UNEP FI in 2020: Sustainable finance collaboration grows despite challenges

10 December 2020

Despite one of the most challenging years in living memory for businesses around the globe, UNEP FI and our members continued to work together throughout 2020 towards crafting a more sustainable financial system. The Covid-19 pandemic and its economic fallout has highlighted the vulnerability of society and its economy to crises. This year has revealed the urgency of tackling the nature, climate, and pollution crises and addressing inequalities that undermine the resilience of us all.

Proof that commitment to sustainable finance is growing is reflected in the growth in membership: in the year to September 2020, more than 50 financial institutions joined UNEP FI, growing total membership by over 20% to 355 banks, insurers and investors. This review of 2020 highlights just some of the many collective successes of UNEP FI and its members.

Members responding to COVID-19 shared experiences

The COVID-19 pandemic has highlighted how crucial sustainable finance will be to delivering a fairer and more resilient world and at helping humanity better prepare for and hopefully avoid the next pandemic or other global crises. Earlier in the year, many of our members shared their experiences as they responded to COVID-19. UNEP FI brought together banks from around the world to exchange experience and ideas to support society and businesses. Read a summary here. Insurers met over the summer at a series of virtual events to help shape leadership in sustainable insurance, and real estate investors summarised their collective perspectives on managing the recovery from the crisis.

Signatories to Principles for Responsible Banking reach 200, celebrate one year of progress

In September 2019, 130 banks signed the UN’s Principles for Responsible Banking, the first global sustainability framework for the banking industry. One year later, we celebrated its first anniversary and summarised the progress the coalition had achieved through a series of videos with banks and stakeholders. To help members effectively implement the Principles, UNEP FI established an Implementation Support Structure in 2020. Over 300 colleagues from member banks are participating in 11 working groups across six areas including impact analysis and target setting to exchange knowledge with peers and co-create tools, guidance and resources that will benefit all members.

Following an Extraordinary General Meeting of UNEP FI’s banking membership, over 87% of over two-thirds of UNEP FI members voted in favour of our Banking Committee’s proposal for delivering the Principles for Responsible Banking. Outcomes include a strengthened Banking Board and additional resources to support effective implementation of the Principles for Responsible Banking.

Members also agreed to put in place robust accountability mechanisms involving civil society through the creation of a Civil Society Advisory Body in 2021. By December 2020, the coalition reached 200 signatories across 58 countries and six continents. The signatories collectively represent 1.7 billion customers and USD 54 trillion in assets: more than 40% of the global banking sector is now part of the coalition for change. More information is available on the Principles for Responsible Banking pages of the UNEP FI website.

The first reporting of the Collective Commitment to Climate Action

The Collective Commitment to Climate Action (CCCA), the most ambitious global banking sector initiative supporting the transition to a net zero economy by 2050, launched in September 2019. 38 banks who represent US $15 trillion have now signed the commitment pledging to strategically align their business with the goals of the Paris Climate Agreement. UNEP FI summarised the first reporting from the banks in an overview of the concrete measures taken by the CCCA signatory banks in the first 12 months to deliver on their commitment. It shows the growing use of scientific climate scenarios in banks’ strategies and reflects the timelines imposed by science for achieving “well-below 2 degrees” of average global temperature increase. While most banks still have some way to go before they can publish a full assessment of their portfolios’ alignment with the Paris Agreement and publish scenario-based targets, all 38 banks have committed to doing so within three years of signing the Collective Commitment. The 38 CCCA banks – all signatories to the Principles for Responsible Banking – will provide leadership, guidance, tools and frameworks for the other 200+ signatories to the responsible banking coalition. Find out more here.

The first year of the Net-Zero Asset Owner Alliance

The Net-Zero Asset Owner Alliance (AOA), convened in 2019 by UNEP FI and the Principles for Responsible Investment and supported by WWF and Mission 2020, also celebrated its first anniversary in 2020. In just one year, members increased from the initial 12 to more than 30 members, representing many of the world’s largest institutional investors. The members have committed to transition their portfolios, with over $5 trillion assets under management in total, to net-zero greenhouse gas emissions by 2050. The Alliance published for consultation in October its Target Setting Protocol, which lays out how members will implement concrete and deep GHG emissions reductions for the period 2020-2025, and the Thermal Coal Position which calls for the cancellation of all new thermal coal projects, a phase-out of all unabated existing coal-fired electricity generation and a cessation of the financing, development and planning of further thermal coal power plants. Read more on this game-changing initiative here.

Global Guide: Managing environmental, social and governance risks in non-life insurance business

The first global guide to manage ESG risks in risk assessment and insurance underwriting was published earlier this year. It has an initial focus on non-life insurance business—also known as property and casualty insurance business. Heatmaps indicate how ESG risks can vary by country or region, line of business, type of cover, economic sectors, client characteristics, over time, and due to other factors. The guide helps draw attention to this complex range of considerations and how some industry participants are integrating ESG risk factors into non-life risk assessment and underwriting.

Download the guide here.

Insurance Sustainable Development Goals

A PSI-Swiss Re international sustainability leadership event series focused on the role of insurance in achieving the SDGS. This led to a PSI global initiative to create a UN-backed alliance of leading insurers committed to supporting the achievement of the SDGs by 2030 via their insurance portfolios through a set of Insurance Sustainable Development Goals (iSDGs). As part of the initiative to the iSDGs, the PSI team undertook a comprehensive global consultation to identify how organizations are currently responding to the SDGs across their insurance portfolios and which SDGs insurers see as most relevant to the global insurance industry. Look out for more on this in 2021.

Implementing the Financial Stability Board’s TCFD recommendations with banks and insurers

Second phase of work with banks develops more guidance

After a year-long project that took place from 2017-2018, UNEP FI together with 16 of the world’s leading banks worked to pioneer application of transition and physical assessment models and metrics to enable scenario-based, forward-looking assessment and disclosure of climate-related risks and opportunities. Building on the success of Phase I, from 2019-2020, UNEP FI’s Phase II TCFD Banking programme helped 39 banks on six continents to enhance their climate risk toolkits and improve climate risk disclosures. Supported by a range of expert partners, participants explored both physical and transition risks and opportunities.

Phase II focused on the four pillars of TCFD disclosures: Governance, Strategy, Risk Management, and Metrics & Targets. The programme developed tools, frameworks, and thought papers that enabled participants to better address each of the recommended disclosures within these pillars. Beyond building capacity for participants, the Phase II outputs aimed to establish good practices for TCFD disclosures across the financial sector. Phase III of the TCFD banking program is expected to commence in January 2021.

Find out more about implementing TCFD for banks and explore the guidance here.

22 insurers work together piloting TCFD for the insurance industry

UNEP FI is collaborating with 22 leading insurers and reinsurers from across the globe, representing more than 10% of the global industry premium. The group collaborated on the development of methodologies to evaluate the financial impact that physical, transition and litigation risks may have on their underwriting portfolios. UNEP FI’s Principles for Sustainable Insurance team led the project with the technical support of PwC and the Sabin Centre for Climate Change Law at Columbia University.

The resulting report will launch in January 2021. Download an interim report here.

New tools enable finance sector to analyse positive impact

In April 2020, UNEP FI launched two ground-breaking tools for corporates, banks and investors to work together and step up their capacity to deliver on the Sustainable Development Goals (SDGs): the Portfolio Impact Analysis Tool for Banks and the Corporate Impact Analysis Tool. The tools’ unique holistic impact analysis methodology enables financial institutions to understand the actual and potential positive and negative impacts associated with their business across the SDG spectrum of environmental, social and economic issues. The Corporate Impact Analysis Tool helps banks and investors gain a holistic view of the impact status and possibilities of their clients and investee companies. The Portfolio Impact Analysis Tool for Banks, on the other hand, is designed to guide banks through a top-down analysis of their portfolios using the same holistic methodology as the Corporate Impact Analysis Tool. Banks can use the analysis to set targets for their most significant impact areas, where it matters most, in order to drive their contribution to society’s goals. The two complementary tools are designed to drive collaboration across the finance sector and significantly boost their ability to identify and impact global SDGs.

Informed by six months of implementation by practitioners, UNEP FI also released a detailed User Guide  as well as first updates, as one of the several unique built-in resources of the tools.

Financial Action on Nature and Biodiversity Gains Urgency

Biodiversity and Nature Loss

More than half the world’s GDP is moderately or highly dependent on nature, which is increasingly under threat. Biodiversity – the variation of species and genetics among animals, plants, fungi or microorganisms – is fundamental to economic health. In June, UNEP FI published a report on Biodiversity Targets and Finance, designed to enable financial institutions to start setting biodiversity targets across their activities. The report draws on the science and analyses of the online ENCORE tool, and will be followed in 2021 by a ground-breaking new biodiversity module, currently under development in consultation with 27 financial institutions.

Under the Principles for Responsible Banking, UNEP FI is working with a sub-group of signatories to develop guidance for setting and attaining targets on biodiversity, which includes practical support for those institutions who have committed to the Finance for Biodiversity Pledge. The Task Force for Nature Related Financial Disclosures (TNFD) is currently being formed, with UNEP FI as one of the core partners. An Informal Working Group, including around 30 UNEP FI members, is planning a two-year programme of work for the Task Force to resolve the reporting, metrics, and data needs of financial institutions that will enable them to better understand their risks, dependencies and impacts on nature.

Sustainable Ocean Finance

The Sustainable Blue Economy Finance Initiative continues to gain momentum, with over 50 institutions having joined the community accelerating action towards a healthy ocean. The initiative is built on the Sustainable Blue Economy Finance Principles, the first of their kind in the market, and a gold-standard for financing activities in the ocean economy.

In 2021, the initiative will release a report on the current state of blue finance, as well as practical, actionable guidance for all financial institutions to sustainably engage with the sectors of shipping, seafood, marine renewable energy, ports and coastal tourism. Both publications will be launched in Q1 2021. If your organisation would like to get involved, contact Dennis.Fritsch@un.org, or find out more.

UNEP FI’s Biennial Global Roundtable Goes Virtual 

UNEP FI hosted its 16th Global Roundtable in a virtual format for the first time in October 2020. The biennial event has become the major global agenda-setting get-together for sustainable finance practitioners. Held under the theme “Financing a Resilient Future”, the GRT brought together more than 3,000 decision-makers, experts and thought leaders on a virtual event platform, and helped shape approaches to integrating environmental, social and governance issues and accelerating sustainable banking, insurance and investment. It offered participants a selection of both high-level plenary sessions with speakers such as Amina Mohamed, Inger Andersen, Christine Lagarde, Mark Carney and Kristalina Georgieva, as well as panels that took a deep-dive into current sustainable finance initiatives.

For a detailed summary of the 2020 GRT, click here. Learn more about  Day 1 and Day 2 as well as our distinguished speakers and in-depth dialogues.  Watch recordings from the 2020 GRT here.

These are just some of the year’s achievements, which highlight the tenacity of our members in this tumultuous year and the undeterrable drive to align finance with society’s goals. The role of sustainable finance in helping to reset the economy for a sustainable recovery aligned with the Paris Agreement and UN Sustainable Development Goals is more important than ever.

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