A summary from Court Assistant Ashutosh Shastri:
- UK Private Finance Strategy paper unveiled – Climate Reporting, Climate Risk Assessment, Returns and Markets and Mobilisation (3Rs and 1M) cornerstones of UK Green recovery strategy in run up to COP-26- This is a huge plus for the City.
- The Portfolio Allocation Metrics report from the team led by David Blood of Generation Investment Management is a huge step forward towards the required consensus on forward looking benchmarks for asset managers- begins to fill an important gap
- Number of Asset Owner Alliances emerging focused around Climate Risk reporting
- UK Green Sovereign Bonds to be issued Spring 2021- much will depend upon sustainabledemand for these; great step forward.
- Leveraging public funds with private capital- single most challenge before the City (This isnow important for our green investment led recovery); Next Step Green Infrastructure Bank (?)
- Within the EU Non-Financial Risk Directive, climate risk reporting still remains “optional” inthe EU; this hopefully will soon change- Christine Lagarde
- 70% of all ESG mandated funds still based out of the EU- diversification required? EU Justtransition funds will be highly contested for (esp by fossil intensive Germany, Poland etc) how this is being handled- still an open issue
- The “report or explain” guidance by the London Stock Exchange on climate risk (Nik Rathi’scomment)
- The obligatory TCFD reporting requirements announced by Alok Sharma, BEIS.
Our view is that there is a need for balancing sustainability exuberance with pragmatism about economic competitiveness.
The view from Day 1: Dr Rhian-Mari Thomas OBE, Chief Executive of the Green Finance Institute
Today would have already been an extraordinary day in green finance -- with the publication of Mark Carney’s private finance strategy for COP26 and David Blood’s new report on ‘Measuring Portfolio Alignment’ for transitioning to NetZero – even before the major announcements from the UK Chancellor at the Green Horizons Summit, we co-hosted with City of
London Corporation with support from WEF.
As over 30,000 viewers tuned in to the summit today, it was surreal for me to hear the news that the UK government would issue its first green sovereign bond, that so many of us have worked so hard to promote and champion, while sitting at my kitchen table. I can only imagine the cheers that would have met that announcement had we been at London’s Guildhall as in previous green finance summits. Chancellor Sunak also announced that the UK would establish a green taxonomy and introduce mandatory climate disclosures by 2025 – the latter being an action that UN Secretary General Antonio Guterres highlighted earlier in the day as being a necessary step for governments alongside ending fossil fuel subsidies and introducing carbon pricing.
Indeed the collective enthusiasm and engagement of the community across the globe urging greater action has been inspiring whether hearing Christine Lagarde call for greater information and innovation or the IMF’s Kristilina Georgieva calling for us to “harness the firepower of the financial sector” for a global green recovery.
It is also clear that the international climate finance community has been buoyed by the results of the US election including Mary Schapiro who said the difference now for climate would be “extraordinary” and that a Biden Administration would “only be a positive for the future of financial reporting on climate risk.”
Increasingly we’re seeing the rhetoric turn to action. At the Green Finance Institute our focus is on collaboration, practical solutions and financial innovation and we heard those messages loud and clear today.
Listening to the regulators, the politicians and leaders from across the financial and private sectors today I was struck by the pace at which collectively we are ensuring that we have the building blocks in place to channel the capital we desperately need towards a Net Zero transition – within the context of a global recovery.
And I am excited that we’re doing it all again tomorrow.
What you may have missed
Mark Carney, the UK Prime Minister’s Finance Advisor for COP26 and UN Special Envoy for Climate Action, announced a private finance strategy for COP26. Describing climate change as a “crisis which involves the entire world, and from which no one will be able to self-isolate”, Carney set out his framework designed to ensure that every financial decision takes climate change into account. Resting on four pillars – reporting, risk management, returns, and mobilisation – it will mean that every company, bank, insurer and investor will have to adjust their business models.
- Reporting: improving the quantity, quality and comparability of climate- related disclosures, using the Task Force on Climate-related Financial Disclosures (TCFD) as the starting point for any mandatory disclosure regime.
- Risk management: ensuring that the financial sector can measure and manage climate-related financial risks. This calls for wider use of climate stress tests, and to develop and disclose their management of climate risks on their balance sheets.
- Returns: helping investors identify the opportunities in the transition to net zero and report their own alignment.
