Other Financial Sector Study
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Publication
Activating Alignment: Applying the G-20 Principles for Sustainable Finance Alignment with a Focus on Climate Change Mitigation
(Washington, DC: World Bank, 2023-09-26)The first action in the G-20 Sustainable Finance Roadmap proposes six high-level principles for the development and global coordination of approaches to align investments with sustainability goals. “Alignment approaches” are national and international frameworks for the financial sector that aim to monitor global sustainable finance flows and ensure that they are contributing to the temperature goals of the Paris Agreement, the Sustainable Development Goals (SDGs), and other international sustainable finance objectives. These approaches increasingly leverage “alignment tools,” which include but are not limited to (a) taxonomies (or classifications) of private sector activities that can be labeled as achieving environmental and social objectives; (b) certifications and labels that confirm that products or services have met environmental, social, and governance (ESG) standards; (c) disclosure frameworks that guide private sector entities to manage and report on their ESG performance; and (d) transition frameworks that help the private sector design a credible shift to low-carbon technologies and practices. The tools can then be applied in different ways—ranging from national-level regulations to voluntary private sector–led initiatives, to corporate-level practices. The tools can be applied by investors and finance providers for different purposes at different levels: at the “asset level” (as in determining whether a project or activity is compatible with a relevant sustainable finance taxonomy or due diligence framework); the “entity level” (as inwhether a corporate or financial institution has a robust low-carbon transition plan and adheres to the International Labour Organization (ILO) Declaration on Fundamental Principles and Rights at Work); or “portfolio level” (as in whether an index is aligned with a credible temperature objective or supports poverty reduction). The G-20 Voluntary Principles for Developing Alignment Approaches provide a common foundation for ensuring these alignment approaches are robust and consistent. -
Publication
Emerging Market Green Bonds: IFC-Amundi Joint Report
(Washington, DC: World Bank, 2023-09-12)This fifth edition of the ‘Emerging Market Green Bonds Report’ reviews key green, social, sustainability, and sustainability-linked (GSSS) bond market trends in 2022 and outlines our expectations for 2023 and beyond. It also discusses the implications for the asset class of recent developments in policy, regulation, and technology. As in the previous four editions, this year’s report is also the result of joint work by Amundi, a leading European asset manager, and the International Finance Corporation (IFC), a member of the World Bank Group. -
Publication
Scaling Up Ecosystem Restoration Finance: A Stocktake Report
(World Bank, Washington, DC, 2022-11)Humanity is embedded in nature and depends profoundly on the goods and services it generates. Future economic development and well-being hinge on healthy and resilient ecosystems that provide our food and raw materials, drinking water, clean air, and the stability of the climate system. More than half of the world’s gross domestic product (GDP) is generated in sectors such as construction and agriculture that depend on ecosystem services (WEF 2020), making nature relevant not only to policymakers, but also business and financial leaders. The UN Decade on Ecosystem Restoration is an initiative led by the United Nations Environment Program (UNEP) and the Food and Agriculture Organization (FAO) of the United Nations, which aims to drive the restoration of one billion hectares of degraded land between now and 2030. The UN Decade is a rallying call for the protection and revival of ecosystems around the world, for the benefit of people and nature. Only with healthy ecosystems can we enhance people’s livelihoods, counteract climate change, and stop the collapse of biodiversity. The UN Decade Finance Task Force (FTF), chaired by the World Bank, aims to catalyze action which can contribute to unlocking the capital needed to meet the Decade’s goals. ‘Unlocking Restoration Finance: A Stocktake Report’ is the first in a series of outputs of the FTF. This report provides an overview of the current challenges to and opportunities for increasing public and private investment in restoration. It looks at innovative approaches to financing restoration activities taken by actors in the public, private, or non-profit sectors and the potential for these to be replicated or scaled. The report also lays out a draft roadmap of actions the FTF will take to overcome challenges and contribute to scaling investment in restoration. -
Publication
Unleashing Sustainable Finance in Southeast Asia (November 2022)
(Washington, DC, 2022-11)Climate change mitigation and adaptation efforts are urgently needed across Southeast Asia. The financial sector can play a critical role in supporting countries in their journey toward greater resilience and sustainability, but it must adapt to do so effectively. This report shows that while sustainable finance has experienced widespread expansion, sustainable financial markets remain small and unable to meet the funding needs of ASEAN-5 economies for their various sustainability objectives. In fact, the reach of sustainable financial markets is extremely limited, with a sizeable gap especially for small and medium enterprises. Survey evidence reveals that underlying these patterns are marked gaps in climate-related information, capabilities, and investment opportunities. This report highlights the importance of developing the financial architecture for sustainability in financial markets, with emphasis on improving the information environment. -
