Shaping the climate action journey for financial institutions - Navigating through the cluster of climate initiatives - PCAF
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Shaping the climate action journey for financial institutions Navigating through the cluster of climate initiatives
Shaping the climate action journey for financial institutions
Navigating through the cluster of climate initiatives
Nowadays, climate change is an ever-present topic for the financial The goal of limiting global warming to well below 2°C is clearly
industry. With the world heading towards more than 3°C of warming defined by the Paris Agreement. To trigger changes in capital
based on current policies, the requirement for urgent action is ever flow and signals for all actors, it is key for the financial industry to
greater. Financial institutions are one of the major stakeholder groups acknowledge and support accelerated decarbonisation.
responding to this emergency.
Understanding where and how to start is a logical first step. Banks
This is not only because of the financial implications of the potential and investors should be aware of the different areas of climate
5 – 20% loss of global gross domestic product (GDP) each year1, actions and how existing initiatives can support financial institutions
but also the tremendous need and opportunity to contribute to the (FIs) on implementation as well as complement one another.
transition to a low-carbon, resilient society. Understanding this landscape will help FIs at different levels of
progress to identify the most efficient support available to scale their
climate efforts.
1 UNEP FI (2019) https://www.unepfi.org/climate-change/climate-change 2Six main areas of climate actions
Measuring the financed emissions of a Some of these initiatives touch on climate-
Scenario
portfolio is the foundation enabling financial analysis related risks. For example, Task Force
High-level
institutions (FIs) to perform scenario commitment on Climate-related Financial Disclosures
to act
analysis, set targets, inform actions and (TCFD) focuses on the financial risks and
disclose progress. These areas jointly risk management of climate change (e.g.
Measuring
are crucial for portfolio alignment and Reporting financed
Target by performing scenario analysis) as well
setting
emissions
decarbonization. as defining metrics and targets (e.g. GHG
emissions as disclosure metrics).
Climate actions can be categorized into six The upcoming CDP questionnaire for FIs also
main areas. High-level commitments and includes questions on financed emissions and
Climate
policies endorsed by c-suite executives action climate-related risks.
provide a strong driving force for FIs to
address climate change by taking actions. The six key areas of climate actions for financial institutions The graph maps various climate initiatives
against the six areas of action. Initiatives in
FIs can join several climate initiatives. These each area share common principles but vary
are a great starting point and provide insights in specifics. For instance, Climate Action 100+
and guidance on various methodologies, As shown in the table at the end, these focuses on investee engagement, whereas
standards and tools to decarbonize their initiatives have different coverage, target Climate Safe Learning Lab is a platform to
portfolio. audience, coordinators, and status. share knowledge and best practices.
3Existing collaborative climate initiatives supporting FIs on climate actions
as of December 31, 2019
For whom?
Focus of
B Banks I Investors BI Banks & Investors Initiative High-level Measuring
Scenario Target- Enabling
Commitment Financed Reporting
to Act Emissions Analysis setting Action
B UNEP FI Principles for Responsible Banking
(PRB): Collective Commitment on Climate Action
B Climate Action in Financial Institutions
I United Nations-convened Net-Zero Asset Owner Alliance
I Investor Agenda
BI Task Force on Climate-related Financial Disclosures (TCFD)
BI Partnership for Carbon Accounting Financials (PCAF)
B Poseidon Principles (for shipping sector only)
BI UNEP FI TCFD pilots
BI Paris Agreement Capital Transition Assessment (PACTA)
I IIGCC Paris Aligned Investment Initiative
BI Science Based Targets for Financial Institutions
B Climate Safe Learning Lab
B Banking Environment Initiative
I Climate Action 100+
BI CDP Financial Services Questionnaire 4Other resources to support FI climate actions
Besides these initiatives, there are also standards, projects and tools, and upcoming policies and
regulations offering solutions and guidance for financial institutions throughout their climate journey
Standards Projects and tools Policies and regulations
Various standards support FIs to report on Many projects and tools provide data and Increasingly, policies on sustainable finance
climate actions. The ISO 14097 standard analytical capability to support FIs on their are developed. The EU Green Finance
currently under development aims to provide climate journey. For example, the Transition agenda leads with its Action Plan on
a framework for assessing the impact of Pathway Initiative and Investor Energy- Sustainable Finance, the EU Taxonomy,
financer’s action related to climate goals, Climate Action Toolkit (InvECAT) help FIs the EU Green Bond Standard and the
which could support financial institutions to to perform scenario analysis, set targets and methodologies for EU climate benchmarks
track progress towards climate targets. monitor climate actions taken by non-state and disclosures. Through the International
actors. Platform on Sustainable Finance (IPSF)
Other standards providing guidances on Some platforms such as OS-Climate and these policies will be shared internationally
reporting include the Financial Accounting SENSES Project provide analytics and and scaled up to mobilize private capital
Standards Board (FASB), Sustainability visualisation for climate scenario analysis, towards sustainable investments.
