Aviva Investors CEO Says Global Finance Architecture 'Not Fit For Purpose'

Aviva Investors on Thursday called on the IMF, World Bank and global financial rulemakers to create a global transition plan for finance to support the faster mobilisation of private capital to address climate challenges.

The current financial system is not fit for purpose and must be reformed to address the climate crisis and to oversee an orderly and just transition, the fund unit of British insurer Aviva said in a report released to coincide with the U.N. COP27 climate talks between world leaders in Egypt.

"The global economy and financial system are currently financing their own destruction because the global financial architecture is not fit for purpose," Aviva Investors CEO Mark Versey said.

"Finance needs proactive net zero leadership from its global regulators and standard-setters if we are to evolve an effective paradigm for the next 80 years."

Aviva Investors' demands reflect the concerns of critics who say institutions like the IMF and World Bank are not acting fast enough to tackle the climate emergency, both in the pace of their deployment of capital to emerging countries and in the decarbonisation of their own portfolios.

A separate report commissioned by this year's climate summit host Egypt and 2021 COP26 host Britain said on Tuesday developing countries would need $1 trillion in external financing every year by 2030, and match that with their own funds to meet the world's goal of preventing runaway climate change by keeping average warming to below 2 degrees Celsius.

By contrast, in 2021 the world's leading development banks lent $51 billion to poorer countries.

Without changing regulatory regimes, climate action will only ever be a "second-tier priority," for the highly-regulated $510 trillion dollar financial industry, the fund manager warned.

Aviva Investors has challenged all institutions who oversee global financing, including the IMF, World Bank and regulators the Financial Stability Board, IOSCO and the Basel Committee, to create a 2050 net zero transition plan for their work, report annually on their progress and collaborate with others in the financial system to create an overarching transition plan.

Billions of dollars of global finance continues to pour into projects which exacerbate climate change, rather than those which finance mitigation, adaptation and loss and damage, because of weak leadership on climate from regulators, the fund manager said in the report.