Set up by the World Meteorological Organization (WMO), the Systematic Observations Financing Facility (SOFF) provides a new way to upgrade our global weather and climate forecasting systems for a fraction of the cost compared to current investment plans. This new information brief outlines how the SOFF will work and describes the process by which this new way of investing benefits all of the global community.
Many countries lack the resource and capacity to produce
regular and detailed observations, and to share them with the global community.
This significantly limits the accuracy of weather and climate forecasts made
for their local areas, and therefore limits the plans they can put in place to
adapt and become more resilient to climate change and extreme weather events.
This is because weather prediction models’ outputs are reliant upon the quality
of data input – if you have low quality or infrequent observational data for an
area, then the outputs are likely to be limited.
Whilst improvements have been made to other types of earth
observation methods, such as from satellites, surface-based observational
coverage is not consistent across the globe and has not received as much
investment. This has spurred the creation of the Global Basic Observing Network
(GBON). GBON sets out the standard for observations, ensuring that data are of
acceptable frequency and coverage, and shared in a timely and consistent way
across the global community. However, not all countries are able to meet this
basic standard – or if they can, they may struggle to sustain it due to the
resource and capacity needs for making surface-based observations.
This brief describes how SOFF will act as the mechanism by which countries – in particular, 68 SIDs and LEDCs – can be supported in covering their ‘GBON gap’ and in sustaining compliance with the GBON requirements. This includes both financial and technical assistance, delivered in new ways. Internationally agreed metrics guide investments (GBON), and data exchange is used as a measure of success, which also create local benefits and provide a global public good.
SOFF will only cost $400 million in its first 5 years – a
fraction of the $2.5 billion currently invested just in the Alliance for
Hydromet Development member’s projects. Yet SOFF is predicted to result in a
10-fold increase in radiosonde observations (observations that are taken by
suspending measuring equipment under a large balloon that will ascend to high
altitudes) and a 20-fold increase from weather stations.
The mechanism of SOFF’s financial and technical assistance
has been carefully designed so as to ensure investments are made wisely, and
that success is measured by how well data is being shared – the crucial element
of improving global forecasts. This design also ensures that countries’
contributions are sustained and increase the benefits for the entire global
This information brief is one of several produced by the World Meteorological Organization in collaboration with Acclimatise. They are based on the work of the SOFF working groups that brought together 30 international partners to jointly develop the SOFF concept and design.
You can learn more about SOFF and read the other briefs here.
In 2019, the World Meteorological Congress and its 193
member countries agreed to establish the Global Basic Observing Network (GBON),
setting out an obligations and clear requirements for all members to acquire
and exchange the most essential surface-based observational data at a minimum
resolution and timeframe level. Achieving compliance with the GBON requirements
requires sustainable investments and strengthened capacity in many countries. Spearheaded
by the World Meteorological Organisation (WMO), the Systematic Observations
Financing Facility (SOFF) is being established to meet these needs.
This new information brief explains the GBON gap analysis undertaken by the WMO for each of its 193 Members and how to calculate it. The gap analysis provides a quantitative estimate of the number of surface-based observing stations that will need to be installed, rehabilitated or upgraded, and exchange data in order to meet the GBON requirements.
Preliminary findings indicate that Small Island Development
States (SIDS) and Least Developed Countries (LDCs) are currently far from
meeting the GBON requirements, largely due to a lack of infrastructure and
capacity. In order to close this gap, about 2000 new and/or rehabilitated
stations need to become operational which, in turn, will lead to massive
increases in exchanged observations. SOFF provides a new way to help close the
GBON gap by ensuring upgrades to weather and climate forecasting systems for a
fraction of the cost compared to current investment plans.
This information brief is one of several produced by the World Meteorological Organization in collaboration with Acclimatise. They are based on the work of the SOFF working groups that brought together 30 international partners to jointly develop the SOFF concept and design.
You can learn more about SOFF and read the other briefs here.
Australia’s largest super fund, Rest, has agreed to test its
investment strategies against various climate change scenarios and commit to
net-zero emissions for its investments by 2050, after a legal case brought by a
25-year-old man from Brisbane. Mark McVeigh sued Rest in 2018 for failing to
provide details on how it will minimise the risk of climate change. The
landmark case represents the first time a superannuation fund has been sued for
failing to consider climate change.