- Mobilisation: building new public-private partnerships, pipeline of investable projects and market structures to increase sustainable private financial flows, particularly to developing countries.
Key announcement and quotes from today’s speakers:
- Andrew Bailey, Governor of the Bank of England announced the new launch date of climate stress test exercise for June 2021 declaring: "But what is different [to COVID] with climate change is that we know now it is coming, so we can identify where risks will arise and start managing them in advance. Compared to the financial crisis and the pandemic, the risks from climate change are even bigger and more complex to manage. And acting now gives us the best opportunity to manage those risk”
- Christine Lagarde, President of the European Bank said: “The economic challenges of the climate transition are phenomenal and often I ask myself what is the cause: survival"
- Kristalina Georgieva, Managing Director, International Monetary Fund said: “To win the fight against climate change, we also must harness the power of the financial sector. We need policies that nurture sustainable finance and mobilize funds for green investments.”
- European Commissioner for Economy Paolo Gentiloni said: “The EU's budget for the next 7 years will fully earmark 30% for climate-related spending across all areas.”
- John Green, Chief Commercial Officer, Ninety One said: “Mobilising finance for the challenge of climate change will be defining issue of our generation.[...] This is mission possible, not mission impossible.”
- Rt Hon Kwasi Kwarteng MP, Minister for Business, Energy and Clean Growth, BEIS highlighted today that we did not do enough in the 2008/9 financial crisis to ensure a green recovery. He highlighted the importance of innovation and collaboration and offered the Green Finance Institute’s mission-driven alliances as a model, as well as the importance of developing new markets such as Mark Carney’s Taskforce on Scaling Voluntary Carbon Offsets.
- Antonio Guterres, UN Secretary General gave a rousing speech calling on governments to end fossil fuel subsidies, mandate TCFD and enact carbon pricing. He called on the financial sector to mobilise capital, and on regulators to also take action embedding climate measures in fiscal policy.
- Mary Schapiro, Vice Chair of Global Public Policy and Special Advisor to the Founder and Chairman, Bloomberg, said that said the difference now for climate following the US Election would be “extraordinary” and that a Biden Administration would “only be a positive for the future of financial reporting on climate risk.”
- Anne Marie Verstraeten, UK Country Head, BNP Paribas said “We would challenge oil and gas companies whether the speed of investment is as fast as you would want it to be. Is the speed fast enough to meet Paris alignment?"
Panel session highlights
There were several panels at today’s Summit. We have picked out a couple below:
Breakout Session: The Built Environment: The Green Finance Institute held a breakout session on the built environment and financing the net- zero transition:
• Dr Rhian-Mari Thomas (CEO, Green Finance Institute) was joined by Minister Kwarteng (Minister for Business, Energy & Clean Growth), Joe Garner (CEO, Nationwide), Julie Hirigoyen (CEO, UKGBC) and Nigel Wilson (CEO, L&G) to explore the practical, impactful and scalable financial solutions to help decarbonise the built environment.
- The panellists explored the growth in measurement, disclosure and financial product innovation in relation to the built environment; examples include the commitments by L&G and Nationwide to decarbonise the building stock they fund, the £1 billion commitment to green home products announced by Nationwide earlier this year, and the mechanisms under development by the Institute’s Coalition for the Energy Efficiency of Buildings including Property Assessed Clean Energy finance and Building Renovation Passports.
- Universal agreement among the panellist on the “win-win opportunities” in the decarbonisation of buildings, from emissions reduction and biodiversity gains, to jobs creation and health improvements.
- The panellists highlighted to opportunity to integrate embodied carbon and nature into the decarbonisation journey of our homes, as summarised by Minister Kwarteng who states “we’ve got to work with nature and nature-based solutions... and use market mechanisms” to bring in green pricing differentials.Breakout Session: The Future of climate-related Financial Disclosures
- Mary Schapiro, Vice Chair of Global Public Policy, Special Advisor to the Founder and Chairman, Bloomberg, lauded New Zealand’s decision to make climate-related financial disclosure mandatory, adding that it can “hopefully be a model for the rest of the world”.
- The latest TCFD status report showed progress in mainstreaming TCFD disclosure requirements driven by: investor demand (from large investors such as Blackrock and LGIM); policy and regulatory actions of central banks; and green COVID-19 recovery programs.
