By Laura Canevari
On the 2nd of July, the City of London hosted its third Green Finance Summit, coinciding with London Climate Action Week. The event revolved around the critical role that financial institutions have to play in the transition to a low carbon and resilient economy.
As noted by Hoesung Lee, Chair of the IPCC, the scale and speed of climate impacts is unprecedented, and much higher than previously understood. Failing to achieve net zero emission by 2050 and increases in temperature over 1.5 °C above pre – industrial levels would have irreversible impacts on the climate system. Although, in aggregate terms, the shift of investment required is relatively small (0.4% of global GDP) In fact, there are not enough policy supports and market initiatives to enable this shift.
One of the challenges Mr Lee stressed is the disparity between aspirations and facts: indeed, the majority of Nationally Determined Contributions (NDCs) from countries that have signed the Paris Agreement lack an aligned financial strategy to fuel the transition. This is also why the announcement by John Glen (MP and Economics Secretary of the Treasury) of the release of the UK Green Finance Strategy has been so well received. Mr Glen also reminded us on the key role that the City of London has to play as one of the key financial centres globally, in helping to unlock capital and to develop the financial instruments to seize the opportunities for a green and resilient future. It is not enough for London to address the climate challenges facing the city: it has to actively engage in shifting the financial system and changing the way in which companies do business.
The event also saw the launch of the new Green Finance Institute, which will be directed by Dr Rhian Mari Thomas, former Global Head of Green Banking, Founder and Chair of the Green Banking Council at Barclays, who strongly advocates for the need to update our definition of what markets are for. In her view, their purpose today is not simply that of generating value and revenues to its shareholders: It is to facilitate the movement of capital to meet the needs of society.
The conversations throughout the day were lively and filled with aspirations. But they also reminded the audience of the challenges ahead. During a session chaired by Daniel Godfrey (CEO of the Investment Management Association) that focused on how to unlock capital for the SDGs, Andrew Parry (Hermes Investment Management) noted that it is not the lack of available finance that is holding us back; but rather the lack of financeable projects. He emphasised that we should focus on building the business model of potential solutions, and from that point the finance will flow more easily. Amal-Lee from the Inter-America Development Bank noted that whilst the SDGs provide a good framework, it is not sufficient to inform investment. Thus, we need a more granular understanding and more detailed taxonomy to help financial institutions greening their portfolios.
The event also benefitted from the wise words of former Ireland President, Mary Robinson, who summarized her call for action in three simple steps:
- Make climate change personal in your life
- Get angry and active and support those who are on the right side
- imagine the world we need to hurry towards