The sustainable investment industry is too small to drive the global transition to a low-carbon economy and to help it grow governments must do more to protect investors from being misled by greenwashing, the IMF said on Monday.
Assets in sustainable investment funds have doubled over the past four years to about $3.6tn, the IMF noted in its semi-annual Global Financial Stability Report. But massive new investments estimated at up to $20tn will be required by 2050 to achieve the goal of reducing worldwide carbon emissions to net zero by the middle of this century, it said. About 70 per cent of this additional funding is expected to come from private sources.
Achieving this scale of expansion will demand that savers and investors properly understand how their money is used, the IMF suggested, calling on regulators to prevent financial companies from making misleading claims concerning their environmental credentials.
“Proper regulatory oversight and verification mechanisms are essential to avoid greenwashing,” it said.
The IMF said growth in sustainable funds could be accelerated if policymakers harmonised climate disclosure related standards and developed new green frameworks to help direct investment flows towards projects such as renewable energy infrastructure.
“The sustainable investment fund sector can be an important driver of the global transition to a green economy but, at the current juncture, is too limited in size and scope to have a major impact. A green investment push is thus essential and urgent to facilitate the transition,” the IMF said.
It noted that climate-orientated funds accounted for just $130bn of the assets in sustainable investment strategies that employed a range of environmental, social and governance metrics.
Tax breaks could also encourage climate themed funds in retirement savings schemes or life insurance products bought by retail investors, but only after improvements in reporting standards and regulatory oversight have been established, it said.
The UK government hopes to generate billions of pounds of new green investment after inviting the bosses of BlackRock, Blackstone, Goldman Sachs and JPMorgan to a summit ahead of the UN COP26 climate conference, which will be held in Glasgow next month.
More than 200 top financiers are expected to attend the event including Barclays’ boss Jes Staley, the new chief executive at Lloyds Banking Group Charlie Nunn, Santander chair Ana Botín and Peter Harrison, the boss of the asset manager Schroders, as well as representatives from sovereign wealth funds such as GIC and Mubadala.
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