutional Partners provided comments on the country presentations, and offered insights on their work on training courses and capacity building, and how the Coalition and its Members could benefit from these.

The HP2 workstream is finalizing a report on mainstreaming climate into economic policies and incorporate the learnings of this workshop. The workstream also continues building a training program for Ministries of Finance.

Image credit: Greg Kahn / Getty Images Climate Visuals Grant recipient

On October 7, 2021, the Helsinki Principle 5 workstream hosted a workshop on ‘The Role of Ministries of Finance in Driving Resilient Investment and Investment in Resilience’. This was the second workshop on resilience and adaptation organized by the HP5 workstream.

Worsening climate change is expected to increase the frequency and intensity of physical climate risks, with potentially strong repercussions for people, nature, and the economy. Thus, adaptation and resilience plans are needed to ensure continued sustainable development. If strategically designed, proactive actions can help to mitigate and manage climate risks, while also accelerating development and poverty reduction. Adaptation actions could bring multiple benefits by avoiding losses, increasing productivity, driving innovation, and ensuring additional social and environmental benefits. While the imperative for adaptation action is clear, money is not flowing to adaptation at the pace or scale needed.

This workshop provided an opportunity to discuss how Ministries of Finance (MoFs) can contribute to driving resilient investment and investment in resilience by creating the conditions for private sector finance mobilization. Jennifer De Nijs opened the workshop by sharing Luxembourg’s most recent experience of severe flood impacts and highlighted the necessity to step up adaptation action, including an increase of climate mitigation efforts. Next, Stéphane Hallegatte (Lead Economist, Climate Change Group, World Bank) presented ways that MoFs can drive the integration of adaptation and resilience considerations into all public and private investment through policymaking and regulation—drawing on some of the findings of his recently co-authored book, The Adaptation Principles – A Guide for Designing Strategies for Climate Change Adaptation and Resilience.

The next presentation was jointly given by Carlos Sanchez (Executive Director, Coalition for Climate Resilient Investment), Carter Brandon (Senior Fellow, World Resources Institute) and Courtnae Bailey (Research Graduate, Imperial College London), who presented how the Coalition for Climate Resilient Investment (CCRI) enables public and private actors to work together to drive investment in adaptation and resilience. They further presented CCRI’s investment prioritization tool—applied in a recent pilot in Jamaica—that could inform national strategies on adaptation. Mahbub Alam (Deputy Secretary, Economic Relations Division, Ministry of Finance, Bangladesh) presented the adaptation strategy of Bangladesh and its climate fiscal framework. Finally, Elena Višnar Malinovská (Head of Adaptation to Climate Change Unit within the Directorate General Climate Action of the European Commission) presented the European Union’s adaptation strategy as a whole-of-government approach to mobilize private finance that focuses on how to create an enabling environment to develop risk sharing instruments and to reduce negative externalities.

The presentations were followed by a short question and answer session, moderated by Nepomuk Dunz (Junior Professional Officer, World Bank). Masyita Crystallin (Coalition Co-Chair Sherpa, Indonesia) closed the workshop by acknowledging the importance of this topic for the Coalition and the potential for countries to share experiences and best practices. She emphasized 1) the relevance of the adaptation and resilience topic for Members of the Coalition; 2) the role of MoFs in creating an enabling environment for mobilizing private sector adaptation and resilient investment; and 3) the importance of knowledge sharing on platforms, tools, and best practices in supporting the build-up of expertise in Member countries, including through workshops like this one and enhanced training efforts. The HP5 workstream has agreed to deepen its work on adaptation and resilience and private finance mobilization in the 2022 work program.

Above: Parque Nacional Natural Farallones de Cali, Colombia. (Image credit: World Resources Institute. License CC BY-NC-SA 2.0)

On September 23, 2021, the HP5 workstream hosted a Latin America and Caribbean (LAC) focused workshop on ‘Developing Subnational Green Bond Markets in Emerging Economies: Challenges and Solutions for Ministries of Finance.’ The workshop was organized by the Inter-American Development Bank (IDB). This is the first region-focused workshop the Coalition has organized and others will soon follow.