Mr McVeigh alleged Rest had breached Australia’s
Superannuation Industry Act and the Corporations Act, after it failed to
provide him with information on how it was managing the risks of climate
change. These risks include physical climate risks that threaten Rest’s
investments, and also transition risks which arise from the decarbonisation of
the global economy.
Climate change is a ‘material, direct and current
Australian law requires trustees of super funds to act with
“care, sill and diligence to act in the best interest of members – including
managing material risks to its investment portfolio”. In its settlement Rest
agreed that its trustees have a duty to manage the financial risks of climate
In Rest’s statement about the settlement it said: “The
superannuation industry is a cornerstone of the Australian economy — an economy
that is exposed to the financial, physical and transition impacts associated
with climate change.” and went on to emphasise that “climate change
is a material, direct and current financial risk to the superannuation
Rest also agreed to take immediate action by testing its
investment strategies against various climate change scenarios, publicly
disclose all its holdings, and advocate for companies it invests in to comply
with the goals of the Paris Agreement.
The latest cases in Australia are part of a global movement towards stricter regulation governing the financial risks posed by climate change (see Acclimatise’s timeline charting the rise of climate law). In 2015, for example, France introduced laws mandating climate disclosure for institutional investors and asset managers and in 2017 the Financial Stability Board’s Taskforce on Climate-related Financial Disclosure published recommendations for corporate climate disclosures. In 2019, National Instrument 51-102 Continuous Disclosure Obligations set out new requirements for firms reporting in Canada to disclose material risks in their Annual Information Form.
The implication of landmark cases such as the Rest settlement, is that super funds, pension funds, banks and other investors will increasingly require companies to understand and manage their climate risks. Earlier this year, Acclimatise worked Working with Asia-Pacific’s largest law firm, MinterEllison to produce a primer on physical climate risk aimed at Non-Executive Directors. The primer was published by Chapter Zero a global voluntary programme that connects and supports Non-Executive Directors to improve oversight and action on the issue of climate change.
Nature and biodiversity have gained the spotlight this year, becoming the next frontier for financial services. Earlier this year, the Task Force on Nature-related Financial Disclosure(TFND) was launched under the leadership of the Global Canopy, UNDP, UNEP and WWF, aiming to redirect financial flows towards nature-based solutions and nature-adding activities.
The TNFD is informed by a number of recent publications that help to increase our understanding of nature-based risks and record widely the scale of loss that economies globally would experience if we don’t steer towards a future that nurtures nature. In this article, we review the recent findings of these initiatives and their recommendations for financial institutions on how to implement adequate strategies to work with nature.
The economic impacts of global environmental change
The rate of loss of biodiversity and ecosystems degradation is staggering. As noted by IPBES in their Global Assessment Report on Biodiversity and Ecosystem Services, seventy-five percent of the global land surface is significantly altered, 66 percent of the ocean area is experiencing increasing cumulative impacts, and over 85 percent of wetlands (area) has been lost. The average abundance of native species in most major terrestrial biomes has fallen by at least 20 percent. Land use change, climate change, pollution and the increasing material demands exerted by the human population are among the main drivers of nature’s degradation and loss. Yet, without ecosystems services and the biodiversity that sustains it, economic prosperity as a whole is at risk. In fact, according to the World Bank (2020) over half of the world’s GDP is generated in industries that are directly dependent on nature and its services.
The Global Futures Reportestimates that the costs to the economy from the loss of nature in a “business-as-usual scenario” could reach US$10Tn by 2050, compared to a potential net gain of +US$490bn under a future scenario guided by the preservation of nature. This is a net drop of 0.67% of GDP per year by 2050. While significatively indicative, these results only reflect the effects that a business-as-usual vs a “global conservation” scenario would have on six major ecosystem services modelled, namely: Pollination; Coastal protection; Water yield; Timber production; Fish production; and Carbon sequestration. Hence, we must recognise that the true impacts of nature loss (and gains secured from protecting it) could in fact be much higher (and in some cases, irreversible).
