Normalizing sustainability in finance

This briefing paper argues that current global and national financial systems act as a critical barrier to sustainability, primarily because financial flows are driven by perceived profitability rather than sustainability goals. It advocates for the 'normalization' of sustainability criteria in finance through fiscal measures, international regulatory harmonization, and the active inclusion of developing countries in shaping the global sustainable finance architecture.

• The current global financial system is a major obstacle to sustainability, with liquid assets totaling approximately USD 400 trillion. Of these, 64% are owned by individuals and 36% by governments, while private financial institutions manage about 85% of these assets.
• There is a significant funding gap for the 2030 Sustainable Development Goals (SDGs) in developing countries, estimated between USD 8.4 trillion and 10.1 trillion. While some flows are driven by ESG or net zero standards, the primary driver of global financial flows remains perceived profitability.
• To move sustainability from voluntary initiatives to standard working practices, the author suggests using fiscal measures like taxes and subsidies to reflect externalities, such as carbon pricing. Multilateral development finance institutions and sovereign wealth funds are identified as key actors that can accelerate this shift by making sustainability norms a condition for cofinancing.
• International harmonization of financial regulations is essential to prevent fragmented regimes in developing countries from hindering capital flows. The paper highlights the International Platform on Sustainable Finance, the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), and the TCFD as existing platforms for this coherence.
• The author emphasizes that for sustainable finance platforms to be effective, developing countries must be included as equal partners, as they are the primary destinations for sustainable investments. Furthermore, the USD 100 billion mentioned in the Paris Agreement should be viewed as a minimum floor rather than a ceiling given the trillions needed for infrastructure in these countries.

APA

Stockholm Environment Institute (n.d.). Normalizing sustainability in finance. https://www.sei.org/wp-content/uploads/2022/05/normalizing-sustainability-in-finance-stockholm50backgroundpaper.pdf

Chicago

Stockholm Environment Institute. Normalizing sustainability in finance. n.d. https://www.sei.org/wp-content/uploads/2022/05/normalizing-sustainability-in-finance-stockholm50backgroundpaper.pdf.

Wikipedia

{{cite report |author=Stockholm Environment Institute |title=Normalizing sustainability in finance |url=https://www.sei.org/wp-content/uploads/2022/05/normalizing-sustainability-in-finance-stockholm50backgroundpaper.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{stockholmenvironmentinstitutendnormalizing, author = {{Stockholm Environment Institute}}, title = {{Normalizing sustainability in finance}}, institution = {Stockholm Environment Institute}, url = {https://www.sei.org/wp-content/uploads/2022/05/normalizing-sustainability-in-finance-stockholm50backgroundpaper.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }