I. Problem Statement
Financial institutions’ actions are causing harm to communities, nature, and the climate, leading to destabilization and conflicts. Financial regulation must establish frameworks to prevent fundamental destabilization of our economy, and thus promote a sustainable future for our planet. This is a significant responsibility.
Therefore, we call upon financial regulators and supervisors, central bankers, the BIS, BCBS, FSB, and G20 to abide by the following principles.
End Fossil Finance Now. It is time to cut off the financial support for fossil fuels. For the sake of humanity, nature, climate, and financial stability, financial regulators and central bankers must supervise the financial sector's transition away from the destructive and risky fossil fuel industry. This will require decisive action from international standard setters.
Indigenous People's Rights and Human Rights. We urge for the critical recognition of indigenous and traditional communities' fundamental rights. Financial bodies must honor these rights, including their entitlement to consultation and agreement - or refusal - regarding projects within their domains. The Right to Say No enhances the communities' central right not only to participate in and be aware of plans, but also to reject proposals if negotiation outcomes fall short. This crucial concept amplifies community voices, promotes equitable standing, and urges corporations to value indigenous wisdom and customary laws. Therefore, the Right to Say No is also a right to endorse a self-determination, equipping communities with a tangible tool to shape their own growth model via grassroots methods and local law. Financial institutions have a duty of care to avoid infringement of substantial human rights like health, life, water, privacy, and property, often at risk from extractive industries.
Environmental Defense and Harm Prevention: It is crucial that no financial backing supports activities that lead to deforestation and the destruction of critical ecosystems–our seas, wetlands, rainforests, and cryosphere. The preservation of our ecosystems should take precedence in financial decision-making.
Precautionary Approach, Forward-Looking Supervision, and Equity. The impacts climate and biodiversity crises should not be underestimated due its radical uncertainty. We call for a forward-looking approach to financial planning and supervision, factoring in the long-term effects of climate change and biodiversity loss. We must balance the need for global consistency with the recognition that some countries may require more time and support to achieve these reforms.
Debt for Climate. Global South countries are at the frontlines of twin crises of climate and debt. Debt is a form of colonialism that forces these countries to continue extracting fossil fuels and prevents any climate action of the magnitude needed to face the climate crisis. Global North nations must begin to pay their climate debt by cancelling the financial debt they hold on Global South countries in order to enable a self-determined just transition.
Decolonize Global Finance. BIS, IMF and World Bank must reexamine their mandate to build an international financial system that serves the needs of the Global South and future generations. Debt traps linked to development and catastrophe relief, unfair credit rating systems, Global North dominance over IMF voting and reserve asset allocation, structural adjustment and austerity, and other policies perpetuate colonial dynamics. Global South countries and their central banks must have fairer representation in Global standard-setting and financial decision-making spaces.
III. Immediate Policies
We demand the immediate enforcement of one-for-one capital requirements for new fossil fuel projects, projects with risks of deforestation or ecosystem degradation.
G7 Finance Ministers must agree that timely international prudential reform is a critical component of systemic finance reform for climate and biodiversity safety. They must accelerate reform in the banking and insurance sectors, and the G20 Finance Ministers must endorse this agenda, mandating the Financial Stability Board, the BCBS, and IAIS accordingly. The FSB, BCBS, and IAIS should confirm an accelerated timeline on expected outputs already underway and announce roadmaps for this new agenda.
We demand the cancellation of Global South financial debt in order to enable a self-determined, just transition. The Global South owes trillions of dollars in debt, and also holds trillions of dollars worth of fossil fuels that they are forced to continue extracting to pay that debt. Cancelling the debt is a prerequisite to enable an energy transition that can leave trillions of dollars worth of fossil fuels in the ground.
IV. Political and Technical Demands:
The BCBS should focus on revising the systemic risk buffer revision, large exposures threshold, and revision of credit risk weights for targeted set of exposures subject to high transition risk.
The Financial Stability Board should consider climate and biodiversity-related risks from a broader perspective of financial stability, beyond banking and insurance.
National financial regulators and supervisors must approve and support these changes, while finance ministers must push this agenda forward in the G20 and IMF. Implementation of this agenda should be at the core of the G20's work on sustainable finance.