- Progress is welcome, but what we also need more data, said Audrey Choi, CSO, Morgan Stanley, adding that we cannot measure something if we do not have robust metrics and benchmarks. This will also help avoid greenwashing, allowing us to compare “apples to apples”.
• The panel agreed that regulatory oversight was important, with global standardisation required. Lucrezia Reichlin, Professor of Economics, London business School, stated “companies have given us the message, now is the moment of the global regulators”. The panel further stressed that discussions around disclosure and risk must be accompanied with discussions on the opportunities available. When looking forward, “we have seen tremendous opportunities for outsized growth” added Choi.
The view from Day 2: Dr Rhian-Mari Thomas OBE, Chief Executive of the Green Finance Institute
An inspirational start on Day 2 of the Green Horizon Summit with His Royal Highness The Prince of Wales outlining ten action points for green finance, setting the tone for what would be another day of solid, action- oriented discussions.
Nature was firmly on the agenda and keeping the Green Finance Institute busy. Our editorial director, Helen Avery led a panel that highlighted the necessity for nature to be put at the forefront of green recovery talks, illustrating the importance of the Taskforce for Nature-related Financial Disclosures which is dear to our hearts here at the Institute.
It was also busy day for our Chairman, Sir Roger Gifford today, who sat down with Professor Partha Dasgupta to discuss the value of nature and also with HSBC’s Noel Quinn. Indeed, it was a pleasure to see so many private sector leaders today making bold commitments including Michael Bloomberg, Larry Fink and Bill Gates.
For the UK, Rt Hon Alok Sharma continued yesterday’s positive momentum with the announcement that the government today endorsed proposals from the IFRS Foundation to establish a Sustainability Standards Board. And it was fantastic to hear Scottish First Minister Nicola Sturgeon share about the strides Scotland has been making in mobilising green finance including the launch of a Scottish National Investment Bank later this year. We are strong advocates of green banks here at the Institute.
Finally, on a personal note it was a privilege for me to speak with Christiana Figueres - a role model whose optimism and energy inspires us all. She exemplifies the type of pioneering leader who doesn’t aspire to leadership for the sake of status, but rather so that she can use leadership to bring about positive outcomes. It is this kind of leadership that we will need in the decades ahead.
A big thank you for all the messages we are receiving from people who are enjoying the Summit and feeling inspired to action by the speeches and discussions. We feel the same and look forward to the final day tomorrow.
What you may have missed today at the Green Horizon Summit
The Main Story: The Taskforce on Scaling Voluntary Carbon Markets released its recommendations today; launched its consultation paper. Today, Mark Carney, UN Special Envoy for Climate Action and Finance Advisor to UK Prime Minister Boris Johnson for COP26, announced the publication of initial recommendations from the Taskforce on Scaling Voluntary Carbon Markets. The development of a market is widely noted as a game-changer in addressing our environmental challenges sending a positive signal to nature-based project developers of carbon credits as well as to carbon capture innovations. It will create a new market to finance investments for net zero and nature, as well as creating opportunities in the financial sector. The Taskforce highlights six key recommendations for consultation before issuing a final report in January.
- Core carbon principles and a taxonomy
- Core carbon reference contracts to build upon
- Infrastructure of trade, settlement, financing and data creating a market
- Consensus on legitimacy of offsetting to build confidence
- Market integrity assurance
- Demand signals – offering consistent investor guidance
In a panel today at the Green Horizon Summit, the report and its implications were discussed by the Taskforce’s Chair, Bill Winters (Group Chief Executive, Standard Chartered), Tim Adams (President and CEP, Institute of International Finance), Sir Ronald Cohen (Chairman, The Portland Trust and Social Impact Investment Taskforce) and Annette Nazareth (Partner, Davis Polk).
For more information visit www.scalingvcm.com
Also, listen to Taskforce operating lead, Annette Nazareth share on today’s podcast with the Green Finance Institute
Key announcement and quotes from today’s speakers:
- HRH Prince of Wales: “The window for action is rapidly closing. With the urgency required, I hope you will join me to drive a new Marshal-like plan for nature, people and planet, led by the private sector to align our collective efforts and resources for the highest possible impact. Our children and grandchildren deserve nothing less.”
- Rt Hon Alok Sharma, MP: “Join the Race to Zero. Commit to net zero by 2050 at the latest and publish a clear plan of how to get there. Please do it now. Because we do not have time to waste. Together, with you knowledge and expertise, we can finance the move to our green global future.”