Accounting Standards Board (SASB), whereas others like the Natural Capital Next to this, supervisors and regulators across
Climate Disclosure Standards Board (CDSB) Finance Alliance , Carbon Delta, over 50 legislations request and provide
and Global Reporting Initiative (GRI). Four Twenty Seven, S&P Global/Trucost, guidance to stress test the financial sector on
Sustainalytics, Mercer/Oliver Wymen, climate-related risks through the Network for
ISS ESG, Woods Hole, etc. offer specific tools Greening the Financial System (NGFS).
for measuring climate-related risks.
5Overview of existing collaborative climate initiatives B For Banks
for financial institutions (part 1 of 2) I For Investors
Initiative Coordinator What it is about Coverage (e.g. Current status (as of Oct 31, Requirement to join
sector, asset class, 2019)
region)
Collective UNEP FI Pledges to align portfolio with Paris Agreement, engage with Global 33 banks with US$13 trillion of Become a signatory of PRB with CEO
B Commitment on stakeholders on climate neutrality, and disclose within 1 year the assets signed up signature on commitment document,
Climate Action set of measures the committed bank will employ. becoming UNEP FI financial institution
I member, and publicly promote the
commitment. Signatories are also expected
to assess, set target on, reduce, and disclose
impacts.
Climate Action Institute A collaborative platform for implementing the five voluntary Global 34 development banks and 10 Sign a commitment letter and agree with the
B in Financial for Climate Principles for Mainstreaming Climate Action, sharing best commercial banks signed up use of institution’s logo for communication
Institutions Economics practices, and collaborating on innovative approaches. materials.
(I4CE)
United Nations- UNEP FI, PRI Commitment to transit investment portfolios’ GHG emissions Global Led by 12 asset owners with Sign a commitment document, including
I convened to net zero by 2050 through engaging corporates and over US$2 trillion asset under endorsement on the net zero pledge,
Net-Zero Asset policymakers on actions, and measuring and disclosing progress management (AUM) participation, support, and communication
Owner Alliance every 5 years in line with Paris Article 4.9 within the alliance.
Investor Agenda UNEP FI, PRI An NGO-led initiative to provide investors a set of climate Global Nearly 1,200 investors are Submit questionnaire forms on the website
I actions in investment, corporate engagement, investor acting in at least one of the to provide feedback or participate in joint
disclosure, and policy advocacy with the aim of keeping global four focus areas. statement for specific focus areas. Sign up for
warming within 1.5°C. Global Investor Statement to Governments on
Climate Change, Climate Action 100+ or CDP
for corporate engagement.
Task Force FSB A disclosure framework for climate-related financial risk through Global 867 organisations signed up Submit information through a web-based
B on Climate- four pillars – governance, strategy, risk management, metrics to be TCFD supporters form and have the organisation listed on
related Financial and targets. TCFD website as a supporter.
I Disclosures
(TCFD)
Partnership PCAF An open and industry-led collaboration to measure and disclose Global with regional 57 financial institutions with Sign a commitment letter and participate in a
B for Carbon Secretariat GHG emissions of loans and investments. teams; nine asset US$3.5 trillion assets signed regional implementation team.
