Cooperating for Sustainability

Opening speech of Federal Minister for Development Dr Gerd Müller at the Annual Meeting of the Asian Development Bank in Frankfurt/Main 02.05.2016

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Dear Mr President Nakao,
Distinguished guests,

Welcome here to Frankfurt in Germany. Ladies and gentlemen, Mayor, we are delighted that we have here guests from across the whole world, and I would like to thank everyone concerned for making this possible.

As I came in here today I met President Nakao and our Chinese guests, and also the Minister from Australia. We know that it has taken some of them 16- to 24-hour-flights to get here to Frankfurt, and so we are delighted to see them; with beautiful weather and spring sunshine here in Germany and Frankfurt. We are pleased to welcome them.

Mr. President, the ADB is doing extraordinarily important work and, with the topic of sustainable divestments, you are launching a new debate on our shared common future.

We need a new concept of development for fair globalisation from Australia to Asia to Europe – and we should not forget Africa, the USA and Latin America. Beating poverty, conserving natural resources, keeping global warming well below two degrees, those are the key questions for the survival of us all. Not only for developing countries but also, and in particular, for us in the industrialized nations. Those are the commitments arising out of the agreements of New York and the Treaties of Paris.

What would a world without hunger and need cost us, ladies and gentlemen?

The United Nations has estimated it would cost some 4,000 billion euros. That is 30 times as much as is currently invested in development assistance. But the key message is that a world without hunger is possible. So let us send out a clear signal here in Frankfurt; we want to beat hunger, poverty and need in the world.

Development efforts need to be stepped up to a whole new dimension in future. And that cannot be done with public funding alone. We also need private investment and fair trade. Those are the three key pillars.

The good news is that there is enough capital available in the world. Just look at Frankfurt, just look at the towers in which the banks have their offices; we have enough capital. Pension funds, sovereign wealth funds, insurance companies alone are managing, across the world, some 93 trillion US dollars; that is more than global GDP.

What we need now are incentives to make sure that this private capital is mobilized for sustainable development. At the same time, we cannot allow billions to continue to flow into the fossil fueled growth we have pursued to date. Financial markets across the world must be harnessed in the service of sustainable development. And, President Nakao, the ADB is playing a pioneering role in doing so; my congratulations on that.

Policymakers must set the necessary framework for these efforts. That is why global targets such as the de-carbonisation, the vision of a carbon-free century, laid out at the G7 summit here in Germany under the leadership of Chancellor Merkel, are so important. Or the commitments made in Paris to stay well below two degrees. These targets point the markets in the right direction. This move in the new direction has already begun.

But policymakers need to do a lot more to speed up that change. The social and ecological costs of goods and services must be reflected in prices. We need to tax "bads", and not goods. We need higher taxes on higher CO2 emissions, and tax breaks for sustainable investments. Let us put a price on CO2 emissions – that will make the market into our ally. Unfortunately, so far the opposite has been happening. Fossil fuels are being subsidised to the tune of over five trillion US dollars every year.

To the finance ministers, heads of central banks, those responsible for the global markets I say: You need to send out the signal that the global finance markets need to be slowed down. On the US markets alone, every day more than one billion shares change hands through high frequency trading. We should at least think about whether this can be the future, and whether that type of trading should not be subject to higher taxation. The EU Commission estimates that a tax of 0.1 percent on shares and bonds and a tax of just 0.01 percent on derivatives would generate an annual 50 billion euros – 50 billion euros that could be invested in sustainable development.

We are here at the Annual Meeting of the Asian Development Bank; it too will have the task in future of steering more private capital towards sustainable investments.

We wish to, indeed we must, enter new terrain as investors and, so, that is why today we wish to launch a new finance or insurance instrument. The money will be used to prepare projects and reduce risks. In this way, every dollar invested by the ADB can attract many more dollars from the private sector.

Another successful innovation is also to be rolled out to Asia, namely climate risk insurance. It is a paradox that we as industrialized countries have the highest CO2 emissions in the world, per capita. But those who suffer the impact of climate change most severely are developing countries in Asia and Africa – in other words, mainly poor countries. That is why climate risk insurance is a very important instrument.

If we are to steer private funding to the areas where it is needed most, then we need some good ideas. For example, how to provide better protection against exchange rate risks; how to prevent speculation on food so as to keep food prices within acceptable levels. We expect the financial industry to show more innovation.

In Germany, for example, responsible investment is a rapidly growing market. In ten years, it has grown from five billion euros’ worth to now nearly 130 billion euros. Ecological and social standards should also be made the global standard when it comes to financial investment in the infrastructure area.

One example is the textile sector. We want the ILO core labor standards to be made binding in the lending rules of the multilateral development banks, from the World Bank to the ADB, who is already acting as a pioneer in this regard. No child labor, minimum standards across the entire value chain from the mine and the fields all the way to the coat hanger: introducing these standards in ecological and social fields is what we want to tackle together. We must tackle this together. It is not only AAA ratings that are of key importance, but also "GGG ratings", globalisation for the greater good in value chains from Asia to America. If the development banks subject their projects to rigorous testing, then they set the bar for others.

When discussing innovative instruments and lending guidelines, one thing that is key is that it is not just about what kind of and how many investments there are in a country, but also about how much money is leaching out of the country again, unnoticed. Thanks to the Panama Papers we now have some names. But we knew even before this disclosure that money laundering and tax avoidance is causing developing countries to lose more than 1,000 billion US dollars every year. Just imagine that if we just had some transparency and proper tax collection, and if that was to be applied to trade with developing countries, then we would have much more money available for development in these countries, much more than we can possibly provide in official development assistance – 1,000 billion US dollars of tax avoidance money every year as compared with 160 billion US dollars in official development assistance. That money is lacking, of course, for schools, for infrastructure, for children, for health, for jobs. So we need more transparency on movements of money, worldwide. We need a global finance register and all tax-related information must be made available to developing countries.

Therefore, I strongly call on you to support President Nakao and all of you here. We will be sending out a very important signal. I call on you to support the 10-point plan set out by German Finance Minister Schäuble. He recently presented it at the IMF meeting in Washington.

For our partner countries it is also very important that we provide them with advice and support in tax matters, and on how to make tax systems socially and ecologically compatible.

Ladies and gentlemen, a global change to fair globalization is made up of many small changes. The change must begin in our minds. We have to start thinking about the future, about tomorrow, about the consequences of our decisions for our grandchildren and great grandchildren.

That is why, at this Annual Meeting of the Asian Development Bank here in Germany, we want to get everybody on board. Therefore I would like to thank you, once again, for visiting this conference in record numbers – not only from across the world, but also from many different areas: business, finance, business associations, political foundations, NGOs, policymakers and government institutions, researchers, academics and scientists, and the media. I am delighted that you are all here and that you are so committed.

There is a lot on our agenda. We will be showing in very practical ways what options already exist. We will be learning from each other. We will be taking on board ideas and criticism from civil society.

Every investment decision must be part of a solution, must be part of a sustainable development towards implementing the SDG targets for more justice, for peace and for a fair partnership between developing countries, emerging economies and industrialized nations. We must all continue developing.

Thank you very much.

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