Economic materiality is the basis of all new macro-economic policy initiatives and such materiality can be established in a number of ways. In the case of strengthening international institutions after a global shock, establishing materiality can be accomplished through analysis of the changes in financial flows within international institutions. Development of proposals to strengthen these institutions can then occur on the basis of a clear diagnostic of the impact of these shocks. Alternative scenarios can then be modeled and solutions can be tested and prioritized on the basis of agreed to principles. The same is the case for the industries made up of regulated private-sector firms. Financial flows are transparent and modeling 'repair' or alternative scenarios can be accomplished once consensus has been established on materiality and the need to avert past or possible future risky scenarios.

The role of international governance innovation for growth is more complicated. This is in part because growth plans are inherently national rather than international. By virtue of its national focus, innovation in international governance should favour peer review and benchmarking as a vehicle to spur macro-economic innovation. For example, for the global macro-economic priority to spur growth via investment, peer review of country-specific strategies to boost investment is more likely to review reveal new areas of economic materiality in one country that have not yet been considered in another.

Barriers to finance for SMEs are one case in point. For example, one jurisdiction may establish growth plans based on innovative macro-economic reporting of SME economic activity such as SME export value or SME investment in innovation. As a result of innovative national-level reporting, other jurisdictions can benefit from this insight and consider materiality for their economy. It could therefore be argued that in the case of growth, international governance innovation could begin with national macro-economic innovation which is nested within global joint-working and benchmarking mechanisms.

Establishing priorities for such macro-economic innovation and exploration might be grounded in consultations with the private sector to establish hypotheses on economic materiality. Such an approach would make governance innovation a more open process and would open a channel to new lines of sight to uncover economic materiality and therefore channels for growth policy development to stimulate employment and mitigate inequality. Two areas which would appear to be material but as yet not explored are environmental goods and the role of SMEs in global trade.

A transparent approach to exploring as yet undiscovered areas of economic materiality would contribute to innovation to global governance priorities where current approaches are not yielding desired growth results.

The delay in full and consistent implementation of reformed regulatory frameworks is cause for concern. If the delay in implementation is due to a need of greater political degrees of freedom, there may be a case for establishing a communication channel with civil society (e.g. Global NGOs for whom financial reform is a priority) to establish a public constituency for implementation of reforms. Civil society actors may be able to remove the barriers to implementation by communicating before and after regulatory scenarios and their impact on society. Public understanding of the risks of not moving forward may remove non-technical impasses and ease implementation by doing some of the heavy lifting to shift the political landscape.

Development impact assessments point to the strong results from private sector vehicles for development project delivery. Establishing vehicles for benchmarking value for money of development investments may provide a means to improve confidence in development investments. International benchmarking of how national development agencies are changing how they engage with the private sector is one area which may contribute to innovation in governance of international development.

The new global framework for financing sustainable development calls for the alignment of economic, social and environmental priorities (Addis Ababa Conference in July 2015). The impact of the private sector on delivering (not just financing) development projects that address all three dimensions may provide evidence to strengthen international governance of development institutions.

In addition to benchmarking ‘principles-based’ approaches to improving international governance, there remain important gaps in evidence to track impact of good governance. The World Bank has identified 77 countries for which no poverty information is collected. This is more than half of World Bank developing country members. Investing in benchmarking how these 77 countries are establishing poverty information baselines is one area of international governance innovation that would pay dividends for global development institutions.

The WTO’s plurilateral Environmental Goods Agreement (EGA) initiative made good progress in 2015.  The following jurisdictions are engaged in the EGA: Australia, Canada, China, Costa Rica, the European Union, Hong Kong, Iceland, Israel, Japan, South Korea, New Zealand, Norway, Singapore, Switzerland, Chinese Taipei, Turkey and the United States.  The participants are now working actively in the plurilateral WTO negotiation process seeking tariff elimination for Environmental Goods in categories such as renewable energy, air pollution control (including CO2 capture), energy efficiency technology, environmental monitoring and analysis, as well as water treatment and wastewater management.   Of the original 660 goods submitted for consideration for tariff elimination, 450 were included in the Chair’s list of goods to be considered during the September round.  While this list is likely be subject to further refinements this fall, this large number of goods suggests that the participants are working to conclude an ambitious agreement.

Global trade in environment goods may prove to be an economically material area of global trade. As a test, Canadian exports of environmental goods excluding waste are of the same order as other areas of material economic activity for Canada. At $12 billion exports in environmental goods (excluding waste bi-products) are of the same order as Canadian exports of livestock, wood, processed food and minerals. As carbon regulations are brought into force at both the national and infra-national levels, the share of environmental goods as a share of economic activity may begin to displace trade in fossil fuels as global GHG emissions begin to decline in line with commitments to UNFCCC processes. Tracking trade in environmental goods may also facilitate benchmarking the impact of national macro-economic growth and innovation policies aimed at retooling economies within carbon-constraints.

For countries that choose to establish growth plans that are focused on stimulating investment in low carbon infrastructure, reports on trade in environmental goods would provide insight into the pace of translation of investments at the micro-economic level.

For countries who have focused investments in innovation in low-carbon technologies, trade in environmental goods may provide evidence of aggregate supply and demand which in turn may stimulate the formation of new private sector capital markets.

Establishing principles to address trade implications of phasing-in of carbon-pricing regulations will be key to avoiding spill-over effects onto jurisdictions that have not yet implemented such regulations. Understanding the impacts and implications of possible border tax adjustments that reflect an internalized carbon price will be of increasing importance.

Efforts since 2007 have established the economic materiality of fossil fuel subsidies and continued refinement of this analysis by the IMF (fossil fuel subsidies are equivalent to $1000 USD a year per citizen in the G20) continue to push the case for economic materiality of these subsidies and the pressing need for policy change. And yet commitments by G20 members to end fossil fuel subsidies have not yet been honoured despite increasing evidence on the need to restrict extraction of proven reserves of fossil fuels.

For some oil exporting countries, geo-political shifts and potential future restrictions on extraction of proven reserves may be leading to accelerated production today. For other oil producing countries, new technologies have ushered an era of energy security. Overall, the production and burning of fossil fuels has increased to meet demand in top net importers of oil (China, Japan, India and South Korea) while the US’s net imports sit at half the volume only five years ago.

For still other oil producing countries such as Canada, the implementation of carbon-pricing regulations needed to meet international emissions targets are re-writing the economic landscape.

In what is a period of significant global economic change, how can international governance innovation ease the transition? The G20’s support of the UNFCCC process and of entities such as Climate Finance Study Group is key but there are other avenues worth exploring.

Could the G20’s peer review process of national growth plans also be applied to how G20 members establish growth policies that also decarbonise the economy? Carbon regulation seeks to reduce carbon emissions at the lowest price. Carbon regulation will stimulate investments in business processes and in deployment of new technology.

Peer review of low carbon growth policies may enable G20 members to learn from national level macro-economic policy for growth in a carbon constrained world and apply these learnings to innovation in international governance.