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19 06, 2019

Impact washing gets a free ride

With its Action Plan on Financing Sustainable Growth, the European Commission set the ambitious goal of “reorienting capital flows toward sustainable investment”. This objective seems ideally aligned with the strong momentum of impact-related concerns as to financial products among retail investors and numerous financial institutions. Concurrently, the evolution of several financial regulations at the EU level appears to support this movement. In this context, however, the recent EU Ecolabel Technical Report issued by the EC’s JRC has raised serious concerns as to its consistency with such trends. This papers shows that the approach developed in the Ecolabels Report is technically inaccurate, as it is based on flawed assumptions regarding impact in the context of finance, and does not comply with the EU’s own regulations as regards to Ecolabels. As such, the proposed approach appears to be a dead end, generating potential financial and legal risks, especially from a consumer protection perspective, and undermining the overall environmental objectives of the EU. This paper suggests an alternate approach, consistent with the state of scientific research and compliant with existing rules on the Ecolabel and consumer protection, which centers on implementing an Environmental Management System to design and execute the investment strategy.

Full text

13 06, 2019

Sustainability Improvement Loans: a risk-based approach to changing capital requirements in favor of sustainability outcomes

In the context of the EU Action Plan on Sustainable Finance, the European Commission plans to explore the introduction of a Green Supporting Factor (GSF) under capital requirement frameworks, that would incentivize banks to lend to ‘green’ activities. This takes capital requirement frameworks away from their risk-based origins and this move is widely contested, including by many financial supervisors. This paper suggests an alternative pathway that satisfies both the objective of aligning capital requirements as a way to shift capital towards sustainability, while preserving their core role of supporting risk management in the financial system and avoiding the drawbacks of a GSF. The paper introduces the concept of Sustainability Improvement Loans (SILs), which could merit lower capital charges as they are lower risk. We define SILs and how they could incentivize sustainability practices and reduce risk. The potential pathway to policy application and its estimated effects on banks’ capital and profitability is then discussed, as well as the extent to which the policy is aligned with the financial stability prerogative of financial supervisors.

Full Report

13 06, 2019

A new year gift from the 2° Investing Initiative Copy

Dear Friends and members of the 2° Investing Initiative,

We are launching a new excel-based tool that will allow financial institutions to define scenario-based targets for their portfolio allocation and engagement actions.

Financial institutions using the tool simply have to input their current portfolio exposure – sourcing data from the PACTA website or any data provider in the market – to figure out where their portfolio should be headed to align with the goals of the Paris Agreement. The goal of the tool is to support financial institutions in understanding science-based climate targets under the PACTA model and to apply them using a data provider and data inputs of their choice, independent of the PACTA online tool (Link).

As always, look forward to your comments, feedback, and questions.

Wishing you all the best for 2019 from the entire 2° Investing Initiative team.

3 04, 2019

Announcement: 2° Investing Initiative is now a GRESB industry partner

We are delighted to announce that 2° Investing Initiative just became a GRESB industry partner and now belongs to the GRESB Strategic Alliance Partnership!

In the scope of our collaboration with Beyond Ratings, we are currently developing a platform for national climate technology and investment transition pathways. This model will cover 10 sectors, including Real Estate*, and will fill an essential market gap in providing, at a country level, sectoral technology pathways consistent with 2°C scenarios. Such technology road maps respond to the existing market demand of governments and investors and support corporate needs to better grasp how they can plan technological investments with regards to climate performance.

When looking for industry partners in the Real Estate sector, we identified GRESB as a leader for sustainability-related data, and connection between our two organisations was natural in terms of mission alignment on sustainability and climate topics. We are looking forward to our collaboration with GRESB in the next months!

* Other sectors already covered in the 2°ii database include: Coal production, Oil&Gas production, Power generation, Aviation, Cement, Shipping, Steel, Automotive, Agriculture (ongoing)

7 03, 2019

Financing the ‘Clean Billion’: The role of investors and policymakers in solving the climate innovation puzzle

From shifting the trillions to addressing the billions. There is a growing narrative and traction among investors around contributing to financing the transition to a low-carbon economy. While partly motivated by questions around financial risk, this narrative is driving a number of commitments around investing in the low-carbon economy. This narrative has focused equally on divesting from high-carbon assets and on mobilizing the “clean trillion”.

Largely missing from the debate, however, has been the role of investors in financing and scaling new zero carbon innovation technologies. Such investment in innovation requires much lower overall levels of financing – billions rather than trillions.

This report addresses the missing role of investors and policymakers in this debate, and how they can contribute to solving the climate innovation puzzle.

Full Report

13 02, 2019

Storm ahead: A proposal for a climate stress-test scenario

This report provides guidelines for building an adverse climate scenario that can be used by financial supervisors as inputs into either traditional or climate-specific stress-tests of regulated entities. The report has been designed to cover the key metrics and indicators found in traditional stress-tests, integrating both risks associated with the transition to a low-carbon economy as well as physical risks in a +4°C / +6°C world. The report provides both insights into key indicators needed in the context of climate stress-tests or scenario analysis, the values they would take in the context of transition risk and physical risk analysis based on the existing literature, options for modelling these indicators in the future, and example applications developed by the 2° Investing Initiative.