- Shemara Wikramanayake, Chief Executive Officer, Macquarie Group “Financial services have an obligation to be clear on requirements and work constructively with emerging markets governments to create the required conditions.”
- Minister Luhut Binsar Pandjaitan, Coordinating Minister for Maritime Affairs and Investment, Government of Indonesia “Indonesia will not let the pandemic derail our effort to reduce green plastic debris as much as 70% by 2025”
- Michael R. Bloomberg, Founder, Bloomberg LP and Bloomberg Philanthropies “This year, the Climate Finance Initiative has been helping emerging markets make climate finance a top recovery strategy so that they can accelerate their progress towards a clean energy future”
- Dr Ma Jun, President of the Beijing Institute for Finance and Sustainability Dr Ma Jun shared that the impact of COVID could lead to a short-term de-prioritisation of green finance for smaller emerging markets, but economic recovery bonds and other longer- term financial instruments (such as transition bonds) can lead to a more permanent global shift that effectively incorporates emerging markets.
- The Rt Hon Lord Goldsmith of Richmond Park, Minister for Pacific and the Environment, FCDA “The market is the most powerful force for change, other than nature herself. But until it applies a value to nature, and a cost to its destruction, that power will continue to drive destruction”
- Inger Andersen, Under-Secretary-General of the United Nations and Executive Director of the UN Environment Programme “Stimulus funds must go to zero carbon, nature positive and pollution free societies and economies. We must not saddle the next generation with Covid-debt and a destroyed planet,” adding: “We need financial powerhouses to open their books to scrutiny to make sure they make good on their commitments.
- Margaret Kuhlow, Global Conservation Director, WWF International “The Green Stimulus Index shows stimulus will have a net negative environmental impact in 16 of the G20 economies. It is concerning,” and stresses importance of Leaders Pledge for Nature.
- Dame Elizabeth Corley DBE, Chair, Impact Investing Institute outlined the urgency around action and the pace of innovation that needs to be achieved through 'transition financing'. Long term impacts and skills for the future need to be incentivised for the transition to zero.
- Jean-Laurent Bonnafé, Chief Executive Officer, BNP Paribas “We believe that only the establishment of common standards and metrics will enable the finance industry to contribute to a genuinely decarbonised economy. ”
- Nicola Sturgeon, Scottish First Minister “Scotland is intensifying our efforts to attract investment even during the COVID pandemic ” through the “The establishment of the Scottish National Investment Bank, that will be launched later this year, with the aim of becoming a cornerstone of the Scottish Economy. It’s primary mission will be to support Scotland’s transition to net-zero”
- Richard Curtis, screenwriter and film director “The power in the world lies in where you invest your money” speaking about the global Make My Money Matter campaign that he co-founded.
- Christiana Figueres, Global Optimism “There is about 150 trillion dollars of capital on the demand side wanting to have the information of climate risk that is embedded in companies. That is unheard of. That is no longer marginal, that is total exponential growth.” Adding: “[Making Financial] risk disclosure and pricing pollution are the highest impact measures that governments can take. ”
- Noel Quinn, Chief Executive Officer, HSBC “The industry needs to build transparency into the disclosure of our activity. The worse thing we can be accused of greenwashing. So we need to build acceptable reporting standards that are verifiable and that everyone looking at can say I understand exactly where that institution is and how well they are progressing on those commitments.”
- Philanthropist Bill Gates “[Leading companies] who take the [right] steps now, will not only help the world avoid climate disaster, they will position themselves for success in this new world. They will be the best equipped to finance, produce and buy the clean solutions that will underpin our future economy.” “We have a long road ahead of us but if we work together to support innovation, we will get this done. Let's go to work”
- Larry Fink, Chief Executive Officer, Blackrock “Because we are taking the long-term approach, we give people more time than people would like – but at companies that are not making changes we will vote against their directors”
Panel session highlights
There were several panels at today’s Summit. Here are summaries of some of them.
Panel Session: Investing in a Low-Carbon Future: Paths Forward to Addressing Enabling Environment Challenges
- Manus Cranny welcomed Ewen Stevenson (CFO HSBC), Alberto De Paoli (CFO, Enel), Tobias C. Pross (CEO, Allianz Global Investors), Maria Hakansson (CEO, Swedfund) to discuss the enabling environment for investment in a low carbon future, particularly in emerging economies.
