Connecting the dots between climate goals, investment frameworks, and financial policies
The financial sector (institutional investors, banks, and financial service providers) plays a key role in the reallocation of capital in line with 2°C climate goals. We call this mobilization and the related changes in investment frameworks ‘2° investing’. The role of the financial sector in this mobilization can be mapped as follows :
- Supplying investment capital to make the 2° transition happen : Financial institutions and policy makers influence the supply of capital for both ‘green’ and ‘brown’ activities through their decisions framework.
- Anticipating changes in the demand of capital : The introduction of more stringent carbon policies, new technologies, and the potential development of climate litigation will change the risk-adjusted returns of different financial assets, creating financial risk and opportunity.
How we work
The 2° Investing Initiative approach is based on inclusiveness (involvement of all stakeholder groups in workshops and review panels, inclusion of all critical views in the publications), non-duplication (collaboration is systematically proposed to peers and organizations working on the same topics) and independence of research (the research team doesn’t serve the interest of a stakeholder group).
We seek genuine inclusion of all stakeholder groups in research projects, engagement activities, and governance of affiliated entities, including members and board members. By implementing this approach, we aim to ‘bridge the gap’ between groups that don’t traditionally work together and secure multilateral support as facilitators for soft or hard policy making (e.g. standard development, disclosure requirements).
At a governance level, these principles apply both to research activities and engagement activities that are core elements of all actions undertaken by existing 2° Investing entities. The principle is embedded in the bylaws : the board of the association is obliged to provide a public, detailed justifications if it declines a membership application. The board of the 2° Investing Initiative includes a diverse range of stakeholders that do not typically work together, including BankTrack (probably the most activist environmental group in the financial sector), Caisse des Depôts, a government representative, and an asset manager.
At project a level, the participation of target stakeholder groups ensures buy-in for ideas and recommendations, and increases impact. For example, 2°ii created a panel of French economists and practitioners to get critical feedbacks on its project related to the inclusion of climate-related criteria in tax incentives on savings. To our knowledge we are the only organization in this industry with this governance model worldwide.
2°ii-Paris provides the services of a free technical back office for certain member organizations and partners, such as the French and German ministries of environment, environmental advocacy NGOs (Greenpeace, Climate Action Network, WWF France), standard-setting organizations (GHG Protocol), and international organizations (UNEP-Fi, UNEP Inquiry).
Project development starts with a review of existing and upcoming work streams that might overlap with our work. 2° Investing Initiative then systematically engages with relevant stakeholders, regardless of their background (cf. inclusiveness principle) with the objective of avoiding duplication and creating economies of scale, opportunities for cross-fertilization, and trust between stakeholder groups.
This approach gives 2° Investing Initiative a research and activity focus on topics that are both gaps in the overall ecosystem research pipeline and connectors between different topics and disciplines. For example, the SEI metrics project that develops investor-oriented climate metrics bridges gaps between organizations specialised in climate modelling, policy-making and financial data analysis.
2° Investing Initiative’s research is unbiased and pursued independently from any of its stakeholders and financial contributors. All research projects are developed in line with 2° Investing Initiative’s mission. This status of independence is crucial to the development of objective approaches, acceptable to all stakeholders.