13th December 2021

Impact Taskforce Calls G7 to Take Urgent Action to Mobilise More Institutional Capital for a Just and Inclusive Transition to Net Zero

The Impact Taskforce, the independent, industry-led taskforce supported by the G7 Presidency, has today released its recommendations aimed at financing a Just Transition to a climate-secure future for all.

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Impact Taskforce Calls G7 to Take Urgent Action to Mobilise More Institutional Capital for a Just and Inclusive Transition to Net Zero

Recommendations are focused on transforming the quality and transparency of information on the impact of investment decisions and deploying financing, especially in emerging markets, that delivers positive social and environmental impact 

The Impact Taskforce, the independent, industry-led taskforce supported by the G7 Presidency, has today released its recommendations aimed at financing a Just Transition to a climate-secure future for all. Actionable recommendations include:               

  • Mandatory accounting for impact by businesses and investors to harmonised standards, recognising the central role of transparency and integrity in changing behaviour and driving investment flows.
  • Support for the efforts of the International Financial Reporting Standards
    Foundation’s International Sustainability Standards Board (IFRS-ISSB) to create a global reporting “baseline” on impact related to enterprise value.
  • Increasing the supply of investment vehicles suitable for institutional investors, empowering multilateral development banks and development finance institutions to be more effective in catalysing mobilisation of private investment, with particular focus on emerging economies where the funding gap is greatest.
  • Driving alignment across public and private actors and ensuring that more capital meaningfully contributes towards a Just Transition, by putting forward three Just Transition Elements that provide a common foundation for action to deliver a transition to Net Zero that leaves no one behind.

The Impact Taskforce, which brings together 120 leading voices from the worlds of business, investment and public policy, representing over 100 institutions across 40 countries, today published its report entitled Time to deliver: mobilising private capital at scale for people and the planet. The in-depth analysis provides actionable recommendations that answer the pressing question: “How can we accelerate the volume and effectiveness of private capital seeking to have a positive social and environmental impact?”

With just eight years to the deadline to achieve the Sustainable Development Goals, which aim to eradicate poverty and achieve a better and more sustainable future for all, more investment is urgently needed. Public funding alone can only meet a fraction of countries’ needs, particularly in emerging markets.

The report explains how societal shifts and leaps in technology now create the opportunity to mobilise private capital at scale in the search for better solutions. The Impact Taskforce’s recommendations establish the roadmap for unlocking finance to support these urgent funding requirements. The roadmap lays out actionable pathways so that institutional capital, estimated globally at $250 trillion, can work more effectively with public capital to deliver positive social and environmental benefits for people and the planet. 

The report urges governments to create mandatory and harmonised disclosure standards for companies and investors. The Taskforce endorses the IFRS-ISSB work on a globally harmonised baseline on impact related to enterprise value that can allow greater transparency, efficiency, and accountability, and encourages all G7 members to do the same. Countries should urgently build on that baseline to include impact on all stakeholders.

The Impact Taskforce also recommends that larger businesses use their expertise to help guide small- and medium-sized enterprises to better disclosure in the longer term. And it calls for public-private cooperation to advance emerging work on impact valuation that might allow meaningful comparison between the impacts and profits of companies, enhancing integrity in impact accounting and disclosure processes.

“Investment decisions are being taken today with incomplete information. We need to transform the quality and transparency of data on impact. Our report presents an actionable pathway towards a world in which investment decisions are looked at through the triple lens of risk, return, and measured impact,” says Nick Hurd, a former UK Minister and the Chair of the Impact Taskforce (ITF).

The far-reaching recommendations are the product of the taskforce’s two interdependent working groups, Workstream A focused on transparency, harmonisation and integrity in impact measurement and reporting, and Workstream B on the development of policies and investment vehicles to mobilise capital at scale to address the needs of people and the planet. The taskforce’s work is coordinated by the Global Steering Group for Impact Investment (GSG), working with its UK member, the Impact Investing Institute.

Douglas L. Peterson, President and Chief Executive Officer, S&P Global, and Chair of ITF Workstream A states: “Financial markets can be a powerful force for good, and transparent and comparable standards will be an essential tool for market participants to evaluate and optimise their impact. The Impact Taskforce’s recommendations provide a valuable roadmap for the investment community’s search for greater transparency, evidence-based insights and high-quality data and analytics. Most importantly, they inform and advance the goal of achieving a sustainable and equitable future.”

The requirement for greater transparency is matched by the need for more investment structures that can channel private investment at scale into initiatives that contribute to achieving the Sustainable Development Goals (SDGs) generally and a Just Transition specifically. To drive alignment across public and private actors and ensure that more capital is meaningfully contributed towards a Just Transition, the Taskforce introduces three Just Transition Elements: advance Climate and Environmental Action; improve Socio-economic Distribution and Equity; and increase Community Voice.

The Just Transition Elements help to break down the silos between climate-first and social-first strategies, offering all actors – public and private – a globally consistent approach for building a future that works for people and the planet. The Elements present a practical means for integrating environmental and social objectives, while also incorporating community voice, into the design of financing vehicles and policies. The three Just Transition Elements can be integrated both in existing investment vehicles and those yet to be designed.

“The transition to net zero needs to happen at pace and globally, but transition pathways must also recognise local needs and capacity to secure genuine inclusion and fairness. The Just Transition Elements of our report provide a practical steer on how to invest for high impact in areas that are mission critical for climate security and economic inclusion,” states Dame Elizabeth Corley, Chair of the Impact Investing Institute and Chair of ITF ‘Workstream B’. 

The report also calls for an enhanced role for multilateral development banks and development finance institutions. The Impact Taskforce asks G7 members to use their power as shareholders in those institutions to enable them to be more effective in supporting the mobilisation of private investment, and to amend their mandates to give equal weight to mobilising private capital alongside investing balance sheet capital, using a range of proven tools and instruments for investment.

The taskforce also calls specifically for the creation of a series of emerging market-domiciled guarantee companies, replicating existing models, to help address hurdles to institutional capital investment. And it pushes for rapid removal of external and internal barriers that limit the flow of institutional investors’ transformational capital.

While the ITF calls on the G7 to spearhead these efforts, its recommendations make clear all actors across the financial system need to work together in a coordinated movement if there is to be any prospect of achieving the SDGs by 2030.

Laurie Spengler, ITF member and senior advisor to Workstream B, says: “Building on decades of experience and track record, particularly in emerging markets, multilateral development banks and development finance institutions can – and must – play an even greater role expanding the flow and pace of capital to people and places too often ignored by financial markets. That role is particularly important to help convert commitments from institutional capital to solutions that advance the SDGs into real and meaningful action. “

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