You are here

Without finance, Rio+20 will fail to deliver

As Rio+20 is not expected to lead to legally binding treaties along the lines of The Earth Summit in 1992, the ability to deliver on aspirations and policy agreement from the conference is going to depend principally on the mobilisation of finance.

This is a time of government budget austerity in many parts of the world. However, government expenditure is not the only potential source of money: it is increasingly necessary to look to flows of finance from the private sector and private investors. Yet if private finance could be relied upon to deliver a green economy, it would already be happening. Governments have a key role to play in encouraging finance to change direction, by setting an appropriate framework of incentives and other measures.

Information is crucial in this. Investors and the general public need higher standards of reporting on what companies are doing, in order to make better-informed decisions. Governments need better information from companies in order to feed into their decisions on policy and regulation. Insurers need better information in order to set realistic premiums that take into account environmental risk. A key outcome from Rio+20 therefore needs to be an agreement to raise standards of corporate reporting about environmental and social risks and impacts. This cannot be on a purely voluntary basis – if it is, we can expect nothing much to change. Governments should agree to establish a process for negotiating a binding convention on reporting. Stock exchanges should reinforce this by setting their own requirements for the listing of companies.

Reforms to corporate governance are also needed, requiring directors to pay much greater attention to environmental and social risks and impacts, taking their responsibilities beyond simply the short-term financial ‘bottom line’.

The prices of different products create a structure of incentives for investors and consumers - but currently, prices in general do not reflect the environmental impacts of the products on sale. Trading in carbon emissions permits represents one attempt to move in this direction, although there have been many problems with current schemes.

Rio+20 should agree that governments will move forward to restructure incentive patterns. Immediate priorities in this area are:

  • An end to fossil fuel subsidies, which currently skew price incentives in exactly the wrong direction;
  • A level playing field for sustainably sourced and certified commodities, such as timber, so that they are not undercut by rival products which are cheaper because they are produced unsustainably; and
  • An agreement by governments to increase the proportion of total tax revenue accounted for by green taxation.


Government expenditure remains important: expenditure options should be assessed partly on the basis of climate and biodiversity impacts, so expenditure in some areas of government is not undermining what the same government is spending money on through its environmental policy.

Governments should pledge to increase the funding made available to assist the transition to green economy. In particular:

  • A Financial Transactions Tax should be introduced to raise money for green economy;
  • International shipping and aviation fuel should be taxed;
  • Money currently spent on fossil fuel subsidies and environmentally harmful agricultural subsidies should be redirected; and
  • There should be a thorough review of the investment policies and infrastructure schemes of the World Bank and regional development banks.

Without finance, Rio+20 will to fail to deliver. The main measure of its success will be its achievement in influencing financial flows, towards investment in the transition to green economy.

Victor Anderson, Senior Policy Officer, Green Economy, WWF