- In terms of opportunities Maria suggested that solar in Africa, while having a small share of the global market currently, due to lower technology costs was seeing double digit growth. There was also the suggestion that the expanded use of IoT and blockchain would bring further opportunities in developing markets.
- Much of the conversation focused on the enabling role of universally and science-based standards. Panellists suggested that this was a key enabler to investors. In particular, the proliferation of standards undermines their applicability and hence, centralised and globally recognised standards
- Finally, the role of the new US administration was suggested to only be helpful but Alberto De Paoili added that the technology and returns on investment already exist and it isn't incentives which are required but frameworks to mobilise the capital at scale.Panel Session: Strengthening the Enabling Environment: Government and Multilateral Institutions Actions
- The panel brought together Josue Tanaka (EBRD), Danny Alexander (AIIB) and Jose Vinals (Standard Chartered), under the chairmanship of Lord Stern (Grantham Institute) to explore the opportunities for multilateral development banks (MDBs) to support the green finance agenda.
- The panellists said it was an opportunity for MDBs to move beyond Green and Social Bonds, to offer solutions from Green Loans to Green Deposits, from ESG Money Market Funds to Green Equities.
• Other core themes of the panel included the need for clarity and homogeneity on green standards and definition, the importance of climate policy that is not myopic, and the opportunity for governments to work in close collaboration.
Panel Session: Is Nature the Next Frontier?
- Global Canopy’s Andrew Mitchell discussed the Task Force for Nature-related Financial Disclosures, which launches next year that will help the private sector assess risk and impact. Until now, the role of nature has been recognised as being undervalued – and the source of large economic risk.
- Yet, inclusion of the environment in green recovery packages is lacking. WWF’s Margaret Kuhlow points out that stimulus packages will have a net negative environmental impact in 16 of the G20 economies, which is concerning. Governments must reduce harmful subsidies and also prime nature investments like they have with renewable energy – particularly in the food sector.
- Investment is necessary but as yet limited. Pollination’s Martin Berg points out from his firm’s own experience and better usable data is needed as well as policy changes and regulation. On data, Refinitiv’s David Craig points out better data is necessary but coming. There must be hand-holding over this journey lest the financial sector become the “policemen for nature” which they are unequipped to do.
- Extra: Episode 4 of the Green Finance Institute's podcast, Green is the New Finance, featured Ray Dhirani from the WWF discussing the message to financiers of Our Planet: Too Big To Fail herePanel Session: Scaling Investment into Resilience
• The panel session on Scaling Investment into Resilience brought together Emma Howard Boyd, Dr. Amal-Lee Amin (CDC Group) and
Professor Saleemul Huq (ICCCAD) to discuss how the private sector plays a pivotal role in accelerating investment into climate adaptation and resilience efforts.
- The panelists discussed the need for deeper collaboration between public and private sector actors, as well as the need to channel capital to the local level. Other core themes of the panel included the role of regulation in providing the right enabling environment to protect our natural ecosystems, which can be achieved through the use of carrots and sticks to stimulate positive investments and prevent negative investments.
- The panelists collectively stressed that we need both climate change adaptation approaches, to reduce the risks associated with climate change, and resilience measures, to build our capacity to absorb the stress imposed by climate change
About the Green Finance Institute
The Green Finance Institute is a co-host of today’s event with the City of London Corporation, supported by the World Economic Forum.
Established in 2019, the Green Finance Institute is the UK’s principal forum for public and private sector collaboration in green finance.
As part of its work, the Green Finance Institute convenes and leads mission- led coalitions, such as the Coalition for the Energy Efficiency of Buildings (CEEB) to identify and unlock barriers to deploy capital at pace and scale towards impactful, practical, real-economy outcomes. The Green Finance Institute is also among those recommending the establishment of a National Infrastructure Bank and has proposed the issuance of a Green+ Gilt.
The Institute is an independent, commercially focused organisation, supported by Her Majesty’s Treasury, the Department for Business, Energy and Industrial Strategy, the Foreign, Commonwealth and Development Office and the City of London Corporation.
Find out more about the Green Horizon Summit and the work of the Green Finance Institute here.
Useful Links to Upcoming Events:
London Climate Action Week
Finance in Common Summit
Natural Capital Finance and Investment Conference 2020
COP 26 Website