Publication
Egypt - The First Sovereign Green Bond in the Middle East and North Africa: Case Study
(Washington, DC: World Bank, 2022-11-01)Sustainable debt is loan or bond financing that helps mitigate or address a specific environmental or social concern or achieve positive environmental or social outcomes. The term environmental, social, and governance (ESG) investing, often used interchangeably with sustainable investing, denotes an investment approach wherein investors apply nonfinancial factors related to ESG issues in their investment analysis to identify risks and opportunities. The practice of ESG investing began in the 1960s as socially responsible investing, with investors excluding stocks or entire industries from their portfolios to avoid investing in morally questionable businesses. In recent years, ESG investing has garnered tremendous interest because of the recognition of environmental and social risks to the global economy; the urgency that the Paris Agreement and the 2030 agenda for sustainable development have created; and the resulting impetus to finance initiatives that help limit global warming, environmental degradation, and various social problems. Investors use a variety of strategies, including negative or exclusionary screening, positive screening, integration of ESG considerations, thematic and impact investing, and active ownership and stewardship, to incorporate ESG considerations into their investment processes. Climate change, resource scarcity, and demographic and social change feature prominently in several investment strategies. Impact investments are often made to address challenges in sectors such as sustainable agriculture, renewable energy, conservation, microfinance, and affordable and accessible basic services, including housing, health care, and education. -
Publication
Islamic Finance and the Development of Malaysia’s Halal Economy
(World Bank, Washington, DC, 2022-10)The halal economy (HE) plays an important role in Malaysia’s economic growth, contributing 7.5 percent to the Gross Domestic Product (GDP) as of 2020. Under the Twelfth Malaysia Plan, 2021-2025 (12MP), one of the key strategies to boost Malaysia’s economic growth is enhancing the competitiveness of the halal industry to capture a more significant share of the global halal market. The term halal refers to anything that is permissible or lawful under Islamic Law that dictates the way of life of a Muslim (a follower of the Islamic faith). Hence, the scope of the HE is broad and can be defined as an industry that is involved in the provision of halal products and services, including food, clothing and fashion, cosmetics and personal care, travel, and financial services. Consequently, Islamic finance is both parts of the broader HE (Hassan et al., 2021) and can facilitate the development of the HE. This report requested by Bank Negara Malaysia (BNM) explores the role of Islamic finance in supporting the development of Malaysia’s HE with the objective of informing policy discourse on enhancing existing strategies to increase access to Islamic finance solutions to underserved HE enterprises. The report comprises the following chapters, (1) the current state of the HE; (2) the financing ecosystem of Malaysia’s HE, (3) enhancing role of Islamic finance for the HE in Malaysia; and concludes in Chapter 4 with a set of recommendations for stakeholders in Malaysia. While the recommendations focus on Malaysia, they may also be relevant for other developing economies where the HE and Islamic finance are prominen -
Publication
Key Principles for Effective Regulation and Supervision of Credit Reporting Service Providers
(Washington, DC: World Bank, 2022-10-01)The first section of this report briefly introduces the topic and explains the role of credit reporting systems in the financial infrastructure. The second section briefly discusses the role of the different types of CRSPs and recognizes alternative credit reporting service providers as emerging players in the industry. It also sheds light on the use of new technologies in credit reporting and their potential implications. The third section discusses GPCR as published by the ICCR in 2011. GPCR represents the only universal set of standards for credit reporting as included under the Financial Stability Board (FSB) noncore compendium of standards for the financial sector. GPCR’s five principles describe the respective roles of key stakeholders, accompanying guidance, and recommendations for effective oversight. The section elaborates on the relevance of GPCR for developing key principles for the effective regulation and supervision of CRSPs. In doing so, it provides numerous examples of how GPCR applies in the regulatory frameworks of different jurisdictions around the globe. The fourth section discusses the major types of risks related to credit reporting systems. These risks are not necessarily mutually exclusive and interrelate in many ways, but they can be termed strategic risk, operational risk, cyber risk, model