It therefore should come as no surprise that over the past 5 years the World Economic Forum’s annual Global Risks Report (GRR) ranks biodiversity loss and ecosystem collapse as one of the top five risks in terms of likelihood and impact in the coming 10 years. What’s more, the 5 top risks according to the latest WEF survey are all environmental.
financial risks defined
In order to swiftly incorporate nature-related risks within existingERM (enterprise risk management) and ESG (environmental, social and governance) processes and within investment decision-making, and financial and non-financial reporting, several publications recommend aligning nature-related risks with existing risk categories. In particular, WEF’s “New Nature Economy” Report and the Global Canopy and Vivid Economics report “The Case for a Task Force on Nature-related Financial Disclosures” recommend to align nature risk categories to the the Task-Force for Climate Related Disclosures (TCFD) framework. Accordingly, the classification of biodiversity-related financial risks into financial risk types is best laid out in PwC and WWF´s “Nature is too big to fail[” and is reproduced below in Figure 1.
Steps to de-risk
Financial institutions (FIs) must start to consider the risks and opportunities stemming from the ecological limits of nature. However, and as noted in the WWF and AXA “Into the wild” 2019 report, integrating nature into investment strategies can vary according to the type of strategies followed by financial institutions and the asset classes taken into account. Sustainability indexes (such as Dow Jones Sustainability Index) can prove a useful tool to monitor nature-related issues and for acquiring information on corporate sustainability. However, the market today does not provide a comprehensive list of sustainability trackers to enable a diversified sustainable passive strategy. Some investors following a more active qualitative approach (generally within niche dedicated impact funds) are already integrating environmental considerations, but remain unable to internally calculate their exposure to nature risks.
According to WWF and
AXA, the most effective way to integrate nature-related issues into investment
decisions would be to quantify them in order to derive natural capital costs from
corporate information. This can be done through a three-step approach consisting of:
Formulating a description of corporate activities and environmental impacts on the basis of financial and sustainability reports.
Integrating data from life cycle databases and models extracted from a global environmental-energy-economic model.
Computing natural capital costs in monetary terms based on valuation factors, which determine the monetary costs per environmental impact (i.e. societal costs, solution costs, and potentially avoided costs).
Complementing this information on costs with the likelihood of their occurrence provides then a perspective in terms of risks.
related target-setting by the finance sector.
Either directly or indirectly, businesses rely on nature and ecosystem services. Yet, dependency on nature can vary considerably between different industries and sectors. Equally, the negative impact of companies on the natural environment differs significantly from sector to sector. The Beyond Business as Usual report, published by UN Environment Programme, UNEP Finance Initiative and Global Canopy earlier this year identified a series of priority sectors that financial sector needs to consider in terms of industries with highest dependencies on the environment and those causing the largest negative impacts, here summarised in Table 1 below.
Table 1. Priority sectors for biodiversity target-setting by financial institutions
The industries in Table 1 all have either potentially high material
dependencies and/or potentially high intensity impacts on biodiversity and
ecosystem services. This makes them more likely to be material from a financial
perspective to institutions, including banks, investors, and insurers, and means
that activities—loans, investments, or insurance—expose financial institutions
to biodiversity-related risk.
One way for financial institutions to start integrating nature risks in their decision-making is to use the list of priority sectors presented in the previous section to guide the systematic assessment of biodiversity risks and opportunities in their own activities. Moreover, they can start to explore existing tools to assist the evaluation of nature-risks such as ENCORE, the Natural Capital Toolkit, as well as explore metrics from the Global Footprint Network and Trase Finance.
Moreover, financial institutions need to become more familiar with innovative biodiversity financing tools with high potential to attract capital, such as corporate sustainable timber bonds, corporate green commodity debt funds and ecosystem-based carbon offset bonds. For a full list of innovative investment instruments to finance nature, see the World Bank’s “Mobilizing private finance for nature” recently released report here.
While climate scientists warn that climate change could be catastrophic, economists such as 2018 Nobel prize winner William Nordhaus assert that it will be nowhere near as damaging. In a 2018 paper published after he was awarded the prize, Nordhaus claimed that 3°C of warming would reduce global GDP by just 2.1%, compared to what it would be in the total absence of climate change. Even a 6°C increase in global temperature, he claimed, would reduce GDP by just 8.5%.
