Category: Financial Services

Acclimatise becomes an official endorser of the Principles for Responsible Banking
Acclimatise News

Acclimatise becomes an official endorser of the Principles for Responsible Banking

Acclimatise are delighted to officially endorse the UNEP FI Principles for Responsible Banking (PRB), a single framework working towards a sustainable banking industry.

The PRB sets out a framework of six principles which encourage the banking industry’s role and responsibility in shaping a sustainable future by aligning the sector with the goals and objectives of the SDGs, the Paris Climate Agreement, and other relevant national frameworks. The principles have been developed by 30 leading global banks and members of the UNEP FI through a consultative process with over 250 banks over a period of 6 months, and will be officially launched on 22nd September 2019 during the annual United Nations General Assembly in New York City.

The principles require signatory banks to take 3 key steps:

  1. Impact analysis;
  2. Target setting; and
  3. Implementation and accountability.

Following these steps, signatories are required to set and publish targets in line with sustainable goals and be transparent and accountable by publicly reporting on their positive and negative impacts. The Principles enable a bank to embed sustainability across all its business areas, and to identify where it has the potential to make the most impact in its contributions to a sustainable world. Signatories to the PRB will have the competitive market advantage to leverage new business opportunities in the emerging sustainable development economy.

Acclimatise recognises the importance of greening financial flows as a systemic approach to building resilience to climate change. We have worked with financial institutions (FIs) to develop methodologies, and build capacity, to assess physical climate risks and opportunities in financial portfolios. Beyond this, we are supporting financial institutions’ efforts in implementing the Task Force on Climate-related Financial Disclosures (TCFD) Recommendations. As an official endorser of the PRB, Acclimatise is pleased to see banks commit to these actions and further leverage their efforts in greening the financial system.

“As a specialist advisory and analytics company working on climate risk management in the real economy and with financial institutions for over 15 years, we have long since been proponents of private sector action to build climate resilience. We welcome the PRB as a renewed effort by banks to step into the role they play in developing sustainable economies and societies.”

John Firth, Acclimatise CEO and co-founder

More than 65 organisations have already endorsed the PRB, putting it on track for becoming the industry standard in the banking sector, with banks committing to align their strategies, portfolios and business practices with the UN Sustainable Development Goals (SDGs) and the 2015 Paris Climate Agreement. By the time of its official launch on 22nd September 2019, over 150 banks and banking industry institutions are expected to become signatories to the PRB through an innovative partnership between banks worldwide and UNEP FI.

“It is fantastic to see this coalition growing so quickly. The Principles for Responsible Banking are rapidly setting the global standard for what it means to be a responsible bank. We invite banks that haven’t endorsed them yet to join and show their commitment to the sustainable banking system of the future.”

Simone Dettling, head of the Banking team at UNEP FI

To learn more about how your bank can sign up to the PRB, and how this relates to climate action you are taking, please contact:

Robin Hamaker-Taylor, Policy and Risk Analyst, Acclimatise, Email: r.hamaker-taylor@acclimatise.uk.com

Will Bugler, Senior Communications Consultant,  Acclimatise, Tel: 07726665908, Email: w.bugler@acclimatise.uk.com

Cover photo by Robert Bye on Unsplash.
Climate change adaptation is the “biggest investment opportunity of this generation,” says new UNEP FI report
Acclimatise News

Climate change adaptation is the “biggest investment opportunity of this generation,” says new UNEP FI report

By Will Bugler

The UNEP Finance Initiative launched last month a technical background paper on adaptation finance which identifies 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” with huge investment needs to build social and economic resilience.

The report was authored by an expert team led by Stacy Swann and Alan Miller of Climate Finance Advisors, with contributions from a review panel that included Acclimatise CTO Dr Richenda Connell and CEO John Firth who were joined by other experts from banking, investment, insurance, academia and government.

The release of this paper is a prelude to the first flagship report of the Global Commission on Adaptation (GCA), which is due to be presented on the 23rd September. Launched last year, the GCA aims to accelerate adaptation action, raising it up the political agenda and encouraging bold solutions such as smarter investments, new technologies and better planning.

The ‘Driving Finance Today’ paper identifies the barriers to scaling up financing for adaptation which include weak policies and conventions in the financial industry and a low technical capacity for climate risk management amongst others. It reflects the fact that despite a great deal of demand for climate adaptation finance, with UN estimates suggesting that by 2030 it will take $140 to 300 billion of investment per year to strengthen the resilience of societies and economies to climate change, progress to mobilise funding has been slow.

