By Brune Poirson, Secretary of State, Ministry for the Ecological and Inclusive Transition, France

Brune Poirson. Photo credit: © Manuel Bouquet – MTES-DICOM

The Paris Agreement on climate change is not just an environmental treaty but offers the basis for a new and inclusive model of development. France is committed to making finance a driving force behind this transition, explains Brune Poirson in this post for the Sustainable Finance Leadership Series.

Today, the struggle for environmental sustainability and social justice go hand in hand. In France, the gilets jaunes [yellow jackets] protests are symptomatic of this fundamental connection. And at the core of this linkage is not simply the pursuit of healthy ecology but rather imagining a better future for humanity. Efforts to combat climate change, transform agriculture, preserve biodiversity, eliminate plastics in the ocean and build a more inclusive globalisation should all be considered as intrinsically linked. Acknowledging this reality is the starting point for triggering shifts in the whole system. This is what we need to see in 2019 and beyond.

This is why France has taken on a great ambition: to view the Paris Agreement on climate change as the foundation for a new social contract – a social project that can provide people with a decent standard of living through the ‘ecological transition’ towards sustainable development.

Already this new social contract is coming to life. It has led, for example, to the new French Roadmap for the Circular Economy, a guide for transforming the way we produce, consume and respond to the excessive resource use in our current model of capitalism. Let’s take another priority: land. We know from the European Commission’s World Atlas of Desertification that 75 per cent of the Earth’s soil is degraded because of the pressure we are putting on natural resources; 90 per cent could be degraded by 2050. Worldwide, this is equivalent to the degradation of half the territory of the European Union. And, of course, global warming is also damaging agriculture, biodiversity and land. It is clear that this toll of damages is not simply about the decline of ‘nature’: humanity’s future is at stake. Implementing sustainable solutions at a system-wide level is fundamental, therefore, to ensuring access to the agricultural and water resources required to meet our essential needs.

Finance: daring to place values at the core of business

For this to happen, the financial world will need to have the courage to place these values at the heart of all that it does. The global investment needs to meet our collective climate goal of keeping temperature increases to well below 2°C amount to trillions of dollars a year. This cannot be funded by taxpayers’ money alone. The evidence shows that making the transition is far more bankable than refusing to act: doing nothing results in stranded assets. The task now is to accelerate this financial transition, not least because more and more people are demanding that this happen.

That is why France’s goal is to transform the finance world into a leader for truly lasting change. We want to create powerful synergies between public and private sources of capital. This ‘blended finance’ presents a great opportunity to strongly align financial flows with our green needs. By doing this, we want to propel sustainable finance from the status of pioneer to becoming the new mainstream, measured not in the billions but in the trillions. And as we are making this shift, we have to focus on something crucial: our ecological transition has to be inclusive. The shape of sustainable finance is still to be settled and states should work to ensure that it is both ecological and inclusive. At the COP24 climate conference, I insisted, in the name of France, that it is here that states have a key role to play. There, France also joined the High Ambition Coalition of countries that seeks to go beyond the 2°C target.

This switch in what is considered ‘textbook’ finance has happened before. History teaches us that major financial changes have always had social roots. We must not forget that in the 19th century, banks were financing slavery until people stopped accepting it. That was a question of humanity, equality, a fight for social justice. Time flies, the world changes and so do people’s minds. And soon we will find it just as unbearable, just as morally shocking, that banks are still financing projects that harm the planet.

Reconnecting finance with citizens

This transformation of finance also responds to growing demands from citizens. We need to remember that finance is ultimately nothing more than people’s savings. Nowadays, citizens want to see impact. Connecting finance with impact delivers more than just monetary returns: we get lower carbon dioxide emissions, better air quality, more employment and less social inequality. This is a great prize for the financial world: a chance to regain the public’s trust.

Finance is not a friend, nor an enemy, but a tool – and a smart one – which is able, if well-designed and well-regulated, to trigger a deep social and environmental shift. However, money does not flow spontaneously towards green investments. To change this and shape a 21st century model of finance that is efficient, fair and sustainable we need both transparency and all stakeholders to take responsibility. Because today, citizens are better informed and much more aware of the challenges that confront us. People know that climate change is impacting our planet ever more severely as the days go by. Scientists may have been warning us for decades and policymakers negotiating for years, but now we need more: we need commitment from the financial world and ambition from states.

A new type of multilateralism is taking shape

In June 2017, President Donald Trump announced America’s withdrawal from the Paris Agreement. President Emmanuel Macron’s response was immediate: “Make our planet great again.” More than mere words, this statement was carefully designed to create a new multilateral momentum, linked to France’s ambition to make the Paris financial centre a leader of the ‘finance for tomorrow’.

To give substance to this, the French government established the One Planet Summit, an unprecedented initiative that aims to bring together all those focused on changing the core of our global financial system for the sake of the world’s future. First held in Paris in December 2017, the One Planet Summit has resulted in 12 major commitments and stimulated several coalitions that are all working hard to redirect financial flows at scale towards achieving the ecological transition. In less than a year we have seen tangible results. For example, on sustainable land use France has invested in the Natural Capital Lab, supported by the Inter-American Development Bank, which will develop agro-forestry projects, sustainable rubber plantations and more.

What does ‘taking responsibility’ really mean?

We now see a melting pot of ambition, talents and resources, with leading cities, corporations, financial institutions and NGOs acting out their responsibilities. And at the heart of this melting pot, state action remains essential. Only governments can create the enabling environment – introducing the new rules that are needed, acting as role models in the vanguard of change, and de-risking private investments with scarce public funds. That is what taking responsibility is about.

Finance and governments both have fundamental roles to play in this great transition. In 2019, France takes on the presidency of the Group of 7 industrialised nations (G7) and sustainable finance will be on the agenda. The next One Planet Summit will take place in Nairobi in March, a sign of the need to unite North and South in this financial transition. Let’s promise that together we will pool our strengths to produce a sustainable model of finance to enable the change that our citizens are increasingly – and rightly – clamouring for.

This commentary is published as part of the Grantham Research Institute’s Sustainable Finance Leadership Series.

The views in this commentary are those of the author and do not necessarily represent those of the Grantham Research Institute.

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