Aviva Investors proposes revisions to International Financial Architecture to achieve sustainable transition

(London) – Aviva Investors, the global asset management business of Aviva plc (‘Aviva’), has set out a series of proposals and recommendations to G7 and G20 nations it believes will enable the global financial system to tackle the climate crisis in an effective and cohesive way.

The recommendations follow discussions held with a coalition of global allies – including asset managers, advisory firms, management schools, industry bodies and foundations – which advocates the creation of an International Platform for Climate Finance (‘IPCF’). The concept was first proposed by Aviva Investors in 2020 to ensure global capital is being channelled into sustainable parts of the economy and that markets amplify – rather than undermine – the ambition of the Paris Agreement.

As part of the output from discussions of the Coalition for an International Platform for Climate Finance, Aviva Investors has also proposed that core principles of UN-affiliated finance initiatives be updated to better align with net zero ambitions and ensure they fully support the goals of the Paris Agreement.

Having outlined the rationale for the IPCF and its role as part of a globally coordinated strategy and response to finance the Paris Agreement, the recommendations put forward by Aviva Investors focus on the actions it believes are required to turn the concept into reality.

Mark Versey, Chief Executive Officer at Aviva Investors, said:

“The current international order pre-dates awareness of the climate crisis and was originally set-up with the primary goals of sustaining world peace and supporting global economic growth. Since then, these frameworks have not been revisited, reconfigured, or redesigned to reflect other issues affecting the world today. To these goals, we need to add the challenge of climate change, which represents a growing and catastrophic threat to life on our planet. We believe an International Platform for Climate Finance could play a critical role in harnessing the considerable power of finance to tackle the climate crisis and support long-term net zero objectives.”

In the white paper, Harnessing the international financial architecture to deliver a smooth and just transition, Aviva Investors highlights the following steps it believes can help to create a comprehensive strategy for the global economy, as well as ideas of how to finance the transition:

  1. Invite the OECD to bring forward proposals for convening an International Platform for Climate Finance (IPCF).
  2. Recommend that the G20/OECD principles of corporate governance be updated; develop a Convention on Fiduciary Duty and Climate Change; and update the OECD Framework for Consideration of Prospective Members to require net zero country commitments.
  3. Invite IMF Board of Governors to clarify that the IMF’s mandate to promote sustainable growth and financial stability includes consideration of climate risk, and extend its Technical Assistance Climate Change Policy Assessments (CCPAs) to become a required part of all IMF Article 4 economic surveillance work.
  4. Invite the World Bank to report back to the G20 Indonesia Summit in 2022 on how it can ensure the Systematic Country Diagnostic and the Country Partnership Frameworks are most supportive of the implementation of NDCs and to invite the International Finance Corporation to update, develop and extend its Environmental and Social Performance Safeguards to be more focussed on transition plans and Science-based targets (SBTs), as well as Taskforce on Climate-related Financial Disclosures (TCFD) requirements.
  5. Clarify that the mandates of the Financial Stability Board, Basel Committee and International Association of Insurance Supervisors include the consideration of climate risk. Invite regulatory supervisors to report on how they intend to update regulation to better manage the exogenous and endogenous nature of systemic climate risks, in particular to analyse potential unintended consequences of the structure of banking and insurance prudential requirements.
  6. Encourage finance ministries and central banks to participate in, and implement recommendations from, the Coalition of Finance Ministers for Climate Action and Network for Greening the Financial System (NGFS).
  7. Invite the United Nations to collaborate with OECD IPCF to convene a UN Finance Assembly, including finance minister participants of Helsinki Principles, central bank governors of NGFS and CEOs of systemically important financial institutions (SIFIs).
  8. Replicate the 2021 alignment of the country hosts of the G7 and G20 with UNFCCC COP co-hosts for the future triennial stocktakes and the five-yearly reviews of progress of the Paris Agreement. Importantly, this should be supplemented by the addition of a G77+ country as a third co-host for each of these COPs to maintain the principle of inclusivity.

Steve Waygood, Chief Responsible Investment Officer at Aviva Investors, added:

“Despite substantial efforts, the international community still lacks a cohesive strategy to finance the Paris Agreement and, collectively, we are falling well short of meeting the targets it lays out. To deliver that strategy, we need enhanced international cooperation between public and private financial institutions and a mechanism to track progress. We think it’s right to examine international financial architecture, to allow greater focus on raising the amount of private capital invested in climate adaptation and mitigation solutions globally, how this money can best complement public finance, and how public policy, globally, regionally and nationally can help accelerate capital flows. As we stare down the barrel of the climate crisis gun, now seems the time to take a different approach.”

Harnessing the international financial architecture to deliver a smooth and just transition

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