The paper also identifies a range of opportunities to accelerate the investment required to prepare the planet for climate change, though these face additional barriers such as the perceived lack of private benefits and the immaturity of business models. It presents six recommendations, with illustrative case studies, to promote resilience investment:

  1. Accelerate and promote climate-relevant financial policies;
  2. Develop, adopt, and employ climate risk management practices;
  3. Develop and adopt adaptation metrics and standards;
  4. Build capacity among all financial actors;
  5. Highlight and promote investment opportunities; and
  6. Use public institutions to accelerate adaptation investment.

Collectively, these recommendations provide the outline of a program that is ambitious, actionable, and can directly impact how finance can be unlocked for adaptation and resilience.

Download the UNEP FI / GCA background paper on adaptation finance here.

Listen to the webinar held for the launch of the paper here.

Deadline to inform PRA of plans to manage climate risks looms
Acclimatise News

Deadline to inform PRA of plans to manage climate risks looms

By Robin Hamaker-Taylor

There are now just six weeks remaining until UK banks and insurers need to officially respond to the expectations of the Bank of England’s Prudential Regulation Authority (PRA).  

On 15 April this year, the PRA issued a policy statement (PS11/19) on enhancing banks’ and insurers’ approaches to managing the financial risks from climate change. PS11/19 included the final version of supervisory statement (SS3/19) on managing the financial risks from climate change.

As set out in PS11/19, firms should have an initial plan in place to address the PRA expectations and submit an updated Senior Management Function (SMF) form by 15 October, 2019. It is understood that the PRA is expecting senior managers to be up to speed with the PRA’s expectations by this date – in just under five months’ time – rather than just getting into grips with the supervisory statement.

In its supervisory statement, the PRA stresses the importance of a comprehensive approach to climate risk management. Apart from the risk management process itself, firms are expected to consider elements relating to governance, scenario analysis and disclosures. Our ongoing work with banks and financial institutions indicates those firms who establish effective governance of climate risk management represent emerging best practice in this field. The PRA’s expectations are summarised in our earlier piece, available here.

Acclimatise and Vivid Economics have developed a guidance document which offers an overview of PRA expectations as set out in SS3/19. The guidance reviews our integrated suite of advisory services and analytical toolkits which support banks in meeting the expectations of the PRA’s supervisory statement. Our approach draws on our extensive track records in physical and transition climate risk assessment and management in the real economy.

To find out more about how we can help your firm meet the PRA’s expectations on managing climate-related financial risks, and to obtain a copy of our new guidance document, please contact Robin Hamaker-Taylor: R.Hamaker-Taylor(at) acclimatise.uk.com.  

Cover photo from Climate Visuals and reposted under Creative Commons 2.0 licensing.
Using Earth Observation data in climate risk assessment for financial institutions
Acclimatise News

Using Earth Observation data in climate risk assessment for financial institutions

By Robin Hamaker-Taylor and Jennifer Steeves

Working with financial institutions to understand analyse and disclose physical climate risks and opportunities to loans, investments and across portfolios demands the application of the most up-to-date climate data and information. By deploying data from historic climate observations, modelled projections of future climate and various social, environmental and economic datasets it is possible to begin to build a picture of risk exposure to financial institutions. In recent years, Acclimatise has also been working with new data sources such as Earth Observation (EO) data, which offer the potential to develop our understanding of real-time risk exposure, especially in areas where other data is sparse.

Acclimatise worked with leading programmes, such as the European Space Agency’s Earth Observation for Sustainable Development Climate Resilience (EO4SD CR) cluster, to demonstrate the potential of EO data to build climate resilience. The potential of EO data is enormous, and the developments in the temporal and spatial resolution of satellite data is a powerful tool of analysis. In recognition of this, Acclimatise this month became an Associate Member of Group on Earth Observations (GEO). The GEO is an intergovernmental partnership that improves the availability, access and use of EOs for a sustainable planet.

What is EO and EO data?

EO is the collection, analysis and presentation of information about the Earth’s physical, chemical and biological systems and has the capability to do so across remote and inaccessible terrain. It involves monitoring and assessing the status of and changes in the natural and man-made environment. There are now thousands of data buoys operating in the world’s oceans, hundreds of thousands of land-based environmental monitoring stations, tens of thousands of observations from aircraft platforms and numerous environmental satellites orbiting the globe, according to GEOSS and other academic research.

