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International Monetary Fund. Monetary and Capital Markets Department

Abstract

The October 2019 Global Financial Stability Report (GFSR) identifies the current key vulnerabilities in the global financial system as the rise in corporate debt burdens, increasing holdings of riskier and more illiquid assets by institutional investors, and growing reliance on external borrowing by emerging and frontier market economies. The report proposes that policymakers mitigate these risks through stricter supervisory and macroprudential oversight of firms, strengthened oversight and disclosure for institutional investors, and the implementation of prudent sovereign debt management practices and frameworks for emerging and frontier market economies.

International Monetary Fund. Monetary and Capital Markets Department

Nothing is as powerful as an idea whose time has come . – Victor Hugo Looking Farther Sustainable finance incorporates a large array of environmental, social, and governance (ESG) principles that are becoming increasingly important for borrowers and investors. ESG issues may have material impact on corporate performance and may give rise to financial stability risks via exposure of banks and insurers and large losses from climate change. The integration of ESG factors into firms’ business models—prompted by regulators, businesses’ own interest, or by

International Monetary Fund. Western Hemisphere Dept.

consolidation process, it mitigates the need to take hasty measures over a short period of time. Environmental, Social and Governance (ESG) Practices, and Sustainability Commitments Sustainable and impact investments are becoming key drivers of global capital allocation decisions. Investors are increasingly embedding ESG factors into their sovereign creditworthiness assessments, reshaping their fixed-income investment strategies. Likewise, multilateral institutions are more frequently incorporating responsible investment and sustainability standards to their loan

International Monetary Fund. Asia and Pacific Dept

issuances up to HK$200 billion during 2021–25 to help jump start the green bond market development and establish a benchmark yield curve. The HKMA, as the manager of the Exchange Fund, is a signatory of the United Nations Principles for Responsible Investment and has incorporated environmental, social and governance (ESG) factors in its investment process, giving priority to green and ESG investment if their long-term returns are comparable to other investments on a risk-adjusted basis. In addition, the Green and Sustainable Finance Grant Scheme was launched in May 2021

International Monetary Fund. Asia and Pacific Dept

, including material ESG factors. In early 2021, the GFIT launched a public consultation of Singapore-based financial institutions on a taxonomy to identify activities that can be considered green or transitioning towards green. In May 2021, Singapore announced a carbon exchange to trade carbon offsets, Climate Impact X (CIX). 7 C. Singapore Banks and Environmental Sustainability 13. Singapore’s largest domestic banks are taking steps to assess the financial impact of environmental risk . As methodologies to quantify and assess these risks are evolving, disclosures

Rohit Goel, Deepali Gautam, and Mr. Fabio M Natalucci

standards, and introduction of “Carbon-neutral bonds” 20 . A detailed coverage of the work remains a future work extension. Table 1. Key Types of Sustainable Fixed Income Categories Type of Debt Instruments Key properties Fixed income Green bonds Specific bonds that are labeled green, with proceeds used for funding new and existing projects with environmental benefits. Green money market funds Apply ESG factors to the investment of money market instruments. Social bonds Bonds that raise funds for new and existing

Rohit Goel, Deepali Gautam, and Mr. Fabio M Natalucci
Sustainable finance has become a key focus area for global investors and policy makers. Last year proved to be a breakout year for emerging markets (EMs), with sustainable debt issuance in 2021 surging to almost $200 billion. This working paper, the first comprehensive study in the literature, analyzes the evoluiton of EM sustainable finance markets, including differences with advanced economies. The analysis shows how sustainable finance in EMs is growing fast not just in aggregate but importantly across many dimensions. The paper also identifies key development areas for EMs and policies to strengthen the resilience of sustainable finance markets.
Mr. Jiaqian Chen, Maksym Chepeliev, Mr. Daniel Garcia-Macia, Ms. Dora M Iakova, Mr. James Roaf, Ms. Anna Shabunina, Dominique van der Mensbrugghe, and Mr. Philippe Wingender

financial products (via Ecolabel) to protect integrity and trust of sustainable finance market. Ongoing Fostering investment in sustainable projects. Ongoing Disclosing how ESG factors are incorporated when providing investment advice. Enhance transparency to end-investors on how financial market participants consider sustainability. Ongoing Developing sustainability benchmarks and ESG disclosures for benchmarks. Concluded Mainstreaming sustainability into risk management Better integrating sustainability in ratings and market