If you find reassurance in those mild estimates of damage, be warned. In a newly published paper, I have demonstrated that the data on which these estimates are based relies upon seriously flawed assumptions.
Nordhaus’s celebrated work, which, according to the Nobel committee, has “brought us considerably closer to answering the question of how we can achieve sustained and sustainable global economic growth”, gives governments a reason to give climate change a low priority.
His estimates imply that the costs of addressing climate change exceed the benefits until global warming reaches 4°C, and that a mild carbon tax will be sufficient to stabilise temperatures at this level at an overall cost of less than 4% of GDP in 120 year’s time. Unfortunately, these numbers are based on empirical estimates that are not merely wrong, but irrelevant.
Nordhaus (and about 20 like-minded economists) used two main methods to derive sanguine estimates of the economic consequences of climate change: the “enumerative method” and the “statistical method”. But my research shows neither stand up to scrutiny.
The ‘enumerative method’
In the enumerative method, to quote neoclassical climate change economist Richard Tol, “estimates of the ‘physical effects’ of climate change are obtained one by one from natural science papers … and added up”.
This sounds reasonable, until you realise that the way this method has been deployed ignores industries that account for 87% of GDP, on the assumption that they “are undertaken in carefully controlled environments that will not be directly affected by climate change”.
Nordhaus’s list of industries that he assumed would be unaffected includes all manufacturing, underground mining, transportation, communication, finance, insurance and non-coastal real estate, retail and wholesale trade, and government services. It is everything that is not directly exposed to the elements: effectively, everything that happens indoors or underground. Two decades after Nordhaus first made this assumption in 1991, the economics section of the IPCC Report repeated it:
Economic activities such as agriculture, forestry, fisheries, and mining are exposed to the weather and thus vulnerable to climate change. Other economic activities, such as manufacturing and services, largely take place in controlled environments and are not really exposed to climate change.
This is mistaking the weather for the climate. Climate change will affect all industries. It could turn fertile regions into deserts, force farms – and the cities they support – to move faster than topsoil can develop, create storms that can blow down those “carefully controlled environments”, and firestorms that burn them to the ground.
It could force us to eliminate the use of fossil fuels before we have sufficient renewable energy in place. The output of those “carefully controlled environments” will fall in concert with the decline in available energy. The assumption that anything done indoors will be unaffected by climate change is absurd. And if this is wrong, then so are the conclusions based upon it.
The same applies to the “statistical method”. As I explained in a previous article, this method assumes that the relationship between temperature and GDP today could be used to predict what will happen as the whole planet’s climate changes. But while temperature isn’t a particularly important factor in economic output today, climate change will do much more than simply raise individual countries’ temperature by a few degrees – the disruption it will cause is enormous.
The damage function
Nonetheless, these optimistic estimates were used to calibrate Nordhaus’s so-called “damage function”, a simple equation that predicts a small and smooth fall in GDP from a given rise in temperature. But climate change will not be a smooth process: there will be tipping points.
Nordhaus justified using a smooth equation by incorrectly claiming that climate scientists, including Tim Lenton from the University of Exeter, had concluded that there were “no critical tipping elements with a time horizon less than 300 years until global temperatures have increased by at least 3°C”. In fact, Lenton and his colleagues identified Arctic summer sea ice as a critical tipping point that was likely to be triggered in the next decade or two by changes of between 0.5°C and 2°C:
We conclude that the greatest (and clearest) threat is to the Arctic with summer sea-ice loss likely to occur long before (and potentially contribute to) GIS [Greenland ice sheet] melt.
The reason these mistakes are so significant is that, despite the flawed assumptions on which it is based, this work has been taken seriously by politicians, as Nordhaus’s Nobel prize recognises. To these policymakers, a prediction of future levels of GDP is far easier to understand than unfamiliar concepts like the viability of the ecosystem. They have been misled by comforting numbers that bear no relation to what climate change will, in fact, do to our economies.
The UN Office for Disaster Risk Reduction (UNDRR) is hosting a webinar on Tuesday the 15th of September from 14:00-15:15 CET.
