The global financial system is not fit for purpose and will need a “bold change” in order to combat the climate crisis, the CEO of Aviva Investors, Mark Versey has said.
Following the launch of a report that calls for a 2024 Bretton Woods conference and the further collaboration of its institutions, Versey (pictured) said: “The global economy and financial system are currently financing their own destruction because the global financial architecture is not fit for purpose.
“We need key institutions in the architecture to create their own global transition plans for finance and to add climate considerations to the heart of their agenda.”
At the end of October this year, Steve Waygood, chief responsible investment officer at Aviva Investors, told ESG Clarity: “We need nothing short of a complete rethink of the international financial architecture to repurpose it so that it can help capital flow from where it is – developed countries – to where it needs to be – developing countries – so that we all can secure a future that we would wish to retire into rather than one where there’s climate carnage and chaos.”
Watch the video interview with Waygood here.
Aviva said although action by supervisors, regulators, policymakers and private sector, with the development of practices and frameworks to assess and manage climate and sustainability risk, including the Glasgow Financial Alliance for Net Zero, has been welcome, “the reform of the whole system is needed for the exponential impact required to achieve climate goals”.
The report, Act now: A climate emergency roadmap for the international financial architecture, calls on the IMF, World Bank, FSB, IOSCO, IAIS and the Basel Committee to create a 2050 net-zero transition plan that is reported on regularly and make climate a central focus, as well as convening another Bretton Woods conference. It also sets out 12 leverage points to help facilitate this.
“Only policy and regulation can correct market failures, and until that happens financial institutions will be trying to transition with one hand tied behind their backs,” it said.
Waygood added: “Financial market participants are hugely influenced by their regulatory regimes and respond to signals from their supervisors. A clear focus on managing and mitigating climate risk, and on delivering a global transition plan for finance, will ensure those signals incentivise and support financial institutions.
“It will in turn encourage them to allocate capital towards companies committed to the transition and mobilise finance in support of mitigation and adaptation in countries around the world, especially in developing economies.”
