International Network of Financial Centres for Sustainability (FC4S)

Information presented in this profile is for reference only. The Climate Action in Financial Institutions Initiative does not guarantee as to the exhaustiveness of this information and invites you to contact the Secretariat (contact@mainstreamingclimate.org) if you wish to propose any modifications.

By including this profile, the Initiative, its Supporting Institutions and the Secretariat do not endorse the activities described below nor the guidance and information provided in this profile.

Last updated: July 2018

Website: www.fc4s.org/

Contact:

Summary:The FC4S Network is structured as a partnership between financial centres and the United Nations Environment Programme […]. The objective of the network is to exchange experience and take common action on shared priorities to accelerate the expansion of green and sustainable finance.”[1] Launched in September 2017, the FC4S Network held its inaugural meeting in April 2018. The FC4S Network gathers as of July 2018 17 financial centres and is supported by five partners: the Climate Bonds Initiative, the Sustainable Digital Finance Alliance, the Sustainable Stock Exchange Initiative, the Principles for Responsible Investment and the UNEP Finance Initiative.

What are the objectives of the initiative?

The FC4S’s objective is to “exchange experience and take common action on shared priorities to accelerate the expansion of green and sustainable finance.”

Representatives at the launch meeting supported the Casablanca Statement on Financial Centres for Sustainability and agreed to:

  • “Promote strategic action in their financial centres on green and sustainable finance.
  • Share knowledge to build human capacity, including on measuring the financial centre contribution to climate action and sustainable development.
  • Cooperate on expanding the pipeline of green assets and products.
  • Work with city, regional, national and international policymakers to build positive conditions for green and sustainable finance.
  • Launch the international network of financial centres for sustainability and help in its operationalization.”[2]

How is climate change specifically addressed?

If the working programme as of April 2018 does not mention climate change in particular, the FC4S emphasizes green finance in addition to more general sustainable finance issues. The FC4S defines green finance as follows: “finance that delivers environmental benefits in the context of sustainable development. Sustainable finance looks more broadly at environmental, social and governance (ESG) factors in both market practice and policy frameworks for banking, capital markets, investment and insurance to deliver the Paris Agreement on Climate Change and the UN Agenda 2030 Sustainable Development Goals.”

Source: www.fc4s.org/leadingfinancialcentresagree 

Who launched it? Who is participating?

“The FC4S Network was launched in Casablanca, Morocco, in September 2017, at a meeting co-hosted by the Casablanca Finance City Authority and the United Nations Environment Programme (UN Environment), in association with Italy’s Ministry of the Environment and Morocco’s presidency of the COP22 climate conference. […] The FC4S Network is structured as a partnership between financial centres and the United Nations Environment Programme, which acts as its Convenor and Secretariat.”[3]

As of July 2018 17 financial centres have joined the FC4S Network. The Network is open to all financial centres and is thought of as a “leadership group”, which identifies 10 dimensions for financial centres to become “sustainable”:

Partners of the network are:

The UNEP Finance Initiative will act as Convenor and Secretariat of the Network. The other partners will contribute with their expertise to the FC4S Network’s areas of work.

Why has this been put into place?

“Financial centres clearly compete to attract and generate business in their cities. This is the same for sustainable finance as it is for other areas of financial practice. But sustainable finance is not a zero-sum game and the potential for dialogue and knowledge-sharing is considerable, not least to grow the overall global market. As part of its 2017 G7 Presidency, Italy explored the potential of financial centres to accelerate sustainable finance. In February 2017, Italy’s Ministry of the Environment hosted a first meeting of representatives from the G7’s leading financial centres at Borsa Italiana in Milan. A key conclusion of the meeting was that international cooperation was critical at this stage. To take this forward, G7 Environment Ministers recognized in their June communiqué “the commitments to sustainability made by an increasing number of financial centres and the potential of these initiatives to be furthered through international cooperation.” The mechanism to do this would be a network of centres committed to green and sustainable finance.”[4]

FC4S presents its vision as: “Mobilizing the world’s financial centres will be essential to make progress on climate change and sustainable development […] Financial centres are key locations in the economy where banking, investment and insurance markets are concentrated. This clustering of expertise and resources can also help to scale up the finance required to implement the Paris Agreement on climate change and the UN’s Sustainable Development Goals.”[5] 

What are the main work streams/areas of work?

The FC4S Network has five different working areas:

  1. Strengthening Strategic Commitment: stimulating strategic action by financial centres through guidance, assessment tools and data systems.”
  2. Boosting Market Integrity: bringing clarity and convergence on key definitions, taxonomies and classifications, as well as endorsing international standards.”
  3. Building Capacity: strengthening the capacity of developing country financial centres, supporting implementation, and strengthening the skills base of financial practitioners.”
  4. Fostering Innovation: pooling experience on critical issues, such as how to leverage fintech and digital finance solutions for sustainable finance markets.”
  5. Serving the Real Economy: exploring models to connect financial centres with real economy needs, such as Green Finance Zones.”[6]

“At the [inaugural] meeting, members agreed a five-point action plan to build international cooperation among financial centres on climate action and sustainable development:

  • First, to strengthen links among members, including through regional hubs for Europe, Asia and Africa. The European hub has just been launched in partnership with Climate-KIC. These hubs will involve centres in the regions as well as internationally
  • Second, to develop a robust benchmarking and assessment tool to enable financial centres to evaluate their progress and inspire further action. This will build on initial work presented in 2017 by I4CE and PWC.
  • Third, to develop a joint statement on the importance of effective taxonomies for green and sustainable finance. A common language is key if green and sustainable finance is to develop in a trusted and dynamic fashion across the world.
  • Fourth, to share experience on green digital finance, including through testing the Green Assets Wallet, a new approach to improve efficiency and transparency in the green debt market.
  • Fifth, to gather the experience of financial centres in the development of the green bond market. This resulting briefing paper will be produced together with the Climate Bonds Initiative.

The Network will also explore in more detail ways of sharing efforts to build the capacity of financial professionals in green and sustainable finance and also connecting financial centres with the green and sustainable needs of economic regions.”[7]

What are outcomes of the Network linked with the 5 Principles?

As of September 2018, the main outcome of the Network is the publication of Guiding Principles for the Development of Taxonomies released at the 2018 G7 Sustainable Finance Roundtable, held in Halifax, Canada.

Have intermediate or final reports / guidance been issued?

Calendar and milestones


[1] www.fc4s.org/about-us

[2] www.casablancafinancecity.com/wp-content/uploads/2017/09/Casablanca-statement-on-financial-centres-for-sustainability_Final.pdf

[3] www.fc4s.org/about-us

[4] docs.wixstatic.com/ugd/eb1f0b_5709d803e0fd49169124afe8e00f3765.pdf

[5] www.unenvironment.org/fr/node/20215

[6] www.fc4s.org/what-we-do

[7] www.fc4s.org/leadingfinancialcentresagree

Links with the 5 Voluntary Principles for Mainstreaming Climate Action

This section aims to support discussions on the implementation of the 5 voluntary Principles for Mainstreaming Climate Action. Information provided in this section is for reference only; the Climate Action in Financial Institutions Initiative, its Supporting Institutions and the Secretariat do not endorse the activities nor the guidance and information provided in this section.

In the Statement released at the 2018 G7 Sustainable Finance Roundtable, the FC4S identified Guiding Principles for the Development of Taxonomies:

“A shared language for sustainability can be a valuable public good for the world’s financial system. It is in the core interest of the world’s financial centres that different efforts to develop definitions, taxonomies, and standards converge to a high standard of compatibility. The reasons are clear – a robust, well-designed, and internationally compatible taxonomy (or set of taxonomies) could help to:
• Reduce transaction costs for green and sustainable finance,
• Provide the foundation for multiple standards, products and asset classes,
• Build market trust, foster liquidity, and facilitate cross-border flows,
• Allow financial consumers to express their sustainability preferences,
• Enable regulators to refine requirements,
• Provide a basis for policymakers to adjust incentives and other measures,
• Ultimately, accelerate the transition to a sustainable economy.

To help achieve this convergence, the Network has pooled its collective experience and proposes the following principles to guide the development of definitions, taxonomies and classifications of green and sustainable finance.

1. Scope: An important first step is to clarify the scope of the taxonomy with respect to sustainability themes, frameworks, and definitions. Design bodies (policy institutions) should ensure that the scope appropriately reflects the boundaries of sustainability objectives, and where necessary may choose to address a specific set of issues (i.e. climate finance).
2. Purpose: Taxonomies should be designed with clear end objectives – recognizing the diversity of applications to which taxonomies could be applied (i.e. consistency in use of terms, creating product labels, tracking financial flows).
3. Good Practice: There is evolving international practice which should be drawn upon in the development of taxonomies – to ensure consistency where possible, as well as recognize intentional differences in design.
4. Evidence: Taxonomies must be based on rigorous empirical evidence relating to sustainability risks, impacts, performance, and other factors. A strong empirical evidence base is a critical foundation for good capital allocation decisions, and can help ensure policy alignment between relevant financial and economic policies.
5. Proportionality: In order for taxonomies to have impact and achieve objectives, they should consider levels of development and sophistication of sustainable finance products, services, and practices within a given market – as well as the implications of new standards for market development at different stages.
6. Mechanisms: The design of taxonomies – and the labels and standards that may follow – need to balance the use of voluntary vs. mandatory mechanisms for implementation, as appropriate to different market gaps, barriers, and policy objectives across jurisdictions.
7. Dynamism: Taxonomies should be dynamic to allow for refinement and adaptation to changing market environments, and should include review and updating processes informed by scientific developments and the experiences of market institutions.
8. Consequences: Taxonomies need to be carefully designed so that they do not result in unintended consequences, such as disproportionately increasing transaction costs for green and sustainable finance products.
9. Coordination: Taxonomies for green and sustainable finance should be closely coordinated with other frameworks for market transparency and disclosure, including those already in place (i.e. the TCFD).
10. Transparency: Procedures for the development of taxonomies should be as transparent as possible, to allow market participants to determine whether taxonomy instruments are implementable, fit for purpose, and aligned with both market and policy objectives.”

Adopt the 5 voluntary Principles