This is the first in a series of four webinars examining the case for risk informed investment as a critical element of macro-economic financial stability and the achievement of the SDGs. It will look at examples where we can draw lessons from progress to date, identify the gaps and explore opportunities to address them. This series builds on a report on the integration of disaster risk reduction and climate action into sustainable financing published by UNDRR in 2019 in the European context, and accompanies the development of a new global study to identify concrete actions, evidence and tools to integrate multi-hazard and systemic risk approaches into the implementation of the 2030 Agenda for Sustainable Development in support of more risk-informed investment and finance.
Mami Mizutori – UN Secretary-General’s Special Representative for Disaster Risk Reduction
Steve Waygood – Chief Responsible InvestmentOfficer, Aviva Investors
Sirpa Pietikäinen – Member of the European Parliament
Nine months after its launch, the IDB Invest-funded initiative to support Honduran banks identify climate resilient investments, concluded during a well-attended webinar. Organised by IDB Invest and AHIBA (Asociación Hondureña de Instituciones Bancarias) and facilitated by Acclimatise, the event provided an opportunity to go over the project’s methodology to identify resilient investments and to hear national technology providers’ perspectives on market trends for resilient technologies, their benefits and financing challenges. Further, IDB Invest and Bancolombia also reflected on their experience promoting sustainable finance across Latin America and its benefits. Overall, the ultimate objective was to promote a better understanding of the business opportunities arising from financing technologies and products that can increase climate resilience in at-high-risk sectors.
As 60 people, including over 30
representatives from the banking sector, tuned into the webinar to hear about
the initiative’s insights and lessons learnt, speakers went through the
following key elements:
Financing resilient solutions requires innovation in how investment opportunities are identified and framed
In order to determine how to
finance climate resilient solutions, banks should first analyse their
investment portfolio to see what sectors are the most relevant, which of them
are the most vulnerable to climate change and what climate change risks they
are facing. Grounded on this understanding of climate risks in their
portfolios, they can then identify those technologies, products and services
that could help avoid, minimise and manage those risks. They can also determine
what is the market potential for those technologies and carry assessments of
the business environment. This is all the more relevant in a country considered
one of the most vulnerable to climate change globally.
It is important also for banks to
understand that the mechanisms to finance resilient solutions differs from traditional
financing in that:
The purpose of the credits must be clear and
demonstrate climate resilience benefits;
The process for the selection of eligible
investments must be transparent and eligibility criteria on the resilience
benefits must be incorporated in the credit approval process;
Resources are administered to ensure
traceability of credits and portfolios dedicated to resilient investments
Monitoring and evaluation is undertaken to
ensure access to information on climate resilient credits and their achieved
Similarly, banks must be aware
that commercialising resilient products and how to incentivise and increase
credit demand also differs from traditional financing and the key role played
by technical assistance and strategic alliances with solution providers.
Financing resilient solutions is a business opportunity for banks in Honduras
The webinar has also helped to
demonstrate that there is already a market for a number of resilient solutions
in the country, driven by companies’ need to improve their competitiveness and
ensure their survival in the face of climate impacts. To make the case,
Acclimatise presented 11 resilient solutions that were identified and characterised
following the abovementioned approach, and reflected on the observed demand and
market potential and the return on investment profile of these investment
from Inelec, Frio Industrial and Durman,
which are local providers for some of the resilient solutions identified, took
the floor to introduce these technologies, including energy efficient air
conditioning, smart cooling solutions and solar irrigation. The providers
reflected on the ROI profile of each of these investments, noting a steady
increase in the market demand for their products and services; but
acknowledging that certain barriers still remain, in particular the high cost
of the initial investment and a lack of adequate financial products to support investment
in these technologies are obstacles still to be surpassed.
As noted by Sandra Rivera from PESIC (the Energy Efficiency Project in the Industrial and Commercial Sectors (PESIC), a concrete way to push resilient technologies forward is to build up strategic alliances between technology providers, business owners and engineers providing technical assistance and confirming the technologies’ resilience benefits, such as lower energy consumption. PESIC aims both to increase technical and institutional capacities in energy efficiency, and to develop financial instruments that favour investments in energy efficiency equipment and practices.