EO satellites can collect real-time data on a wide range of indicators such as water distribution, land use, water cycles, atmospheric profiles, heat mapping, sea surface evaluations, and global-regional energy exchanges. EO data provide large quantities of timely and accurate environmental information, which, when combined with other datasets, can give unique insights into managing climate risks.

Of the 50 Global Climate Observing System (GCOS) essential climate variables, roughly half can only be observed from space, making EO an irreplaceable component of climate monitoring. EO datasets are critical in regions where insufficient information is available from weather stations (which is often the case), and its consistency facilitates coordination of information sharing. It is also very useful where on-the-ground assessments of infrastructure are not possible, for example, due to safety concerns.

Why is EO data useful for financial institutions?

Financial institutions (FIs) are accustomed to integrating data from various sources into their risk screening processes. As FIs become increasingly aware of the need to consider physical climate risks in their assessments, EO data offers enormous potential. FIs often lend or invest in diverse geographies with varying levels of available climate hazard data.

EO datasets can complement data held by FIs on their borrowers or investments including data on physical assets, on-site operations, supply chains, markets and logistics. High-quality data on climate parameters combined with other critical investment-relevant information helps investors and asset managers understand current and future risks to their investments across sectors. EO data is often used for post-disaster damage assessment. EO data can also be integrated into existing tools platforms and analyses used by FIs.

Evidence from current uses of EO data by financial institutions

To date, EO data has been used in the context of climate risk primarily by development finance institutions (DFIs), which indicates how commercial FIs could eventually use this type of data. The EO4SD Climate Resilience Cluster provides EO-based products and services to DFIs that have investments in developing countries to support climate resilience. DFIs and other agencies supported through the project include the World Bank, Asian Development Bank (ADB), Inter-American Development Bank (IDB), African Risk Capacity (ARC), Multilateral Investment Guarantee Agency (MIGA) and the International Finance Corporation (IFC).

For example, the EO4SD project is collaborating with a World Bank urban development initiative in Greater Monrovia, Liberia to provide EO-based products and services. An example of this is a coastal erosion service involving 41km of shoreline evolution monitored through a 34-year satellite series, which has been acquired through analysis of satellite images from Landsat, Sentinel 2 and Worldview 3. The analysis estimates that the land loss area from 1984 to 2019 in the 50 km coastline of Greater Monrovia is 0.8 km2. This can be overlaid with data on population and critical infrastructure to aid investment planning.

Flood mapping is also benefiting from EO-based services as EO data provides consistent historical information on floods. The 34-year high-resolution sea-level rise data was also used to identify coastal and inland flood risk areas in parts of Monrovia. The model integrates sea level rise projections to 2030, mapped against a digital terrain model to identify high flood risk areas. These flood maps help the World Bank and local authorities identify the most effective flood management actions and enable better planning decisions to avoid unnecessary development in risky areas.

The direction of travel: What next for EO?

EO data can help banks and lenders around the world understand and prepare for climate change impacts, accounting for future climate risks and opportunities in investment and lending decisions. As EO data gets easier to extract and apply, its use in climate risk assessments will continue to unfold.

One exciting potential application of EO data is in the context of trend analysis where past events are correlated to experienced losses to help paint a picture of risk. There is also potential to develop statistical information using EO data for certain climate hazards such as flooding. Processed climate data will soon be available on flood return periods, for example, as will statistics on flood extent and flood duration. Acclimatise are now gearing up for phase 2 of the EO4SD project, which will build the capacity of DFIs and partner agencies in the practical application of EO data.

Stay in touch with how this project unfolds and how we are using EO to build climate resilience here.

Australian corporate regulator updates guidance on climate-related disclosure
Acclimatise News

Australian corporate regulator updates guidance on climate-related disclosure

Earlier this month the Australian corporate regulator, ASIC published updates to clarify the application of its existing regulatory guidance to the disclosure of climate change-related risks and opportunities.

ASIC reviewed its guidance following the recommendations of a Senate Economics References Committee report on Carbon Risk and the Government’s response which encouraged ASIC to consider whether its high-level guidance on disclosure remained appropriate.

