ANOTHER year has passed, bringing the world closer to the 2030 sustainable development goals (SDGs) deadline. The world adopted the Sustainable Development Goals (SDGs) in 2012 and halfway through the timeline, data reveals that the investment gap across the SDG sectors has widened from $2.5 million in 2015 to more than $4 trillion per year in 2023. The largest gaps are in energy, water and transportation infrastructure.
With the lingering impact of the Covid-19 pandemic, climate change and the geopolitical situation, SDG gains are continuously being offset. The race to 2030 has been extremely challenging, with the financing gap still hovering in trillions of dollars each year. There is an immediate need to find ways to bridge the financing gap through innovative financing, one of which is green finance.
According to the United Nations, green financing is a financial instrument that seeks to increase the level of financial flow from the public, private and not-for-profit sectors to sustainable development priorities. Green financing is not financing per se. It can encompass initiatives enabling green financing, like harmonizing public financial incentives and aligning public sector financing decision-making with an SDG environmental dimension. Simply put, green financing is about channeling finance to environmentally sustainable projects or activities.
The 2015 Paris Agreement, with the commitment of more than 100 countries, provided a solid ground to enable the focus on green finance. Since then, green finance has clearly gained momentum across the world. Over a 10-year period, the value of green finance has grown from $5.2 billion in 2012 to $541 billion in 2021.
However, the sustainability of green financing across the world remains challenging. According to the October 2024 Global Green Finance Index (GGFI), which measures the quality and depth of green finance offerings in the world’s major financial centers/cities, confidence in the development of green finance dropped by 1.96 percent from the last rating in April 2024. Mostly ranking high are European cities and Singapore, with Manila dropping by 12 points, now ranking 81 out of 97 financial centers. Consistently taking the top spot in the GGFI is London, and it is worth looking into why London is taking the lead.
The government of the United Kingdom (UK) clearly understands the importance of green finance to the overall sustainability of its economy and country. In 2019, the UK was the first major country to adopt a green finance strategy. It is the first G20 nation to require the largest companies and financial firms to report publicly how they are taking actions toward financial risk and opportunities associated with climate change.
In 2021, the UK created the UK Infrastructure Bank, dedicated to mobilize private investment and public funding to support economic growth and address climate change. As of October 2024, the UK has raised approximately $54.4 billion in green financing over five years, since the adoption of its green finance strategy. Today, the UK continues to make strides toward its green finance efforts, with its commitment translating both to policies and actions, focus and ongoing actions with measurable goals and impact.
Although the Philippines seem to be lagging in the GGFI, the country has, in fact, made good progress on several fronts in green finance. The first Asean green bond was issued in the Philippines in 2016 by AP Renewables, amounting to $226 million. Major domestic banks such as BDO Unibank, China Bank, Bank of the Philippine Islands, and Rizal Commercial Banking Corporation have also issued multi-currency green bonds.
Government financial institution Development Bank of the Philippines has likewise issued sustainability bonds allocated for green projects. Regulators such as the Philippine Securities and Exchange Commission and the Bangko Sentral ng Pilipinas have taken a proactive stance in enhancing the enabling environment in green finance as part of their sustainability focus. Other government agencies like the Philippine Guarantee Corp. have similarly taken concrete steps to partner with NGOs like Water.org to explore green finance, particularly in SDG 6, water and sanitation.
Overall, there is a positive momentum and environment for green finance. However, the effort needs to be consistent and persistent to reach the SDGs by 2030. The challenges remain a source of opportunities. The largest gaps in SDG financing are in energy, water and transportation infrastructure, which are all opportunities for green financing. Boosting confidence among partners and stakeholders is key to maximizing these opportunities.
A green finance strategy, together with enabling policies accompanied by a regulatory and risk management framework, is critical. Reenforcing accountability and transparency through systematic reporting and measurable targets and goals is equally crucial to make that quantum leap soon enough for SDG 2030.
Griselda Gay Gloria-Santos is the chairman of the financial inclusion committee of the Financial Executives Institute of the Philippines (Finex). She is also the regional director for Southeast Asia at Water.org, a global NGO co-founded by Matt Damon and Gary White. She holds an MBA degree from Johns Hopkins University in Baltimore, USA. The opinions expressed here do not necessarily reflect the views of Water.org and Finex.
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