Another important avenue to
promote resilient investments is through the development of strategic alliances
between the banks and the different providers and distributors of climate
resilient solutions in Honduras. AHIBA, as the national association of commercial
banks in the country, has an important role to play in this, as it can support
the development of these alliances and the transfer and sharing of experiences promoting
resilient investments between the banks.
Practical experiences and lessons learnt in capturing “green” and “resilient” financing opportunities across Latin America
The event also featured reflections from IDB Invest, who
described the mechanisms put in place to promote sustainable finance on the region,
including green and sustainable bonds. In addition, the Colombia bank
Bancolombia share its experience in the development of credit lines to support
sustainable and climate resilience investments. Bancolombia highlighted the
importance that adhering to international protocols (such as the Equator
Principles and CDP) as well as national ones (i.e. the Green Protocol) and the
need to have buy in from the board of directors. Moreover, they noted that
having an Environmental and Social Risk Management system significantly facilitated the development of a green strategy,
as well as the development of a taxonomy to clearly define what constitutes a
green and a resilient investment, to provide banks with an operational
framework. Many banks indeed already finance climate resilience, but it is
likely they are not yet aware of it, given they lack a proper taxonomy and
system to track credits that build climate resilience.
Both presenters agreed on the
benefits of sustainable finance in general and climate resilient finance in
particular. These benefits include, among others, better access to long-term
financing in capital markets, improved value of customer franchise and response
to demands for socially responsible investments. When it comes to financing
climate resilience, this enables banks to avoid losses arising from climate
impacts and potential associated default payments on their loans, while also catering
to the financing needs of new market segments, and as such expanding their
In the time of COVID-19, the need to foster a green recovery has clearly emerged. This includes the importance of considering climate change resilience to ensure the new economy is built upon climate-proof foundations. Banks henceforth occupy a centre role in this endeavour, in Honduras and across the world.
Climate finance can become significantly more transformative by addressing systemic barriers to low carbon and climate resilient investments, according to a new World Bank report.
Although global climate finance has grown significantly in recent years, there remains a sizable gap between the public resources that are available and the investment needs to address climate change in developing countries.
The report makes the case that while stimulus packages to combat the coronavirus-induced economic slowdown can help countries shape a sustainable recovery, they will only be transformative if the limited public funding for climate action leverages substantially more funding from other sources.
“This is exactly the right time to look at how we can make climate finance more effective and more impactful,” says Marc Sadler, Practice Manager of the World Bank’s Climate Change Fund Management Unit. “The increased realization of economic benefits from clean development pathways allow climate finance spending to be much more catalytic. The critical levers identified in this report can – with strategic allocation of climate finance – unlock greater value for money and help countries build back better.”
The report identifies eight sets of climate levers and analyzes how climate finance can best be deployed to maximize their transformative impact for developing countries to achieve clean development goals. The eight climate levers are: project-based investments, financial sector reform, fiscal policy, sectoral policies, trade policy, innovation, carbon markets and climate intelligence.
The report proposes a set of recommendations for transformative climate finance, including:
Employ a wider variety of financial instruments: Expanding the use of instruments such as policy-based finance, results-based finance, equity finance and guarantees can enhance the impact of climate finance deployed.
Enhance leverage on a wider, systemic basis: Public climate finance should maximize leverage from private and government sources. The scope and impact of this leveraging should go beyond project boundaries to achieve economy-wide impacts.
Link to long-term strategic planning: Financing decisions should be aligned with long-term strategies for low-carbon resilient development, while avoiding spending that is inconsistent.
Invest in “climate intelligence”: Appropriate knowledge generation can have a powerful effect: include climate impact and vulnerability maps; early warning technologies; models for long-term scenario simulation and planning; and physical and transitional risk assessment tools.
“The climate finance system has made great strides in the past decade, increasing in both volume and impact,” says Jonathan Coony, World Bank Senior Carbon Finance Specialist and report co-author. “But circumstances have changed over that time and reviewing the programming of scarce public finance to deliver transformation at scale will be essential to help our clients shape a sustainable recovery.”