While ASIC’s review found that its existing, principles-based regulatory guidance remains fit for purpose, to help stakeholders to comply with their disclosure obligations, the organisation has updated its guidance to, amongst other things:

  • incorporate the types of climate change risk developed by the G20 Financial Stability Board’s Taskforce on Climate-Related Financial Disclosures (TCFD) into its list of examples of common risks that may need to be disclosed;
  • highlight climate change as a systemic risk that could impact an entity’s financial prospects for future years and that may need to be disclosed in an operating and financial review (OFR);
  • reinforce that disclosures made outside the OFR (such as under the voluntary TCFD framework or in a sustainability report) should not be inconsistent with disclosures made in the OFR; and
  • make a minor update to INFO 203: Impairment of non-financial assets: Materials for directors to highlight climate change and other risks that may be relevant in determining key assumptions that underly impairment calculations.

The guidance has also been updated to make clear that in ASIC’s view, the risk of directors being found liable for a misleading or deceptive forward-looking statement in an OFR is minimal provided the statements are based on the best available evidence at the time, have a reasonable basis and there is ongoing compliance with the continuous disclosure obligations when events overtake the relevant statement made in the OFR.

ASIC’s review of regulatory guidance follows last year’s publication of ASIC Report 593: Climate Risk Disclosure by Australia’s Listed Companies targeting listed companies, their directors and advisors. High-level recommendations set out in REP 593 included to:

  • adopt a probative and proactive approach to emerging risks, including climate risk;
  • develop and maintain strong and effective corporate governance which helps in identifying, assessing and managing risk;
  • comply with the law where it requires disclosure of material risks; and
  • disclose meaningful and useful climate risk-related information to investors –the voluntary framework developed by the TCFD has emerged as the preferred standard in this regard and ASIC strongly encourages listed companies with material exposure to climate change to consider reporting voluntarily under the TCFD framework.

ASIC commissioner John Price said, ‘Climate change is an area which ASIC continues to focus on. The updates to our regulatory guidance, together with the publication last year of Report 593, round out ASIC’s response to the Senate Report on Carbon Risk. Our updates will help stakeholders to comply with their disclosure obligations in prospectuses and the operating and financial review for listed companies’.

ASIC welcomes the continuing emergence of the TCFD framework as the preferred market standard, both here in Australia and internationally, for voluntary climate change-related disclosures. ASIC considers this to be a positive development and we again strongly encourage listed companies with material exposure to climate change to consider reporting voluntarily under the TCFD framework.

‘While disclosure is critical, it is but one aspect of prudent corporate governance practices in connection with the mitigation of legal risks. Directors should be able to demonstrate that they have met their legal obligations in considering, managing and disclosing all material risks that may affect their companies. This includes any risks arising from climate change, be they physical or transitional risks.’ Mr Price said.

In the coming year, ASIC will conduct surveillances of climate change-related disclosure practices by selected listed companies. ASIC will also continue to participate in the Council of Financial Regulators’ working group on climate risk and participate in discussions with industry and other stakeholders on these issues.

Read ASICS updated regulations here:

Acclimatise becomes a signatory to the Principles for Responsible Investment
Acclimatise News

Acclimatise becomes a signatory to the Principles for Responsible Investment

Acclimatise has signed up to the internationally-recognised Principles for Responsible Investment (PRI). Becoming a signatory to the PRI demonstrates the company’s commitment to supporting responsible investment practices. Acclimatise will also report annually its environmental, social, and governance (ESG) metrics to the PRI.

PRI currently has over 2,300 signatories, including asset owners, investment managers, and service providers that collectively manage over $83 trillion in assets. Last year, the PRI introduced TCFD-aligned indicators to its Reporting Framework, including reporting on four indicators of climate risks: governance, strategy, risk management, and metrics and targets. Until now, this reporting has been voluntary and disclose. This change in their reporting framework will greatly increase the amount of climate-related reporting within in its framework by signatories.

Starting in 2020, the PRI’s strategy and governance (SG) indicators will be mandatory to report, though it will remain voluntary to disclose responses publicly. These indicators include:

  • SG 01 CC: outline overall approach to climate-related risks;
  • SG 07 CC: provide overview of those in the organisation that have oversight, accountability and/or management responsibilities for climate-related issues; and
  • SG 13 CC: outline how strategic risks and opportunities are analysed.

What are the Principles for Responsible Investment?

The six Principles for Responsible Investment are a voluntary and aspirational set of investment principles that offer a menu of possible actions for incorporating ESG issues into investment practice:

  • Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.
  • Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.
  • Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.
  • Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.
  • Principle 5: We will work together to enhance our effectiveness in implementing the Principles.
  • Principle 6: We will each report on our activities and progress towards implementing the Principles

Learn more about the PRI here.