risk, reputation risk, and legal and compliance risk, among others. The section focuses on the evolving role of credit reporting with a forward-looking approach to identify risks and vulnerabilities. The fifth section discusses the key considerations for regulatory and supervisory principles. The section outlines the preconditions for developing and implementing an effective regulatory and supervisory framework and explains the scope of application of the key principles and the responsibilities of regulatory and supervisory authorities. The sixth section then introduces twelve principles for safe and efficient credit reporting along with the roles and responsibilities of the supervisory authority. The seventh section of the report discusses the suggested approach authorities should adopt in applying the principles. This discussion emphasizes the importance of maintaining holistic oversight of how the credit reporting system functions to ensure that the players in credit reporting activities can manage the risks related to credit information sharing. Finally, the eighth section presents the methodology for assessing the regulatory and supervisory frameworks at the jurisdictional level. The assessment methodology is primarily intended for international financial institutions (IFIs), but it is also helpful for national authorities and other internal and external assessors. Assessment responsibility for observing adherence to the key principles primarily lies with individual countries’ regulatory and supervisory authorities. -
Publication
Strengthening Financial Stability, Resilience and Safety Nets in the Pacific Islands: Сompilation of In-Depth Papers
(Washington, DC, 2022-08)Over the past two years, the World Bank has been working with Pacific Island Countries (PICs) to assess the impact of the COVID 19 pandemic on their financial systems and provide guidance to the PIC prudential authorities on policy issues relating to strengthening the resilience of financial systems in the region. As part of this work program, the World Bank produced a series of seven deep dive papers on a range of issues relating to financial stability in the PICs. Each paper was presented during an online workshop with the prudential authorities of the PICs and followed by a Questions and Answers session. The papers in the series are: COVID-19 and financial stability: guidance on financial system surveillance in the pandemic, COVID-19 and stress testing, micro prudential and macro prudential policy: seeking the right balance, early intervention in banking supervision, recovery planning for banks, bank resolution, and financial safety nets This volume pulls together these deep dive papers while being mindful that each paper stands on its own. Yet, an integrated approach is needed in all these policy areas, and it is vital to tailor reforms to country specific circumstances This recognizes that, even in a stable financial system there will inevitably be periods of financial stress and that there is a need to ensure that frameworks are in place to address these events cost-effectively and in ways that preserve market discipline, avoid moral hazard and minimize fiscal risks. Private -
Publication
FinHealth Andhra Pradesh (India): Analyzing Public Financial Management Systems that Affect Service Delivery Outcomes
(World Bank, Washington DC, 2022-08)While high levels of political commitment to improve health outcomes in the state have ensured that Andhra Pradesh (AP) ranks fourth among the category of twenty-one large states in the NITI Aayog Health Index, the health sector is challenged by an epidemiological transition with rising incidence of noncommunicable diseases (NCDs). The state has made significant achievements in the last five years in almost all key maternal and child health indicators. Despite these improvements, prevalence of diarrhea and acute respiratory infections (ARIs) among children under five years appears to be on the rise. Wide inter district variations in the health outcomes indicate challenges in equity and access. Since tax-financed government revenues are essential for progress toward universal health coverage (UHC), and efficient allocation and use of such revenues is more critical in resource-constrained environments, the state government agreed to undertake an assessment of public financial management (PFM) systems within the health sector. In recognition of this agenda, an assessment of the potential for achieving better alignment between the PFM and health systems was undertaken in August 2022. AP was the first state in India for the assessment. -
Publication
CivicTech: Transparency, Engagement, and Collaboration for Better Governance
(Washington, DC: World Bank, 2022-07-17)As economies and societies become increasingly digital, governments around the World are prioritizing the use of digital technologies and data to increase the participation and engagement of civil society in public matters. At the same time, citizen’s rising expectations and demands require public sectors to strengthen civil society engagement. Digital technologies and data have the potential to increase substantially the tools that governments have available to further involve citizens in policy and service design and delivery. This how-to-note provides advice on how to use digitalization to strengthen the engagement between the governments and citizens, with various examples of what CivicTech is and why it is an important element of the GovTech approach.