Supporting Climate Compatible Financial Systems Development

The objective of this study is to assess how financial systems can better align with the new low-emission and climate-resilient development paradigm. The study aims to identify tangible actions that can accelerate this process in four case study countries – Mexico, South Africa, Thailand, and Uganda. It furthers derives concrete recommendations for how enhanced international cooperation can proactively support the required change.

The study provides a systematic overview of how the functions of the financial system can be adapted to support decoupling economic activity from greenhouse gas emissions and strengthening resilience against the adverse effects of climate change. It uses a functional perspective as its methodological approach by looking at financial system development from the perspective of financial functions. Financial functions (such as lending and investing) vary less between countries compared to the institutional set-ups that provide and govern these functions. A functional perspective thus provides a more useful framework for comparing climate compatible financial systems development in different jurisdictions.