Cover photo by Mike Kononov on Unsplash.
Acclimatise participates in Geneva Association 2019 Climate Change Forum
Acclimatise News

Acclimatise participates in Geneva Association 2019 Climate Change Forum

By Robin Hamaker-Taylor

The Geneva Association, the global association of insurance companies, held its 2019 Climate Change Forum on July 11 and 12 in London. Titled, ‘Advancements in Modelling and Integration of Physical and Transition Climate Risk’ the Forum aimed to build a roadmap for advancing both physical and transition risk modelling for insurance, investment and asset management decisions.

Acclimatise’s Chief Technology Officer and Co-founder Dr Richenda Connell participated in the Forum, presenting the broad range of ways that both chronic climate change and extreme events can affect the performance of investments. In her presentation, she challenged the perception that physical climate-related risk to investment performance is just about property damage from extreme events. She emphasised that physical climate-related risks need to be evaluated along the full investment chain, including at the macro-economic level, and throughout a company’s value chain. Though the insurance sector already has a well-established set of risk analysis tools and models for extreme events damage, the Forum suggested these could be improved by better integrating insights from other sectors and experts such as this.

Maryam Golnaraghi, Director of Climate Change and Emerging Environmental Topics at the Geneva Association commented: “Mainstreaming climate risk is becoming a high priority for Boards and C-level suite executives with implications for accountability, corporate strategy, risk management, operations, investments as well as disclosure and reporting. There is a unique opportunity to enhance climate risk modelling and stress testing by leveraging the latest climate science. This Forum was an important step toward achieving consensus among leaders from 10 sectors on aligning priorities on a research and development agenda for the future.”

Several other lessons emerged from the 2019 Forum pertaining to the further development of the next generation of risk models, as highlighted by the Geneva Association. Cross-sectoral collaboration is necessary for this to happen, for example, and there is a need for common definitions to enable collaboration. Terms such as resilience, scenarios, and stress-testing may have different meanings for different stakeholders, so a mutually agreed definition should be reached. It emerged that the need to bridge the gap between science and technological development and financial and business decisions remains as pressing as ever. Finally, discussions at the Forum suggested that surveying existing climate risk modelling initiatives and identifying potential areas of cooperation are important next steps.

Cover photo by Robert Bye on Unsplash.
Latest publication on finance sector contribution to a climate-resilient world now available
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Latest publication on finance sector contribution to a climate-resilient world now available

By Caroline Fouvet

How can the finance sector pave the way towards a more resilient world? This is one of the questions raised by the Global Commission on Adaptation (GCA), launched by the United Nations (UN) in October 2018 to accelerate adaptation action and support in the world. In the run-up to September’s UN Climate Summit in New York City, during which it will present its recommendations, the GCA has organised its work around six action tracks. Each of them have targets aimed to address current adaptation challenges, and include: food security and rural livelihoods, cities, infrastructure, nature-based solutions, empowering locally-led action and finance.

Although the finance sector has heightened its focus on climate risk disclosure and climate change broadly ever since the publication of the Task-force on Climate-related Financial Disclosures (TCFD) recommendations, few actionable plans have set out the ways in which the financial services industry can contribute to fostering global climate resilience. As part of the GCA’s finance action track, the United Nations Environment Programme Finance Initiative (UNEPFI) has been commissioned to work on a background report focusing on adaption finance, entitled “Driving Finance Today for the Climate Resilient Society of Tomorrow”, which was published last week.

The report, prepared by US firm Climate Finance Advisors and reviewed by an expert group including Acclimatise’s co-founders John Firth and Dr. Richenda Connell, acknowledges that aligning global adaptation needs with the 2015 Paris Agreement’s commitments constitutes “the biggest investment opportunity of this generation”. Reaching such goals, however, entails unlocking the necessary private and public capital both that can support investment in adaptation and resilience. With this objective, the report reviews barriers and opportunities for financing resilience and adaptation by all actors across the financial system, although it predominantly targets financial system constituents, including policymakers and financial actors, while highlighting actions required from each.

