The impact of natural disasters and the difficulties posed by climate change on the financial sector is one of the most hotly debated topics among regulators throughout the world.
Because it is now possible for Arab monetary and financial authorities to play a key role in facilitating the transition to green and sustainable finance, based on taking climate change-related environmental risks into account when setting goals and making financial decisions.
Following the 2015 Paris Climate Agreement, policymakers and regulators focused on environmental sustainability, particularly addressing global low greenhouse gas emissions; Article 2 of the Paris Agreement requires signatories to commit to low greenhouse gas emissions and climate-resilient development, and the Paris Agreement is the most important global climate change agreement.
By December 2020, 125 countries have established a "net zero emissions" policy or equivalent targets by 2050 at the latest, necessitating enormous systemic economic shifts. Every economic entity will need to align its strategies, operations, and activities with a global temperature of less than 2°C, and the financial sector (which includes banks, fund managers, insurance companies, investors, and a wide range of supportive professional services) should play a leading role in climate change efforts.
Green and sustainable finance promote the flow of capital into enterprises, investments, initiatives, and technology that contribute to a low-carbon, sustainable world. The financial sector serves a straightforward purpose. Starting from the ground up, every financial choice should be made with climate change in mind at the individual level, not simply at the corporate level. Because implementing green and sustainable finance principles and practices at the individual level into their guidance, analyses, actions, and decisions leads to a smooth and straightforward transition toward financial sustainability.
The broader scope of sustainable finance encompasses more than only climate change threats. In effect, we won't be able to adequately handle the climate emergency unless we also address the broader issues of economic and social sustainability, as well as creating shared prosperity for current and future generations.
As a result, and in line with the Arab Monetary Fund's desire to assist its member countries in the development of the financial sector, which contributes to improving financial stability and access to financial services in the Arab region while keeping up with current and hot issues at the international level, the Arab Monetary Fund is assisting Arab central banks and ministries of finance in their efforts to green and sustain financial systems.
The activities of the Arab Monetary Fund target the following areas, but are not limited to:
• Training courses and workshops on green and sustainable finance.
• Ways to develop green and sustainable finance in line with the sustainable development goals in the Arab countries.
• Central Banks, Climate Change, and Green and Sustainable Finance.
• Sharia-compliant banks and green and sustainable finance.
• Green FinTech, financial innovation, and green finance.
• Green financial instruments (Loans, Bonds, Sukuk, Stocks...).
• Financial derivatives for weather and climate risks.
• The role of fiscal and monetary policies in promoting green and sustainable finance.
• Non-bank financial institutions and green finance for green investment projects.
• Green and sustainable insurance.
• Small and medium business and green finance.
• Financial obstacles to developing renewable resources and renewable energy projects in the Arab countries.
• Greenwashing and its repercussions on the financial sector in the Arab countries.
AMF Green and Sustainable Finance Framework
The Arab Monetary Fund is developing a framework for green and sustainable finance (“AGSFF”) with the aim of highlighting how the fund can support central banks and ministries of finance in Arab countries in moving towards green and sustainable finance and managing climate change risks in accordance with the fund’s vision and strategy.
This framework is considered a basic pillar for integrating the risks of climate change and environmental sustainability into the financial decision-making process and risk management in the Arab countries, with the aim of enhancing the supply and demand for green and sustainable finance, supporting green investments, and green finance tools, through establishing effective Arab and international partnership and cooperation in the form of a network integrated.