Following the crisis, the G20 set a financial reform agenda focused on the prudential perspective: “making finance not hurt society“. Ten years later, the current momentum around sustainable finance brings us back to the more fundamental question of finance’s purpose in society. World leaders have agreed some ambitious societal objectives, such as the Paris Agreement and the broader Sustainable Development Goals (SDGs), and the need to re-direct financial flows to support these is obvious to all.
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For finance to become truly sustainable, we need to think differently about its development and about how it impacts on society and the economy.
The elephant in the room is that the transformation of the financial system over the past three decades – sometimes referred to as a “financialisation” of the economy – has contributed significantly to accelerating environmental degradation, increasing inequalities and a weakening of social protection standards. Suggesting that finance can support a transition to a sustainable economy means turning this approach on its head. For finance to become truly sustainable, we need to think differently about its development and about how it impacts on society and the economy.