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The Climate Finance Product Scanner for retail investors and banks (KliFin-Scanner) is developing a questionnaire on non-financial objectives for retail investors. The questionnaire will enable retail investors to create an investment profile based on their individual extra-financial objectives. This can then be matched to financial products. The questionnaire and matching software will be integrated in a website available to all retail investors in Germany. It will be open-source and available as a white label solution that can be integrated into banks’ infrastructure. The project run-time is from 1 January 2018 to 30 June 2020.
One of the cornerstones of the Task Force on Climate-Related Financial Disclosures (TCFD), as well as governmental regulations such as Article 173 of France’s Law on Energy Transition for Green Growth, center on the need for financial institutions to disclose climate-related risks. However, many financial institutions continue to apply these recommendations haphazardly, with a wide range in terms of the quality and amount of information provided.
Building on their inaugural edition in 2016 and recent international developments in the field of climate-related reporting, the International Awards for Climate-Related Financial Disclosures offer the opportunity for financial institutions to showcase leading practices, share common challenges, and recognize climate-reporting leadership in the sector. They are jointly organized by the French Energy and Environmental Management Agency (ADEME) and the French Ministry of Ecology and Inclusive Transition (CGDD), with the support of the European Commission’s DG-FISMA, Eurosif and the 2° Investing Initiative.
While sustainable finance is a growing field, standards for measuring, reporting, and other frameworks are still in their infancy. Without agreed-upon standards, investing and financing activities related to climate change run the risk of “green-washing,” leaving investors and regulators with little information about the impact of their activities.
ISO (International Standards Organization) Standard 14097 was proposed by the French national standardization body, AFNOR, and approved by ballot in January 2017. The conveners are Stanislas Dupré, CEO of 2°ii, and Massamba Thoiye, Manager of the Sustainable Development Mechanism Program of the UN Framework Convention on Climate Change (UNFCCC). Its objective is to create a standard for measuring and reporting financing and investment activities related to climate change, including:
One of the key recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) focuses on the need for investors to perform scenario analysis, to understand the risks of different climate-related scenarios on their business. However, this recommendation is not being applied consistently, notably by companies in the energy and transportation sectors.
To raise the consistent implementation of this recommendation, 2°ii launched the Company Reports project in 2019. The project targets companies in the utility and automotive sectors that form part of the Climate Action 100+ (CA100+) target group, an investor initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.
2°ii will provide these companies’ climate scenario analysis results to shareholders willing to engage on this topic. This approach will investors to:
Launched in 2018, the Science-Based Targets Initiative for Financial Institutions (SBTI FI) is the first and only initiative in the world developing science-based target setting methodologies, tools, and implementation guidelines for key asset classes covering financial institutions’ main business activities. Targeting banks, pension funds, insurance companies and public financial institutions, the initiative seeks to ensure that the targets set support the transition to a low-carbon economy. As knowledge partner of the initiative, 2°ii is leading the methodology development together with Navigant Consulting. The World Resources Institute (WRI) is the managing partner of the project.
The Japan Energy Transition Initiative (JETI) is a collaboration of global and Japanese knowledge providers dedicated to accelerating the energy transition among business, finance and policy makers in Japan. JETI will address key global climate and energy issues relevant to Japan in a manner that is ahead of the curve and focused on specific outcomes leading to accelerated decarbonisation.
JETI will work with Japanese and global partners to curate cutting edge events and knowledge transfers and facilitate relevant research streams. Its secretariat will be based within the Institute for Global Environmental Strategies (IGES) in Tokyo, will be fully multilingual and supported by a strong global network of partners.
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May 2018: This discussion paper aims to pave the way for the development of a framework for assessing and moving forward the “contribution of green bonds to scaling up the investments in green projects”. The paper focuses on the case of ‘Use-of-Proceeds Green Bonds’ (UoP GB) that represent 95% of the market in 2016. It discusses the link between increasing investment in UoP-GB on the one hand, and the growth of investments in green projects by issuers on the other hand, suggesting how this approach can be enhanced to achieve further impact.
May 2018: Our working paper “The Bigger Picture” shows that under optimistic assumptions around breakthrough technologies, oil demand could drop by 50% in only 22 years. A combination of shared economy, 3D printing, autonomous vehicles, nanotechnologies, and artificial intelligence, among others, could shave around 30 million barrels per day off of global oil demand. Once you add the ‘traditional’ assumptions around the effects of electric vehicles and the end of oil in the power sector, oil demand could drop to 47 million barrels per day by 2040.
The paper builds on a comprehensive literature review of the potential effects of breakthrough technologies, building on the optimistic assumptions founds in academic literature, as well as research by industry experts (McKinsey). Squarely in the realm of the possible, the analysis represents an alternative vision of what an oil demand crash could look like if technology disruption materializes. Our objective in this paper is not to forecast, but rather to show where optimistic technology assumptions lead the oil sector, providing the potential basis for alternative stress-testing frameworks for fossil fuels.
April 2018: In the context of mobilising policy actions with regard to sustainable finance, the European Parliament and Commission are considering introducing a Green Supporting Factor (GSF) or Brown Penalty (BP) for capital reserve requirements. The objective of this working paper is to identify the potential impacts of introducing a GSF or a Brown Penalty.
Jan 2018: An overview of the current state of the household credit market. We argue that household credit has so far been an overlooked topic in climate finance. While there are some tentative steps from early movers to assess the climate impact of various types of household credit, much potential remains to be unlocked.
Jan 2018: 2°ii contributed to the final report of the EU High-Level Expert Group (HLEG) on Sustainable Finance, “Financing a Sustainable European Economy”.
The European Commission established the HLEG to help develop an overarching and comprehensive EU roadmap on sustainable finance. It requested advice on how to ‘steer the flow of capital towards sustainable investments; identify steps that financial institutions and supervisors should take to protect the financial system from sustainability risks; and deploy these policies on a pan-European scale’.
Given the complexity of the financial system and its policy and regulatory framework, there is no single lever to achieve these ambitions and ‘switch’ the financial system to sustainability. Improving the contribution of the financial system to sustainable and inclusive growth requires a comprehensive review, the identification of areas where changes are needed, and the development of specific recommendations in these areas. That is what the HLEG has sought to deliver.
The full report can be found here.