Why do we need a Sustainable Finance Toolbox?

The challenge to achieving the targets of the Paris Agreement and the United Nations Sustainable Development Goals (UN SDGs) is enormous – all economic sectors around the globe need to transform the way of creating welfare for society. This maxim applies to the financial sector and the real economy alike and results in the need for new rules, business models, innovation and incentives. Both public sector institutions and private actors play key roles in “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development” (Paris Agreement Article 2.1.c) and aligning financial flows with the UN SDGs.

In the recent years, new sustainable finance strategies and tools have been developed on an international, national and regional level such as the EU Action Plan on Financing Sustainable Growth. These national and regional policy instruments and regulations are often fragmented and lack a holistic and systematic approach to achieve the structural transformations of the national economic and financial system necessary. This is why Frankfurt School and GIZ have jointly developed the Sustainable Finance Toolbox. The creation of sustainable financial systems is a complex multi-stakeholder and multi-level action task. This requires a well-structured comprehensive yet country-tailored and flexible approach to involve public and private stakeholders in a most efficient way.

In cooperation with:

Commissioned by:

Scope of the Toolbox

Fields of action of the SF toolbox

  1. Awareness raising and agenda setting
  2. Data and standardisation
  3. Transparency and disclosure
  4. Prudential requirements and risk management
  5. Market instruments
  6. Leading by example
  7. Capacity building and inclusion

Actor groups of the SF toolbox

  1. Governments
  2. Central banks and financial supervisory authorities
  3. Public financial institutions and agencies
  4. (Public-) Private actors and initiatives
  5. International initiatives and networks
  6. Civil society and academia

The SF toolbox aims to provide a well-structured, comprehensive but flexible answer to this challenge. It is a comprehensive guidance tool to assist developing and emerging countries in increasing the sustainability in their financial system based on a broad menu of options for taking action.

The SF toolbox structures actions along relevant actor groups and fields of Action. It allows a holistic perspective on relevant financial regulation, on enabling conditions by the public and on complementary action by private sector initiatives. The SF toolbox can support countries in their sustainable finance efforts through advisory work and technical assistance (TA) by identifying gaps in the existing framework and establishing an enabling environment in the respective countries.

The core SF toolbox document is complemented by a technical guidance on how to structure the country advisory process based on the SF toolbox, and a pool of good practice examples referring to specific SF toolbox action.

How does it work?

The SF toolbox is output- and needs-oriented. Country ownership in the development and implementation of actions is at the core of the SF toolbox philosophy. The SF toolbox will steer discussions in a structured way so that stakeholders are enabled to have a joint platform for interaction (e.g. between governmental agencies, public – private interactions, increased dialogue with academia and civil society, etc.). Through the comprehensive analysis underlying the SF toolbox application, local partners will get new perspectives on existing frameworks and can position themselves more easily in the international sustainable finance context, helping the financial sector to gain a competitive edge. When applying the SF toolbox, it is possible to develop actions for a single actor group (e.g. through an action plan for an authority) or to reflect several / all actor groups (e.g. in a national sustainable finance roadmap). As an example, for the public actor group “Central banks and financial supervisory authorities” the action “Provision of a comprehensive data basis on green lending” could be developed under the field of action “Data and standardisation” (see graphic below).

Sharing good practices

The applicability of the SF toolbox benefits significantly from one of its key components: lessons learnt from existing good practices – successful and innovative examples of the different fields of action included in the SF toolbox. Good practices and relevant publications / literature from around the world have been collected along the dimensions of the public actors groups and the different fields of action. This ensures that the advice and guidance based on the SF toolbox is not only derived from theoretical frameworks and recommendations, but stem considerably from practical international experience. Among the collected good practices from around the world, you find a roadmap for aligning the financial sector with sustainable development in Morocco (several actor groups involved: Central banks and financial supervisory authorities / Governments / (Public-) Private actors and initiatives) and climate stress tests conducted by the Dutch Central Bank DNB (single public actor group involved: Central banks and financial supervisory authorities).

Further knowledge and information on SF policy action can be found at (selection):

  • The Green Finance Measures Database (GFMD) launched in 2019, and the Green Finance Platform are part of the Green Growth Knowledge Platform (GGKP) hosted by UNEP, UNIDO, OECD and GGGI. It comprises several hundred good practice example of green and sustainable finance policy measures: https://greenfinanceplatform.org/financial-measures/browse
  • The Network of Central Banks and Supervisors for Greening the Financial System (NGFS) was launched in 2017 and has grown to 55 members in early 2020. The NGFS develops and publishes method for central bank and regulators alignment to climate change: https://www.ngfs.net/en
  • A comparative analysis on sustainable finance regulation from the civil society perspective is provided by the FS-UNEP Centre’s “Finance fit for Paris (3fP)”-Tracker (https://www.3fp-tracker.com/) for several EU countries.