Transformative Climate Finance: A new approach for climate finance to achieve low-carbon resilient development in developing countries is available for download here. The report was launched as part of the Kickstarting the Sustainable Recovery series organized by the World Bank’s Climate Change Group in partnership with Innovate4Climate to shed light on how sustainable finance can be part of the COVID-19 recovery and help countries build back better and stronger.
Three years after producing the first guide of this kind, Acclimatise is releasing today its latest Green Climate Fund (GCF) Proposal Toolkit. This guide integrates the latest GCF policy changes and funding proposal template v2.0 in order to provide the most recent guidance to project proponents, accredited entities and national designated authorities and help them to navigate the ever-changing GCF project requirements.
Our authors have leveraged their experience in assisting countries and organisations access GCF funding and supporting the GCF Secretariat share tips and guidelines to help you work in the most efficient way possible. You can find more information about how Acclimatise can help you mobilise, catalyse, and leverage public and private capital to deliver your climate investment strategies and financing for climate-resilience solutions on our website. Contact the authors: Ms. Virginie Fayolle & Ms. Maya Dhanjal.
The start of a new year is a time for setting new resolutions for the year ahead, whilst giving consideration to moments that shaped us over the past year. With that spirit of reflection in mind, we sifted through our network’s article archive and selected some of our favourites from the past year. We’ve sorted our favourite articles by topic, to make up a six-part series throughout the month of January.
We kick off with six articles related to climate adaptation
for the financial services sector. 2019 was another important year of progress
with momentum continuing to grow behind the recommendations of the Taskforce on
Climate-related Financial Disclosure (TCFD). The noises from central banks
including Bank of England Governor, Mark Carney, indicate that they are
prepared to take further action, if banks and investors are perceived to be
dragging their heals on the issue. The Bank of England and the French financial
regulator have both indicated that they will begin climate stress testing of
banks this year.
In the meantime, there remains a need for more
standardisation of approaches for climate risk disclosure in the industry.
Acclimatise continues to work with leading banks and investors to develop
methodologies to help them understand, measure and manage the physical climate
risks to their loan portfolios and investments.
Advancing climate-related financial risk discourse in the
By Laura Canevari
The financial sector must play a fundamental role in the
transition to a low carbon and climate-resilient future. To do this, there is a
need for a systemic shift in the way the financial system operates and in the
way investment decisions are made. Through the release of the TCFD
Recommendations in 2017, financial institutions, along with corporates, have
been given a robust compass with which to navigate climate disclosures.
Bank of the England plans to test climate resilience of
By Acclimatise news
Mark Carney, governor of the Bank of England, said the
central bank has plans to include the impact of climate change in its UK bank
stress tests. Since 2017, the Bank of England assesses on a yearly basis how
well the UK’s biggest lenders could withstand a shock without needing a bailout
from taxpayers. This announcement comes after a survey completed by the Bank of
England in 2018 showed that only 10% of banks were considering their long-term
climate change risks.
Climate change adaptation is the “biggest investment
opportunity of this generation,” says new UNEP FI report
By Will Bugler
In September 2019, the UNEP Finance Initiative launched a
technical background paper on adaptation finance, identifying barriers and
opportunities for scaling up financing for climate change adaptation and
resilience building. The paper, ‘Driving Finance Today for the Climate
Resilient Society of Tomorrow’ refers to adaptation as “the biggest investment
opportunity of this generation’.
Investor portfolios failing to account for climate risk
By Acclimatise News
A report by the BlackRock Institute accuses investors of
under-pricing the impact of climate-related risks and advises a restructuring
of assessments of asset vulnerabilities. The report, ‘Getting physical:
Scenario analysis for assessing climate risk’ marks an important next step.
Climate poses direct risk to real estate investment says
By Will Bugler
In a recent published just last year, the Urban Land
Institute and real-estate investment management firm Heitman assess the
potential impacts of climate change on real estate assets and give some
direction as to what investment managers and institutional investors might do
to understand and reduce their climate risk disclosure.
COP 25 signals public and private sectors coming together
to green the financial system
By Caroline Fouvet
Multiple side events involving green finance emerged at the
2019 UNFCCC climate negotiations this past year. One common thread was the
importance of collaboration between public sector-led efforts and financial
institutions’ (FIs) initiatives to build a sustainable low-carbon and climate
resilient financial system.