The following barriers are found to be in the way of embedding climate risk and resilience into the financial system:

  • Inadequate support for action on adaptation/resilient investment: the report states that on the one hand, there are currently no sufficient incentives for private finance investments in adaptation, while on the other hand, public finance, that can catalyse private investments, has been historically insufficient and needs to be scaled up.
  • Weak policies and conventions in the financial industry: there is currently a gap in enabling adaptation policy and practice in the financial industry. Guidelines surrounding climate risk and resilience in the financial sector have been weakly established and have achieved limited adoption into practice.
  • Market barriers: there is an overall market perception that investments in resilience address public problems, such as water management or coastal flooding, and as a result lack profitability.
  • Nascent application of climate risk management practices: although there is a growing general awareness of climate risks from corporates and financing institutions, there is still a need to actually integrate physical climate change into operational risk management practices. This is currently hampered by a lack of access tobetter decision-relevant tools from an early stage on.
  • Low capacity in policy and finance for climate risk management: both financial system governance bodies and financial actors have a low capacity to understand climate risks at a level that enables financial decision-making.

As a result of its analysis, the GCA report sets out six recommendations targeting financial system governance bodies and financial actors to overcome the aforementioned barriers and facilitate and accelerate financing for adaptation and resilience:

  • Accelerate and promote climate-relevant financial policies;
  • Develop, adopt, and employ climate risk management practices;
  • Develop and adopt adaptation metrics and standards;
  • Build capacity among all financial actors;
  • Highlight and promote investment opportunities; and
  • Use public institutions to accelerate adaptation investment.

The authors conclude that policymakers and financial institutions need to address the resilience issue hand-in-hand. They also state that behind climate risks also lie opportunities for the financial sector. Last but not least, the finance sector needs to go beyond disclosures, as the ultimate objective of such process is to undertake effective risk management.

Cover photo by Verne Ho on Unsplash.
UK releases Green Finance Strategy signalling potential for mandated climate disclosures among other Government actions
Acclimatise News

UK releases Green Finance Strategy signalling potential for mandated climate disclosures among other Government actions

By Robin Hamaker-Taylor

The UK government released its Green Finance Strategy in early July, coinciding with London Climate Action Week. The strategy is a reflection of the UK Green Finance Taskforce recommendations and sets out a plan to mobilise finance for clean and resilient growth in the UK. The release of this strategy marks the continued support of the UK Government for an orderly and just transition away from fossil fuels and toward a climate resilient economy.

The strategy has two objectives:

(1) To align private sector financial flows with clean, environmentally sustainable and resilient growth, supported by Government action; and

(2) To strengthen the competitiveness of the UK financial sector. The first two chapters of the strategy sets out information relating to between ‘greening finance’ and ‘financing green’ and the final chapter includes expectations relating to capturing the opportunity arising from the ‘greening of finance’ and the ‘financing of green’.

Greening Finance and potential disclosure requirements

This section of the strategy aims to ‘ensure current and future financial risks and opportunities from climate and environmental factors are integrated into mainstream financial decision making, and that markets for green financial products are robust in nature.’

Actions the UK Government are taking to ensure climate and environmental factors are recognised and acted upon, as a matter of strategic and financial imperative, are set out in this part of the strategy. Perhaps one the of most relevant actions for corporates and financial institutions is the Government setting out its expectation for all listed companies and large asset owners to disclose, in line with the TCFD recommendations, by 2022.

Apart from this, the Government is carrying out the following actions which will work to green the finance sector:

  • Establishing a joint taskforce with UK regulators, chaired by Government, which will examine the most effective way to approach disclosure, including exploring the appropriateness of mandatory reporting;
  • Supporting quality disclosures through data and guidance, such as those being prepared for occupational pensions schemes by a new Government and regulator sponsored working group;
  • Clarifying responsibilities for the Prudential Regulation Authority (PRA), the Financial Conduct Authority (FCA) and the Financial Policy Committee to have in regard to the Paris Agreement when carrying out their duties, and include climate-related financial issues in the UK Government’s allocation letter to The Pensions Regulator;
  • Working with industry and the British Standards Institution to develop a set of Sustainable Finance Standards, and chairing a new International Organisation for Standardisation (ISO) Technical Committee on Sustainable Finance;
  • Working with the FCA and Bank of England, including through the Fair and Effective Markets Review, to consider steps that can be taken to understand the potential or actual barriers to the growth and effectiveness of green finance markets; and
  • Working with international partners to catalyse market-led action on enhancing nature-related financial disclosures. This will complement the recently announced global review of the economics of biodiversity by Professor Sir Partha Dasgupta.