Full Report

4 01, 2019

A new year gift from the 2° Investing Initiative

Dear Friends and members of the 2° Investing Initiative,

We are launching a new excel-based tool that will allow financial institutions to define scenario-based targets for their portfolio allocation and engagement actions.

Financial institutions using the tool simply have to input their current portfolio exposure – sourcing data from the PACTA website or any data provider in the market – to figure out where their portfolio should be headed to align with the goals of the Paris Agreement. The goal of the tool is to support financial institutions in understanding science-based climate targets under the PACTA model and to apply them using a data provider and data inputs of their choice, independent of the PACTA online tool (Link).

As always, look forward to your comments, feedback, and questions.

Wishing you all the best for 2019 from the entire 2° Investing Initiative team.

19 12, 2018

Appointment to FRC Future of Corporate Reporting Advisory Group

We are pleased to announce that Simon Messenger has been appointed to the UK Financial Reporting Council’s (FRC) Future of Corporate Reporting Advisory Group.
The group will provide input and give advice to the FRC as it develops its project on the future of corporate reporting.

Simon Messenger

Simon Messenger

Simon Messenger, Director for France and the UK at the 2° Investing Initiative, said: “I am delighted to have been appointed to this advisory group. It is a major project for the UK financial reporting community, which will lead to a number of recommendations for changes to regulation and practice. We look forward to contributing our own experience, in particular with regard to various European corporate reporting directives and scenario analysis disclosure, in order to shape global regulatory practices.”

The group comprises of representatives from the FRC’s major stakeholder groups – companies, investors, civil society groups, academics, auditors, audit committee chairs, lawyers and design agencies. Members of the group have been selected to ensure that there is an appropriate balance of members from different backgrounds.

You can find the FRC’s press release here.

The FRC sets the UK Corporate Governance and Stewardship Codes, as well as UK standards for accounting and actuarial work. It monitors and takes action to promote the quality of corporate reporting and operates independent enforcement arrangements for accountants and actuaries. The FRC also sets auditing and ethical standards and enforces audit quality.

 

By clicking on the link above, you will be leaving the 2˚ Investing Initiative’s website.
13 12, 2018

Climate impact: What it is and how to achieve it

Financial market participants have been increasingly in the spotlight when it comes to climate change. After years of pressure by divestment campaigns, as well as being targeted by regulators and building internal capacity, the investment community has embarked upon stronger efforts to address climate change with their investments.

There is, however, still some confusion when investors talk about “decarbonization”. Some refer to decarbonizing their portfolios and mean de-risking them against the regulatory and physical effects of climate change. Others refer to decarbonizing the real economy and mean the impact that their investments can have on the climate.

This paper is addressing the latter: How investors can have an impact on the climate across different asset classes. This will be discussed for multiple forms of equity investment instruments, such as listed equity, private equity, venture capital and real asset investments. It will also cover debt investment instruments such as bonds and loans.

Full Report

1 11, 2018

Seine, sunrise and sea levels – A breakfast boat cruise on climate scenario analysis

The 2° Investing Initiative is pleased to invite you to a Finance for Tomorrow week-affiliated event:

 

Seine, sunrise and sea levels

A breakfast boat cruise on climate scenario analysis

 

When? Tuesday, 27 November 2018 at 7.45am for departure at 8.00am

Where? Embarcadere Quai de l’horloge – Boat: Henri IV

Since the Paris Agreement, demand from the investment community has been rising significantly to understand how their portfolios contribute to limiting global warming to well under 2°C. How much do their actions contribute to global warming or the mitigation of it? How aligned are their portfolios with the trajectories required by the International Energy Agency? A number of tools, initiatives and frameworks support investors, but how do they actually work in practice?

Come and join us for a breakfast boat cruise on the Seine to find out more about climate scenario analysis in real life and hear from industry experts on how they are tackling the issue.

Dave Jones, California Insurance Commissioner, and Leon Wijnands, ING’s Global Head of Sustainability, will discuss their own approaches to scenario analysis and some of their initial results. Simon Messenger, Head of Corporate and Investor Engagement at the 2° Investing Initiative, will present findings from our latest research and work, as well as discuss future trends.

 

AGENDA

7.45am Arrival of guests

8.00am Departure of boat and breakfast

8.15am Scenario analysis and real-life application:

1) Scenario analysis in practice

State of California: Dave Jones, California Insurance Commissioner

2) Scenario analysis in practice

Project Terra: Leon Wijnands, ING’s Global Head of Sustainability

3) Presentation of research, findings and PACTA tool

Simon Messenger, Director, 2° Investing Initiative

9.00am Networking

9.30am Return to Pont Neuf

Let us know if you need any help in getting back to the Climate Finance Day venue.

 

I will attend this event

 

We look forward to seeing you in Paris.

Your 2° Investing Initiative Team

 

This conference is part of the official programme of Finance for Tomorrow week.

The project has received funding from the European Union’s Life programme under grant agreement LIFE16/GIC/FR/000061

You can reach us at: comms@2degrees-investing.org