This report provided a ‘strawman’ climate scenario that can be used directly in traditional stress-tests, as well as alternative climate stress tests of the kind pioneered by a number of financial supervisors around the world. The analysis can be used as inspiration and input by financial supervisors in designing their own stress-tests. 2° Investing Initiative is currently partnering with a number of financial supervisors on turning this ‘stress-test’ into a direct application for regulated entities.
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.
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, 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.
Financial market participants have been recently in the spotlight when it comes to climate change. After years of pressure by the divestment campaigns, targeted by regulators and building internal capacity, the investment community has embarked to address climate change with their investments.
There is, however, still a bit of 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 can investors 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.
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.
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
9.30am Return to Pont Neuf
Let us know if you need any help in getting back to the Climate Finance Day venue.
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: email@example.com
As a follow-up to the EU’s Action Plan on Financing Sustainable Growth, the European Commission has published a legislative proposal on low-carbon benchmarks and positive carbon impact benchmarks.
The 2° Investing Initiative and WWF are hosting an event to bring together market experts and policymakers to discuss the best way forward to shape the benchmark regulation and contribute to climate mitigation in Brussels on 26 November 2018.
The event is by invitation only. The agenda can be found here.
A recording of the webinar from 8 October 2018, in which you can hear from the Principles for Responsible Investment, the Insurance Commissioner of California and us about climate scenario analysis and the PACTA tool we have developed to assess the alignment of investor portfolios with the goals of the Paris Agreement, is now available here.
We are co-hosting an event with BNP Paribas and ISS-Climate on 24 September 2018 as part of Climate Week NYC.
Today ING announced that it will start steering its €500 billion lending portfolio towards meeting the climate goals of the Paris Agreement after developing a cutting-edge, precise method to do this with the 2˚ Investing Initiative (2˚ii). The Paris Agreement aims to keep global warming as a result of climate change to two degrees Celsius or below.
ING had been working for several years to figure out the best way to measure the climate impact of its lending portfolio. After piloting a financed-emissions approach that ultimately could not be used, ING sought alternative methods for measuring and steering.
In early 2018, ING partnered with 2˚ii to extend the initiative’s existing 2°C scenario analysis framework for equity and bond portfolios – the so-called Paris Agreement Capital Transition Assessment or PACTA tool – to corporate lending portfolios. As a result, 2˚ii and ING have together taken the lead and successfully developed a methodology that could become the standard for how international banks set science-based targets. ING calls this the Terra approach.
“We are delighted that a multinational bank such as ING helped us pioneer this methodology for financial service providers,” said Jakob Thomä, managing director of 2˚ii. “The methodology – and its resulting 2˚C-aligned portfolios – will be an important contributor to combating climate change. We hope other banks will follow suit and adopt it as well.”
Compared to other measurement approaches, this science-based approach could ultimately have a significant impact because it enables banks to direct their money towards financing technologies that support a low-carbon future instead of those that only measure a carbon-rich past.
The approach focuses on the sectors that produce the most greenhouse gas emissions. It also concentrates on the technology changes that companies in those sectors need to make in order to be aligned with the climate goals of the Paris Agreement. For example, it is not enough for automotive companies to lower emissions by producing fewer petrol-powered cars – they have to manufacture more electric cars too.
“Banks have a responsibility to finance change and we are stepping up to that,” said Isabel Fernandez, head of ING Wholesale Banking, who will announce the Terra approach in her speech at the Global Climate Action Summit in San Francisco today. “We believe the Terra approach will enable us to make a real difference.”
Like the PACTA tool, the Terra approach is open-source. ING is collaborating with other banks and stakeholders to encourage them to also work with this methodology.
“All banks will benefit from having an industry-wide standard, greater transparency on their alignment with the climate goals of the Paris Agreement and, as a result, collective effectiveness in fighting climate change,” added Fernandez.
To learn more about the Terra approach, please contact firstname.lastname@example.org or email@example.com
For more information contact:
Marrika van Beilen
ING Group +31654257830
Head of Communications
2° Investing Initiative
ING is a global financial institution with a strong European base, offering banking services through its operating company ING Bank. The purpose of ING Bank is to empower people to stay one step ahead in life and in business. ING Bank’s more than 52,000 employees offer retail and wholesale banking services to customers in over 40 countries. ING Group shares are listed on the exchanges of Amsterdam (INGA AS, INGA.AS), Brussels and New York Stock (ADRs: ING US, ING.N). Sustainability forms an integral part of ING’s strategy, which is reflected in ING’s ranking as a leader in the banks industry group by Sustainalytics. ING Group shares are included in the FTSE4Good Index and in the Dow Jones Sustainability Index (Europe and World), where ING is also among the leaders in the banks industry group.
The 2° Investing Initiative (2°ii) was set up in 2012 with the mission to align financial markets with climate goals. It has since become a pioneering think tank – with offices in Berlin, Paris, London and New York – on the integration of long-term risks and policy objectives into financial markets and regulatory frameworks. Over the past few years, 2°ii has led one of the largest global research programmes on long-term risks in financial markets, working with over 50 research partners. A core principle of its mission is to reduce the transaction costs across companies, financial institutions and policymakers, while guiding financial markets towards the long-term future.