Across emerging and developed countries, subnational infrastructure presents a great opportunity for the creation of green investment pipelines at the municipal, provincial, and state levels – despite such potential, subnational entities still struggle to access finance from capital markets. While the identification of portfolios of green projects does not seem to be a barrier, inability to access capital markets is a key limitation to subnational entities’ infrastructure financing potential. The LAC region is no exception in this case, with only a few green bonds issued by cities and sub-national governments – by Mexico City and Argentinian provinces. These issuances were well received by investors, but the challenges to replicating this capital raising are substantial.

This workshop provided an opportunity to discuss these challenges in emerging economies and explore a range of potential solutions. Germán Romero (Climate Change Advisor, Ministry of Finance, Colombia) opened the workshop by sharing the Colombian experience and instruments and tools his Ministry has used to help develop capital markets for subnational governments. Next, Gianleo Frisari (Senior Climate Change Economist, IDB) presented on green finance possibilities for cities and provinces. His presented was followed by Axel Radics (Lead Fiscal and Municipal Management Specialist, IDB) who presented the key findings from a forthcoming IDB paper he co-authored, ‘Developing conditions for sub-national capital markets in Latin America: a comparative study.’ His co-author Christine Martell (Professor, University of Colorado, Denver) then presented on the US experience, where municipal green bonds are a proven source of financing for local governments – drawing on some of the findings in her recently published a book, Information Resolution and Subnational Capital Markets. Steven Rubinyi (Team Lead, City Creditworthiness Initiative, World Bank) gave the final presentation on the offerings and experience of the World Bank City Creditworthiness Initiative, including a case study on the South African approach to developing subnational capital markets.

Participants then engaged in a roundtable discussion moderated by Isabelle Braly (Senior Financial Specialist, IDB). Pekka Moren (Coalition Sherpa Co-Chair, Finland) closed the workshop by acknowledging the importance of this topic for the Coalition and the potential for countries to share experiences and best practices. He emphasized the importance of 1) ensuring creditworthiness of issuers; 2) the role of MoFs in developing green capital markets; 3) the role of IFIs and MDBs in supporting these efforts locally; and 4) the importance of the Coalition in supporting the build-up of expertise in Member countries, including through workshops like this one and enhanced training efforts. The HP5 workstream has agreed to include a note on this topic in its 2022 work program to offer Members a synthesis of how to approach sub-national capital market development for green projects.

The Coalition of Finance Ministers for Climate Action met on the margins of the 2021 Spring Meetings of the World Bank Group and the International Monetary Fund on April 6, 2021, under Co-Chair H.E. Matti Vanhanen, Minister of Finance of Finland, outgoing Co-Chair H.E. Rodrigo Cerda, Minister of Finance of Chile, and incoming Co-Chair H.E. Sri Mulyani Indrawati, Minister of Finance of Indonesia.

The Coalition issued a press release, available here.

The Minister-level meeting acknowledged the increasing global momentum for action on climate change in the context of the ongoing challenges of the COVID-19 pandemic—many governments are implementing large-scale stimulus packages and using this moment to boost climate ambition. Perspectives were shared on transitioning to a low carbon and climate-resilient global economy, mitigating climate-related financial risks, and pursuing pathways towards decarbonization.

Speakers included United States Secretary of the Treasury Janet L. Yellen, China Minister of Finance Liu Kun, Japan State Minister of Finance Kenji Nakanishi, Republic of Korea Minister of Finance Hong Nam-Ki, Chair of the Network for Greening the Financial System Frank Elderson, Malaysian Central Bank Governor Nor Shamsiah Yunus, and representatives from the Institute of International Finance, the International Chamber of Commerce, and the Worldwide Fund for Nature.

The Coalition also welcomed eight new Members—Belgium, Burkina Faso, Japan, Korea, Kyrgyzstan, Malaysia, Rwanda, and the United States—and marked the formal transition of the Co-Chair role from Chile to Indonesia.

Please see the event page for Video Statements that were contributed to the meeting, as well as the Press Release in other languages.