Accounting classes with regional up, ranging from small and
I Financials variation local to large and global
(PCAF) financial institutions2
Poseidon Poseidon An assessment and disclosure framework for climate alignment Global; shipping 12 banks with approximately Any lenders, lessors, and financial guarantors
B Principles Principles for ship finance portfolios. sector US$100 billion in shipping with shipping portfolios with a formal
Association, finance signed up declaration and application and submitting a
I supported by self-assessment within 5 months.
RMI
table continues 6>>
2 30 banks committed to PCAF through the Climate Change Commitment (3Cs initiative) of the Global Alliance for Banking on Value (GABV)Overview of existing collaborative climate initiatives B For Banks
for financial institutions (part 2 of 2) I For Investors
Initiative Coordinator What it is about Coverage (e.g. Current status (as of Oct 31, Requirement to join
sector, asset class, 2019)
region)
UNEP FI TCFD- UNEP FI Implementing TCFD, focus on scenario analysis, developing pilot Global 16 global banks, 20 asset Identified through TCFD pool of membership
B pilots analytical tool and indicators for both transition and physical managers and owners and voluntary participation in pilot project.
risks.
I
Paris Agreement 2 degrees Framework to measure alignment of financial markets with Global with 5 regional Used to over 700 financial The tool is available online with open access.
B Capital investing climate goals and scenarios with a 5-year time horizon. A target splits; 5 asset classes; institutions globally
Transition initiative setting tool will be developed and added to PACTA with the 8 sectors
I Assessment reference from InvECAT.
(PACTA)
IIGCC Paris IIGCC An initiative to develop concepts, assess methodologies and test Global; 4 asset Over 40 investors with Become an IIGCC member.
I Aligned portfolios for the alignment with Paris Agreement. classes more than €11 trillion AUM
Investment participate
Initiative
Science Based WRI, WWF, Under the SBTi framework, launched project to help financial Global; 4 asset More than 40 financial Submit a Commitment Letter for Financial
B Targets for CDP, UN institutions align their lending and investment portfolios with the classes; up to 9 institutions publicly Institutions, seek preliminary validation for
Financial Global ambition of the Paris Agreement. sectors committed to set targets; targets, and disclosure of progress.
I Institutions Compact framework to be published
in 2020
Climate Safe Climate Safe A confidential peer-learning space for banking professionals to Global Led by a collaborating Become part of the network or join dedicated
B Learning Lab Lending explore the organisational barriers and enablers to implementing group of climate finance workshops organized by the network.
Network climate finance strategies. professionals
Banking University of A collaboration platform for banks to join forces on taking Global Eight banks have joined as Contact CISL to join this initiative.
B Environment Cambridge industry-wide action on sustainability, including a new initiative, members.
Initiative – Bank Institute for Bank 2030, which aims to build a Roadmap for the Banking
2030 Sustainability Industry to 2030 that will increase the level of low carbon
Leadership financing in line with the climate challenge.
(CISL)
Climate Action PRI, IIGCC, An investor initiative showcasing growth and influence of the Global; 161 listed More than 370 investors with Sign on to Climate Action 100+ if you are an
I 100+ Ceres, AIGCC world’s largest emitters and mobilise corporate action on climate companies more than US$35 trillion in investor or contact the coordinating partner
change. AUM have signed on organisation in your region.
CDP Financial CDP Financial Extend questionnaires to focus on financing and investing Global Over 525 investors with Become a CDP signatory, contact regional
B Services Sector Services initiatives. Investors receive CDP access to climate change data, assets of US$96 trillion; over account manager and commit to an
Disclosures Questionnaire deforestation, and water security to engage, make decisions, and 7,000 companies with 50% of administrative fee with an annual rate
I reduce risks. global market capitalisation dependant on level of assets.
7The international, industry-led initiative
to measure and disclose the greenhouse gas emissions
financed by loans and investments.
carbonaccountingfinancials.comYou can also read
