Jean Boissinot: sustainable finance runs risk of ‘over promising and under delivering’

Jean Boissinot, deputy director for financial stability at Banque de France and head of the secretariat for the Network for Greening the Financial System (NGFS), has warned of too much emphasis being placed on sustainable finance instead of policy changes to combat climate change.

“Sometimes, promoting green finance comes from the idea that financial policies could be an alternative to climate policies which are difficult to implement, and it is left to the financial sector to do the heavy lifting instead. When we argue for green finance on the basis of not very good arguments [such as these], we run the risk of over promising what finance can do and under delivering in the end,” said Boissinot.

Boissinot made the remarks at an EDHEC business school webinar, on the topic of “making sense of green finance”. He also argued that green or sustainable finance may seem obvious but could be a confusing idea when there is a lack of understanding. Boissinot showed an image with 20 diverse initiatives, all with different goals and intentions, which could be hard to make sense of collectively. This included the Principles for Responsible Investing, the Green Bond Principles, Climate Action 100+, the Glasgow Financial Alliance for Net Zero, and Reclaim Finance.

The NGFS is a group of central banks and financial regulators organised with the aim of strengthening the global response to the Paris Agreement. It has previously set six long-term climate scenarios, ranging from the “ambitious” of policy changes leading to global net zero by 2050, to the most pessimistic of “basically unchanged” policies from those being enacted currently.

Loss and damage fund

From a policy perspective but insisting he was speaking on a personal capacity, Boissinot also observed that the loss and damage fund for countries impacted by climate change, introduced at COP 27 in Sharm El-Sheikh last year, was a “long overdue” development.

Welcoming the decision, Boissinot also warned that the world should not act “as if we could provide an insurance against the worst of climate change when we have not yet addressed the risk that climate change will keep on worsening and worsening. So I think [the loss and damage fund] is something that is begging for strengthening commitments to transition the global economy to net zero in a timely and determined manner.”

Last month, Livio Stracca, deputy director general for financial stability at the European Central Bank, spoke about how the NGFS is for the first time looking at short-term climate scenarios. These scenarios will be able to assess more immediate impacts, such as how the war in Ukraine and rising energy prices will affect net-zero transition plans.

The EDHEC Future of Finance event at which Boissinot spoke is one in a series of webinars that look to address the most recent advances in the financial services industry and discuss how finance can be a tool for tackling key economic and social challenges.