Sustainable finance: a pathway to stability and resilience in the Global South

Posted on April, 30 2024

Low- and middle-income countries should be able to count on technical and financial support from Europe to develop credible sustainable finance frameworks, recommends the Commission’s expert group on sustainable finance.
The EU should provide low- and middle-income countries (LMICs) with targeted financial and technical support through a dedicated and well-resourced Sustainable Finance Advisory Hub, helping them develop credible sustainable finance frameworks (taxonomies, disclosure requirements, standards) while promoting interoperability, recommends a report prepared by a Commission’s High Level Expert Group composed of 20+ international senior experts from civil society, the finance sector, academia and observers from European and international institutions, including from the Global South.

As a member of the group, WWF supports the report’s recommendations, which aim to help low- and middle-income countries disproportionately vulnerable to climate change, to attract the sustainable finance and investment they need to become more resilient to climate- and nature-related risks. 
The report from the ‘High-Level Expert Group (HLEG) on Scaling up sustainable finance in low, and middle-income countries - which was set up by the Commission in June 2022, provides recommendations for transformative change by promoting sustainable finance and investment in LMICs, while nurturing the growth of local capital markets and the issuance of sustainability-related capital instruments.
Alice Ruhweza, Senior Director of Policy Influence and Engagement and member of the HLEG, commented:
‘We are delighted to present this new report, which provides an ambitious roadmap on how the EU can support low- and middle-income countries on their sustainable finance journey. Nine years on from the global commitments to the Paris Agreement and the sustainable development goals (SDGs), and with just six years left to change trajectory, not only are most of the targets off track, recent multiple crises have undone much of the progress that had already been achieved. Many LMICs require a full-scale injection of sustainable investment across the board to realise a just sustainable transition, from sustainable infrastructure to resilient agriculture, natural capital to health and education, climate adaptation to clean energy. We hope that the European Commission will swiftly implement the HLEG’s recommendations and support countries in the Global South through a dedicated and well-resourced Sustainable Finance Advisory Hub’. 
Maud Abelli, Lead WWF Greening Financial Regulation Initiative said:
Low- and middle-income countries are the most vulnerable to climate change and nature loss. Often, they are also the least able to afford investments that strengthen their resilience.  In line with the EU supporting its partner countries’ transition to a net zero, nature positive economy, it will be imperative to work together to protect financial stability by appropriately integrating climate- and nature-related considerations into financial banking and insurance regulation and supervision. Therefore, it is critical that the Sustainable Finance Advisory Hub also supports central banks, supervisors and financial institutions when it comes to integrating climate-related financial risks and environmental risk considerations in LMICs.”
Sebastien Godinot, Senior Economist, WWF European Policy Office added:
The European Commission has led the way on sustainable finance frameworks by making corporate transition plans and disclosures on forward-looking climate targets mandatory under its sustainable finance action plan published six years ago. Now it is time for the Commission to work more closely with its partner nations in low- and middle-income countries, including the Brazilian government which hosts the G20 this year, and the South African government next year, to promote ambitious sustainable finance frameworks in international fora as well as with global standard setters, and make them truly interoperable”.  
Editors notes 

For WWF, the most crucial recommendations in the report are the following: :

What is needed to foster credible and interoperable sustainable finance Frameworks?
  • The European Commission should provide coordinated Technical Assistance support through a dedicated and well-resourced Sustainable Finance Advisory Hub, helping LMICs develop credible sustainable finance frameworks (taxonomies, disclosure requirements, standards).
  • The EU can step up its support comparing EU, national and regional taxonomies in order to  enhance the interoperability of these frameworks reflecting on how to increase transparency, visibility, recognition and use by the markets.
  • Beyond these measures, in the long term, the Commission should explore further modalities to support greater interoperability, by enhancing the international use and implementability of the EU Sustainable finance frameworks (including the EU taxonomy) for LMICs. Moreover, the Commission should continue working towards collaborating at international fora, including the G20, as well as with global standard setters.  The EU should provide adequate support to central banks, supervisors and financial institutions in LMICs to help them integrate not only climate- but also nature-related financial risks and sustainability considerations in all central banking and supervisory activities. 
How can the EU external financial support be made more agile and fit for purpose to scale up sustainable project development? 
  • The EU should involve relevant actors and facilitate EU instruments to strengthen and scale up collective action, through the establishment of a single EU digital platform hosting sustainable projects in LMICs. This would be instrumental in helping to coordinate and manage the development of sustainable projects through their full lifecycle, from start to end. The EU can also facilitate timely access and involvement of key relevant actors and EU instruments to strengthen and scale up collective action. This could act as a single entry point for all stakeholders and provide clarity on sustainability aspects of the projects.
How can the EU help promote investments in the preservation of nature in LMIC?  
More information:

The EC-mandated ‘High-Level Expert Group’ (HLEG) on sustainable finance was set up by the European Commission with a two-year mandate to make recommendations on how the EU can support low- and middle-income countries in scaling up their access to sustainable finance by developing a dedicated EU Sustainable Finance Strategy and by promoting sustainability-related financial instruments. This final report represents the end of its mandate.
Alice Ruhweza (WWF) presents the report of the HLEG to Commissioner Urpilainen and IMF Managing Director Georgieva.
© Katarina Macejakova / WWF