GovernanceG20 priorities: sustainable finance, cross border payments

G20 priorities: sustainable finance, cross border payments

Italian officials outline what they hope to achieve as this year’s G20 president

Italy has made the establishment and further improvement of sustainable finance a key goal for their G20 presidency.

“Climate change has become an integral component of the G20 finance track agenda,” said Daniele Franco, Italian minister of economy and finance, while speaking at the IIF’s G20 summit.

He called on the private sector to play a part in the drive towards net zero.

“A complete and irreversible transition towards a net zero emission economy cannot be driven only by policymakers and legislators. It has to be fully shared by firms, investors and market players.

“The financial sector plays a crucial role in satisfying the targets set in the Paris Agreement and investing in more sustainable assets.”

To further enhance the work the G20 is doing in sustainable finance, Italy has re-established the sustainable finance study group, upgrading it to a working group. A major priority this year is the establishment of international sustainable finance reporting standards.

The Financial Stability Board’s (FSB) Task Force on Climate Related Disclosures (TFCD) has already published recommendations on what those standards should look like, with international organisations like the International Financial Reporting Standards Foundation using them as a blueprint. Ignazio Visco, Governor of the Bank of Italy said more needs to be done with regards to standards setting in separate remarks.

“Further cooperative efforts are needed to speed up convergence towards a baseline international reporting standard for disclosing climate related risks.”

Cross border payments and regulation

Carrying over from Saudi Arabia’s presidency is the enhancement of cross-border payments. The G20 has commissioned the FSB to identify qualitative and quantitative targets in the areas of cost, speed, access and transparency.

Visco said the Bank of Italy would host an international conference to discuss the FSB’s targets in September.

A growing area of interest in cross border payments is the use of stable coins and the possible emergence of central bank digital currencies (CBDC).

“The G20 will also consider issues related to central bank digital currencies and their possible cross border use,” Visco said. “Central bank digital currencies, and global stable coins are closely interrelated. They share a transactional purpose and may complement or substitute one another. It is therefore important to maintain a holistic view of the payment sector.”

Governments and central banks are eager to identify both the benefits and risks of digital currencies. Half of the projects being conducted by the Bank of International Settlement’s (BIS) Innovation Hubs are related to CBDCs. The BIS in collaboration with central banks have opened two additional hubs in London and Stockholm this week, with plans to open three more in Frankfurt, Paris and Toronto in the coming months.

Visco closed by discussing the importance of striking the right balance between regulation and private sector innovation.

“They are complimentary,” he said.

“A healthy economy needs them both, the [state] provides good rules, high quality public services and intervenes in areas where social returns are high, but private business is insufficient. The [market] generates dynamic and innovative firms, able to promote their work, and to be rewarded for the quality of the outputs,” he added.

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