Mitarbeiter sonstige

How the FfD process should promote a better alignment of financial markets with sustainability goals

Hilbrich, Sören / Kathrin Berensmann / Clara Brandi
Mitarbeiter sonstige (2025)

in: Stephan Klingebiel / Jorge A. Pérez-Pineda / Kathrin Berensmann, Financing for development: From Monterrey to Seville, Bonn: German Institute of Development and Sustainability (IDOS), 53-58

The financial markets continue to provide significant amounts of capital for socially and environmentally harmful investments. At the same time, financing for the investments that are necessary to achieve sustainability goals is lacking. Over the past 10 years, several private and public  initiatives have attempted to change this misalignment. Their aim has been to design and implement an appropriate global architecture for sustainable finance. Among other things, regulators have mandated new sustainability disclosures from financial market participants and companies in  the real economy, and they have developed sustainable finance taxonomies that define which economic activities should be considered sustainable. So far, however, there is no evidence that these initiatives have led to a large-scale redirection of capital flows. The international  interconnectedness of financial markets requires a coordinated approach by the key actors in this area, including national governments, regulators and international financial institutions (IFIs). The financing for development (FfD) process offers an opportunity to promote a common  understanding and facilitate decisive political action. As part of the FfD process, governments should in particular agree to: 1) enhance transparency on the sustainability impact of investments and 2) improve incentives to redirect capital flows; in order to attain these goals, 3) comprehensive and coherent policy frameworks are required that are internationally interoperable and at the same time take regional and national circumstances into consideration.