The G20 Meeting and Sustainable Finance: What should President Jokowi say in Hamburg?

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The G20 Meeting and Sustainable Finance: What should President Jokowi say in Hamburg?

By: Rahmawati Retno Winarni  (TuK’s Executive Director) and Jalal (Sustainable Finance Expert for TuK)

The G20 heads of finance meeting ended on Saturday, March 18th, 2017. The results are really shocking to all parties because they show that USA protectionism can really change many agreements that have been made years before. Steven Mnuchin, the USA finance minister, publicly stated that the G20’s approach against protectionism has been ‘not really relevant’.

 

Representatives of China, Japan and the EU have expressed their deep disappointment over the difficulty of maintaining free, mutually beneficial, and fairer trade among the G20 nations. They have all gone to great lengths to reach an agreement by accommodating the interests of the United States without harming the goals and approaches that have been believed to be the best. But the US non-compromising attitude made the deal unachievable.

 

In addition to protectionism, the United States is also showing science denialism in the form of opposition to climate change mitigation and adaptation efforts. In the US itself the budget for environmental protection has been cut by 31%, the coal industry is revieved, and the large-scale oil industry is encouraged. At the G20 the US, together with Saudi Arabia, successfully blocked any reference to funding for climate change management in the text of the agreement, since the text needs to be unanimously approved by all parties. With President Donald Trump openly declaring that climate change is a hoax made by China to detriment the US economy, and that any finance towards dealing with the issue is a waste of money, it is impossible for the United States to participate in addressing the issue.

 

With the loss of statements about free, mutually beneficial and fairer trade, as well as the statement on funding for climate change programs, the meeting was declared a failure by many parties. Fortunately, agreements on exchange rate stabilization and the cessation of currency devaluation competitions did enter the agreements. However, with the failures in these two key issues, all countries—besides the United States and, of course, Saudi Arabia—expect remarkable improvements to be made at the G20 meeting of heads of state in Hamburg.

 

Therefore, the presence of President Jokowi in Hamburg next July needs to be well prepared. President Jokowi’s message should be an important part of the effort to return the two issues to the text of the agreement agreed upon by the heads of state. Meanwhile, on the other hand, Indonesia also needs to get long-term benefits from the meeting. Not only from trade, but also from investment and funding for the benefit of Indonesia’s environmental rehabilitation/restoration which is also beneficial to the world. Some of the messages that need to be addressed are:

 

First, show the advantages of the trade that the G20 has been fighting for. Free, mutually beneficial and fairer trade is one of the raison d’etre of the G20. Economic progress has been achieved through this model and this needs to be supported by concrete evidence of benefits. Up till now, President Trump has become ‘famous’ for his disregarding even the most elementary data. Without having to point out the mistakes in what Trump believes, the emphasis on mutual progress needs to be expressed explicitly.

 

Second, provide a comprehensive picture of the possible impact of protectionism on the US economy. Protectionism has a short-term appeal, which may be the only thing calculated by Trump. However, the world has a large number of examples that show that in the long run protectionism is not profitable. Long-term losses, to be felt by the people of the United States long after Donald Trump is no longer serving as president, need to be calculated and considered by Trump’s economic team which will certainly be present in Hamburg.

 

Third, emphasize the importance and urgency of addressing climate change for the whole world. A total of 97% of scientists qualified in all branches of climate science have agreed that climate change is happening, that the cause is anthropogenic, that climate change mitigation and adaptation efforts need to be done soon, and that the world will experience worse impact if handling of the problem is slowed down. The United States, as the world’s second largest emitter in the world after China, cannot ignore this because not only its own people will suffer, but will also endanger the whole world. The impact on the United States itself needs to be accentuated.

 

Fourth, provide an overview of the socio-economic benefits that have been, and can be, gained for countries that have started to implement a new climate economy. Handling climate change seriously means not only costs some money, but in turn also brings massive economic benefits. All environmental economists agree that the earlier climate change is handled, the lower the cost. In addition, the profits to be gained from these early investments are bigger. Examples can be found in many of the G20 countries, but successful examples can especially be shown from cities and states within United States, many of which have already implemented economies compatible with climate change management objectives.

 

Fifth, express support for investments into achieving SDGs. Not only with regard to climate change, all government and private investments should be directed towards financing that is in line with the achievement of SDGs by 2030. This is the very definition of sustainable financing. The United States itself still has a high gap in many of the SDGs, so it is necessary to direct public financing to the closure of the gap. All other countries as well. President Jokowi can also emphasize that SDG17 emphasizes on intra- and international cooperation in its achievement, so investment in the achievement of SDGs also needs to be done in needier developing countries.

 

Sixth, express support for the GreenInvest Platform under the leadership of Germany. In January 2017 it was agreed that one of the important G20 programs under the German leadership is to run the GreenInvest Platform, not just for the G20 countries, but also for the developing countries that need it. In the calculations of the GreenInvest Platform, to shift the world towards a truly low-carbon green economy, resilient to climate change, with no pollution generation, requires $ 90 trillion, most of which should be invested in developing countries. President Jokowi needs to express support for this platform to show his support to the green economy and developing countries. In addition, of course, this will benefit Indonesia itself.

 

Seventh, urge for the enactment of social and environmental safeguards for investments carried out by, and in, G20 countries. Most financial institutions of G20 countries already have some social and environmental safeguards policies for their investments. However, these are generally entirely voluntary and/or limited in their applicability. The voluntary approach is no longer sufficient, as social and environmental issues related to investments continue to rise.  Many of them are damaging the country where the investments are being made, while the economic benefits are kept by the country of origin of the investment. The enforcement of social and environmental safeguards throughout G20 countries will ensure positive net impact of investment in origin and destination countries.

 

Lastly, invite sustainable investments to Indonesia. Indonesia is a very attractive investment destination for various economic sectors. Moreover, the ease of doing business in Indonesia continues to increase. President Jokowi should emphasize on sectors of the economy that are attractive to foreign investment, but it should be stressed that Indonesia requires sustainable investments, with solid economic-social-environmental dimensions. Indonesia has suffered a lot from both domestic and foreign investments that economically profitable for investors with smaller economic benefits for Indonesia, while the whole negative social and environmental impacts are borne by this country. This needs to end by only accepting sustainable investments.

 

In order for these messages to be taken seriously by other G20 countries, Indonesia needs to show that its policies and development programs are directed to sustainability. Among the most important issues is ensuring that Indonesia has a regulation on sustainable finance. Until now, there is only soft regulation in the form of a roadmap that has been created by the Financial Services Authority and the Ministry of Environment and Forestry, which was launched in December 2014. It would be better if, before going to Hamburg, President Jokowi ensures first that the roadmap has been enacted into a Financial Services Authority Regulation (POJK). This is crucial to show that Indonesia really means business.  Sustainable business.