At UNEP FI, 2022 was a year in which we marked important milestones, while we continued to drive the finance industry’s ambition on delivering sustainable global economies and showcased our members’ progress. But 2022 was also a year of global events that confirmed how urgently the world must move to tackle the triple planetary crisis of climate change, biodiversity loss and pollution. Climate change-induced heat waves, floods, storms, and droughts heavily impacted populations, businesses, and nature across the globe. While the latest Intergovernmental Panel on Climate Change (IPCC) report released in April warned that although we have the technology and global capital to tackle the deepening climate crisis, we are running out of time. At the same time, war in Ukraine has worsened the energy crisis and brought the topic of energy security sharply into focus.
On the other hand, our members have taken large strides forwards on implementing the industry frameworks, the Principles for Responsible Banking (PRB) and Principles for Sustainable Insurance (PSI). Three hundred and twelve banks are now signatories to the PRB representing nearly 50% of the globe’s banking assets and the PSI community now unites more than 230 insurers and supporting institutions. In other areas, work continues, such as developing guidance on the net-zero transition where the UNEP FI-convened alliances are moving on from commitments to target-setting, to implementation, and groups of members are developing new frameworks to help grow finance for nature, adaptation and a circular economy. And while we celebrate our members’ progress this year, we also remind financial institutions, financial regulators and policymakers around the globe that there is no time to lose in addressing the triple planetary crisis. At COP27, in November, there was some encouraging news with an international agreement to establish a ‘loss and damage’ fund to help the world’s most vulnerable withstand and recover from the physical impacts of climate change. But with no agreement to raise countries’ ambitions on decarbonisation and the Nationally Determined Contributions (NDCs) collectively falling short of where the science tells us they need to be, as the UN Secretary General António Guterres reminded us again: “the clock is ticking.”
Read on for a summary of what UNEP FI and its growing membership of more than 450 financial institutions worldwide have done this year to advance sustainable finance. Check out our Annual Overview 2021 for more in-depth information about our different programmes.
Celebrating 50-, 30- and 10-year anniversaries
2022 was a year of big milestones with UNEP’s 50th, UNEP FI’s 30th and the PSI Initiative’s 10th anniversaries. At Stockholm+50, UNEP celebrated 50 years of global environmental action, followed by UNEP FI’s Principles for Sustainable Insurance (PSI) initiative with a 3-day anniversary event in June in Zurich, Switzerland, marking 10 years of harnessing the power of sustainable insurance and engaging with key stakeholders to amplify sustainable insurance. The first ESG guide for the global life and health insurance industry building on the ESG guide for the global non-life insurance industry published in 2020, and a global study harnessing environmental pollution liability insurance for a sustainable economy were launched at the event.
In October, UNEP FI and members marked 30 years of sustainable finance leadership at our 17th Global Roundtable. The virtual event brought together 100+ industry-leading speakers and 3000+ online participants to continue to deepen sustainability integration across the banking, insurance and investment industries. The event saw the launch of the Principles for Responsible Banking Academy, a new global training programme for banking professionals, and new resources for managing impact.
Pioneering implementation of net-zero finance
The oldest and most established UN-convened net-zero alliance, the Net-Zero Asset Owner Alliance (NZAOA), saw another active year, advancing delivery on decarbonization targets while continuing to see consistent membership growth and expanding horizons. The Alliance has now reached 83 institutional investors, representing US$11 trillion in assets, and has welcomed the first African sovereign wealth fund. The Alliance started the new year by publishing the second edition of the NZAOA Target Setting Protocol to guide its members in setting more ambitious climate targets, in alignment with the IPCC no/low overshoot pathways. The second NZAOA progress report published in September, offered insight into aggregate data on intermediate targets set by 44 members. The Alliance also published various position papers throughout the year, calling on stakeholders including policymakers to address climate risk, implement carbon prices, support blended finance, and develop net-zero-aligned benchmarks.
Meanwhile, the UN-convened, industry-led Net-Zero Banking Alliance (NZBA) marked its first anniversary in April and experienced tremendous growth in its first year, with more than 100 banks joining and committing to decarbonizing their lending and investing activities by 2050. The Alliance launched supporting notes for the NZBA Guidelines for Climate Target Setting for Banks in April, a NZBA Transition Finance Guide in October, and finished the year on a high note with the launch at COP27 of its anticipated first NZBA Progress Report. The report details the intermediate 2030 decarbonization targets from over 60 member banks and demonstrates the first stage of progress since the Alliance started its journey. While first attempts are rarely perfect, the report demonstrates exceptional progress for the alliance that is blazing a trail for other banks and building a clear roadmap for regulators and governments to create policies that will support a more sustainable financial system.
The newest of the UN-convened alliances, the Net-Zero Insurance Alliance (NZIA), now numbers 29 leading insurers representing more than 14% of world premium volume globally. The alliance is finalizing its first Target-Setting Protocol to enable NZIA members to independently set science-based, interim decarbonisation targets for their insurance and reinsurance underwriting portfolios in line with a net-zero transition pathway that would limit global warming this century to 1.5° C.
Addressing climate and nature challenges together
Reaching net-zero carbon emissions by 2050 is this century’s global imperative if we are to keep global temperature at a level that human civilization and the natural systems that we depend on can withstand. Action on climate and nature are two sides of the same coin and we are approaching these two crucial issues at UNEP FI in an integrated way as the world recognizes the symbiotic relationship of the two: addressing nature loss can help mitigate climate change and vice versa.
In addition to our work on net-zero finance, UNEP FI continues to help the finance industry assess and manage climate risks through its Task Force on Climate-Related Financial Disclosures (TCFD) Programme. In 2022, 38 banks joined the programme to work towards better climate risk assessment and expand knowledge to prepare for the unique challenges of climate change. Five TCFD guidance reports for banks and investors were published in parallel, covering topics such as physical and transition climate risk, client engagement, climate dashboards, and sectoral risk assessments.
COP27 in Egypt turned the world’s attention to climate adaptation and climate impacts and concluded with a historic decision to establish a ‘Loss and Damage’ fund. As adaptation took central stage at the international meeting on climate action, UNEP FI launched two resources for financial institutions to disclose physical climate risks and define next steps to accelerate climate resilient financing. A Principles for Responsible Banking discussion paper assessing current preparedness of banks globally for adaptation and proposing the next steps and considerations for advancing adaptation in the banking sector in highly exposed regions and globally will be followed by the launch of a PRB working group on climate adaptation in 2023. The group of PRB member banks will develop a set of guidelines and complement net-zero alignment under the responsible banking framework. Adaptation also requires greater cooperation between private and public finance. To this end, UNEP FI will host the Secretariat of the upcoming Adaptation & Resilience Investors Collaborative, a group of 18 Development Finance Institutions (DFI) which will develop tools and research on adaptation metrics, physical risks and innovative financial approaches to climate adaptation.
Over the next two weeks, the world is coming together to tackle biodiversity loss at the Convention on Biological Diversity (CBD) COP15 taking place in Montreal and hopefully creating a ‘Paris moment’ for nature. It is hoped that the Global Biodiversity Framework to be adopted during the meeting will maintain a goal to align public and private finance to enable financial institutions to play a critical role in the global transition towards a nature-positive economy. Many members have signed a statement from the private finance sector, calling on policymakers for a clear policy mandate to align economic activities with biodiversity goals.
The understanding of the importance of assessing nature risks has also moved up the sustainable finance agenda, with the release earlier this year of the beta version of the Taskforce on Nature-Related Financial Disclosures (TNFD) – the first integrated approach to incorporating nature-related risk and opportunity analysis into the heart of corporate and financial decision making. Forty-two insurance companies, banks and investors located worldwide joined UNEP FI’s TNFD pilot programme that kicked off shortly after the launch of the beta version to provide practical examples of what the application of the TNFD framework could look like and enable greater awareness and capacity among the framework’s supporters and financial institutions before the final release of the framework in 2023. Five joint reports on TNFD market readiness, data for nature-related disclosure, and testing of the exploratory framework in staples sector were also published during the year to inform the forthcoming framework.
To support signatories in integrating biodiversity considerations into their business activities and strategies, UNEP FI has created the Principles for Responsible Banking (PRB) biodiversity community. Members of the community have access to resources and the opportunity to learn from biodiversity experts from UNEP FI and beyond.
Tackling nature and biodiversity loss with a blue lens as well, UNEP FI continued its work in blue finance, together with the 74 institutions forming part of the Sustainable Blue Economy Finance Initiative. A new guide on ocean pollution and coastal resilience, was published in March to help financial institutions break the ocean plastic cycle and take sustainable decisions when financing coastal infrastructure projects. A few months later, on the sidelines of the UN Ocean Conference in Lisbon, UNEP FI and four international organisations announced the development of global guidance on blue bonds to be published next year, providing the global market more consistency and transparency when financing the blue economy.
Spurring regulatory action and harmonization
Policy action plays a key role in supporting financial actors meet their sustainability commitments, as well as delivering a more coordinated and rapid response to the challenges that society is facing. In 2022, UNEP FI continued to signal this need to policymakers around the globe.
After testing the application of the EU taxonomy to banking products in 2021, this year UNEP FI published a new report exploring practical approaches to applying the EU taxonomy to bank lending to support banks in understanding the Taxonomy, its requirements and its application for disclosure requirements. We also added our voice to global sustainability standards developments such as the ISSB and EFRAG and actively engaged with policymakers in different jurisdictions. July marked one year since the launch of the ground-breaking report ‘A Legal Framework for Impact’ and its subsequent programme helping investors engage with policymakers to transform global financial systems.
In November, UNEP FI’s Leadership Council comprised of 22 banks and insurance CEOs from across the globe met for the second time and highlighted once more the importance of standardisation and harmonization of sustainable finance regulations, aiming for increasing transparency and a level playing field. To support this recommendation, in 2023, UNEP FI will implement a new strategy on global policy and regulation.
Scaling up work to end pollution and move towards a circular economy
UN Member States endorsed a historic resolution to forge an international legally binding agreement to end plastic pollution by 2024 at the UN Environment Assembly (UNEA-5) in March. UNEP FI will support the development of the treaty by convening a small group of leading banks and insurers to provide input and suggestions to the Intergovernmental Negotiation Committee (INC) on the desired outcomes for the finance sector and build readiness in the financial sector to act on plastic pollution.
To strengthen our support to members and move towards a more resource efficient and circular economy, in February, UNEP FI set up a working group of banks to apply the methodology proposed in the Guidance on Resource Efficiency and Circular Economy Target Setting published at the end of last year. The group received support in setting targets and gave feedback on the methodology which informed an updated version of the guidance to be published in 2023.
Renewing focus on the “S” of “ESG”
UNEP FI expanded its work on Social and Human Rights, clarifying what the “S” in “ESG” means for financial institutions and supporting members in promoting a Just Transition, consistent with the goals of social inclusion and upholding human rights. The second edition of the Guidance on Financial Inclusion and Financial Health Target Setting was published in October and a series of articles on gender, climate and finance published around COP27 kicked off our new social work plan. Activities will speed up in 2023 when a Just Transition Consultative Committee and a Human Rights Community of Practice will be created amongst UNEP FI members to facilitate peer learning and give feedback on upcoming guidance.
Facilitating impact assessment and target setting
UNEP FI continued its work providing tools and guidance to help financial institutions finance the SDGs and measure the impact they are having with the launch of the third version of the Portfolio Impact Analysis Tool for Banks in modular format. The suite of impact analysis tools help with implementation of the Principles for Responsible Banking, and enable practitioners with holistic impact analysis and management across their business activities. This was supported by the launch of the Impact Protocol, which provides a step-by-step overview of how to analyse and manage bank portfolio impacts. UNEP FI has also delivered a capacity building programme on impact analysis and target setting on climate and financial inclusion for banks across regions in 2022.
Upskilling finance professionals around the world
In 2022, the Principles for Responsible Banking celebrated three years since its launch, now numbering over 300 banks from 80 countries all working to implement the world’s foremost framework for a sustainable banking system. To support this global and growing membership, we launched the PRB Academy, an online interactive training programme designed to rapidly upskill banking professionals around the world, giving them a practical understanding of how to apply the Principles for Responsible Banking. It includes modules on the foundations of responsible banking, working with clients & customers to evolve as responsible businesses, climate change, and a course for Board members and senior executives.
UNEP FI’s renowned deep-dive, online courses and tailored in-person workshops also took place during the year, training more than 600 finance professionals on social, environmental and climate risks assessment and management
Preparing the ground for 2023
As we turn towards 2023, we look forward to introducing more opportunities for our members to engage with us and strengthen knowledge and expertise in priority areas. Our thematic and industry workstreams all have important work planned for the new year, with the first Target Setting Protocol of the Net-Zero Insurance Alliance, an adaptation framework for banks, the second collective progress report of the Principles for Responsible Banking, new work on policy and regulation and many more exciting projects to support our members across industries and regions.
We also look forward to significant external developments that will accelerate the transition towards a global sustainable economy and help our members address global environmental, social and governance challenges with among others the launch of the final TNFD framework, and international developments on reducing plastic pollution.
“2022 was a challenging year on many fronts, but I am impressed and grateful for the dedicated and passionate collaboration from our membership. Cooperation across the financial sector continues to be effective and we at UNEP FI are firmly committed to keep pushing for ambition and helping the finance industry deliver real world positive impacts in 2023 and beyond.” Eric Usher, UNEP FI’s Head.
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