Financing Green

This section of the strategy aims to ‘accelerate finance to support the delivery of the UK’s carbon targets and clean growth, resilience and environmental ambitions, as well as international objectives.’ This part of the strategy sets out specific actions to mobilise and accelerate flows of private finance into key clean growth and environmental sectors in the UK and abroad. The Government has mobilised green investments abroad for a number of years. Within the UK, the Government is taking the following actions:

  • Announcing a package of measures to mobilise green finance for home energy efficiency;
  • Using the forthcoming Environment Bill to place the 25 Year Environment Plan on a statutory footing;
  • Determining the steps necessary for landlords and businesses to understand and potentially disclose operational energy use;
  • Strengthening engagement with local actors to accelerate green finance across the country; •Working with the GFI to address market barriers to greater and more rapid deployment of green capital into priority sectors; and
  • The National Infrastructure Commission examining the resilience of the UK’s infrastructure to consider what action Government should take to ensure it is resilient to future changes, such as climate change.

Capturing the opportunity

This part of the strategy aims to ‘ensure the UK financial services capture the domestic and international commercial opportunities arising from the ‘greening of finance’, such as climate related data and analytics, and from ‘financing green’, such as new green financial products and services.’ To this end, the Government is aim is taking the following actions:

  • Launching the GFI to strengthen public and private sector collaboration and cement the UK’s position as a global hub for green finance;
  • Enhancing climate-related and environmental data and analytics and promoting dialogue with regulators and industry to support innovation
  • Promoting the adoption and mainstreaming of green finance products and services, including through the launch of a Green Home Finance Fund making £5 million of funding available to the private sector to pilot products such as green mortgages; and
  • Engaging with professional bodies to drive green finance competencies – notably through the launch of a Green Finance Education Charter – upskilling the UK’s diplomatic networks and building capacity on green finance across the public sector.

Public and private collaboration needed to solve the climate crisis

In the week which saw the London Stock Exchange re-classify a group of oil and gas producers as ‘non-renewable’ energy, and over 200 climate-related events, the UK Government has demonstrated its commitment to harnessing the power of the private sector to help solve the climate crisis. Highlighted time and again in the strategy was the need for collaborative efforts across the public and private sector – this challenge is insurmountable without the private sector. While it is safe to say many in the finance sector are stepping into this new role, it remains to be seen how well the wider UK finance sector will respond, and if it will be quick enough.

Cover photo by Ilya Gavin on Unsplash.
IIGCC moving ahead with investors’ guidance on physical climate risks and opportunities
Acclimatise News

IIGCC moving ahead with investors’ guidance on physical climate risks and opportunities

By Caroline Fouvet and Robin Hamaker-Taylor

During the first ever London Climate Action Week, members of the Institutional Investors Group on Climate Change (IIGCC) came together for a roundtable focusing on physical climate risks for investors. Part of a wider IIGCC initiative launched this spring, the roundtable aimed to support investors in their identification assessment and management of the physical risks associated with a changing climate.  Opportunities for investment in resilience have also emerged as an important part of physical climate risk management. The wider IIGCC initiative will produce a guidance document on understanding physical climate risks, due out this Autumn.

Facilitated by Acclimatise and Chronos Sustainability, the roundtable was a well-attended event, gathering a wide range of stakeholders from the investment industry, from infrastructure to impact investors. The event enabled participants to share insights into their progress to date on physical climate analysis and to discuss proposed guiding elements to undertake such work. Investors expressed the difficulty they faced to rely on current corporate disclosures, and how the guidance document could help them fill knowledge gaps regarding the key issues to consider when climate screening investments.

Five high-level messages on physical risk were presented by Acclimatise, which are crucial for investors to consider when looking at physical climate impacts. Among these, the team framed the difference between transition and physical-related risks as well as acute and chronic climate risks. Delving deeper, we stressed the need to look at previous impacts and the usefulness of conducting analysis that correlates weather and climate hazards with impacts on counterparties. This will be particularly useful for those looking to determine climate impacts over the next 10-20 year period, given the current locked-in levels of climate change. The need to design scenarios that consider a 4°C world was also highlighted, for those interested in assessing risks in the longer term. The discussion also included the importance of identifying climate-related thresholds for assets, and consideration of indirect climate effects at the macro-economic level, beyond damage to fixed assets.

The IIGCC guidance for investors on physical climate risks will be finalised this summer and undergo peer review from IIGCC members before its publication in autumn this year.

Cover photo by Jamie Street on Unsplash.