How to Finance a Sustainable Ocean Recovery – Seminal New Guidance Published

2 March 2021

New guidance published today provides a market-first, practical toolkit for financial institutions to take immediate action on their lending, investment and underwriting activities which negatively impact ocean health.

The ocean covers 70% of the earth’s surface, holding 97% of all water and 80% of all life forms. Major ocean sectors such as tourism, shipping, fishing, aquaculture and marine renewable energy collectively contribute to a ‘blue’ economy, estimated at a global gross value added of USD 1.5trn in 2010. This is projected to double in size to USD 3trn by 2030, with some ocean industries set to grow faster than the global economy (OECD, 2016).

However, ocean health is under existential threat. Faced with the triple crises of pollution, nature loss and climate change, two-thirds of our oceans have been negatively altered by human activity; leaving industries, businesses and livelihoods exposed. With existing financing still largely directed towards unsustainable sectors and activities, it is critical that all sectors of the blue economy are rapidly transitioned towards sustainable pathways.

Banks, insurers and investors have a major role to play in financing this transition to a sustainable blue economy, helping to rebuild ocean prosperity and restore biodiversity to the ocean. Through their activities, and client relationships, financial institutions have a major impact on ocean health and hold the power to accelerate and mainstream the sustainable transformation of ocean-linked industries. They thereby play essential roles in wider ocean governance, engaging in public-private partnerships, and propelling local-to-global actions for sustainability.

“Momentum is building as more banks, insurers and investors wake up to the realisation that their financial activities can have a sizeable impact on ocean health, creating a negative feedback loop for key ocean industries such as shipping, fishing, tourism and marine renewables. A new sustainable pathway for the blue economy is thus both an environmental and economic necessity. This critical new guidance provides a practical toolkit for financial institutions to understand their impact and discover how a new sustainable finance approach can help them identify key risks and opportunities in ocean-linked sectors.”  – Eric Usher, Head of UNEP FI

Leveraging best practice based on input from more than 50 pioneering institutions and experts, this guidance sets out pathways to sustainable growth across five key ocean sectors, chosen for their established connection to private finance. It includes recommendations with a detailed breakdown of which activities to seek out as best practice, which activities to challenge, and which activities to avoid financing completely due to their damaging nature.

This guidance provides decision-makers across banking, insurance and investment with a science-based and actionable toolkit, giving easy-to-follow recommendations on how to approach financial activity related to:

  • Seafood, including both fisheries and aquaculture as well as their supply chains;
  • Ports;
  • Maritime transportation;
  • Marine renewable energy, notably offshore wind; and
  • Coastal and marine tourism, including cruising.

It supports the implementation of the Sustainable Blue Economy Finance Principles – a keystone for financing activities in the blue economy, supported by a community of over 50 institutions worldwide with a collective total asset size of over USD 6trn. 

Download the guide and recommendations 

“Decades of unsustainable consumption and production is leading to environmental risks and losses in natural capital, eroding the ocean’s resource base. Without engagement by financial institutions, we will not be able to change the course to sustain a healthy ocean and unlock its enormous potential. 1$ of sustainable ocean investments can yield 5x higher global benefits. This new guidance can help financial institutions invest in good ocean governance at local, regional and global levels. In a nutshell, making sustainable blue economy opportunities too hard to resist”.  – Leticia Carvalho, Head of the Marine and Freshwater Branch, UNEP

About the Sustainable Blue Economy Finance Initiative: UNEP FI convenes a global financial community on Sustainable Blue Finance, focused on the ocean and sustainable use of marine resources which supports the implementation of the Sustainable Blue Economy Finance Principles. The initiative works across the financial community to provide guidance and frameworks to ensure investment, underwriting and lending activities are aligned to the UN Sustainable Development Goal 14, ‘life below water’ enabling financial institutions to rebuild ocean prosperity, restore biodiversity and regenerate ocean health.

Critical tools and recommendations for managing the climate transition for the banking industry

17 February 2021

Geneva, 17 February 2021 – Transition risk poses a significant near-term threat to the economy. This is one of the findings released today in the latest set of three UNEP Finance Initiative reports on climate risk management tools for financial institutions. The latest guidance is the result of a leading-edge project that convened 39 banks to pilot the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) building on previous UNEP Finance Initiative work. The package of reports also includes guidance on understanding how the impacts of climate change and the low-energy transition may impact our society and economy and an overview of the various tools and analytics available, as well as the potential technological and regulatory developments that may shape climate risk tools in the future.

Climate scenario analysis is a key tool in measuring and managing climate risks. Climate scenarios produced by Integrated Assessment Models (IAMs) are increasingly being used by financial institutions to identify and assess climate risks. UNEP FI’s report, ‘Pathways to Paris’ is a practical guide for financial practitioners looking to understand and apply climate scenarios. Co-authored with the Center for International Climate Research (CICERO), a world-renowned research institution on climate and climate finance, the report examines the driving assumptions and sectoral coverage of the models used to produce climate scenarios, as well as the benefits and limitations of using these pathways. As the report argues, deeper collaboration and dialogue between financial institutions and scenario developers is essential to linking climate-related risk drivers to financial impacts.  Over the course of the past year, UNEP FI has piloted its transition risk methodology with 39 banks. This paper outlines the lessons learned and a series of recommendations for enhancing the development and application of IAMs by financial institutions. Reflecting these views, a North American bank explained that greater granularity, additional consideration of sectoral dynamics, and shorter time-horizons would help financial institutions more effectively use these scenarios. In CaixaBank’s case study, they highlighted a need for greater transparency in the models’ “underlying assumptions” and the treatment of “reputational risks” and “stranded assets,” within the scenarios.

Decarbonisation and Disruption’ highlights the ways in which many sectors are exposed to transition risk. If not properly managed, a disorderly transition could have major ramifications for financial stability. Financial institutions need to not only prepare for the transition along with their counterparties but must have the right tools for risk assessment. Insert example from case study here if poss. This paper was supported with analysis from Oliver Wyman, a leading global management consultancy with deep risk expertise. The paper includes bank case studies that affirm greater economic risks associated with disorderly transition scenarios compared with orderly transition scenarios. Banco Bradesco’s case study highlighted the usefulness of the assessment exercise, stating that “transition risk analysis tools are important allies to identify subsectors that are most resilient to policies aimed at a low carbon economy, as well as those that are most exposed to these risks.”

There is a burgeoning market for physical and transition risk tools which may be difficult to navigate. UNEP FI’s report, ‘The Climate Risk Landscape’ provides an overview of the various tools and analytics available, including an assessment of their key characteristics. The report also looks at the potential technological and regulatory developments that will shape climate risk tools over the coming years. In comparing the methodologies and coverage across tools, UNEP FI offers financial users a view of the relative benefits and limitations of each approach.
Reflecting on the guidance and experiences showcased in the two reports, UNEP FI Head, Eric Usher said, “as these scenario reports indicate, deeper collaboration and dialogue between scenario developers and financial practitioners is essential for linking climate-related risk drivers to financial impacts. Over the past year, UNEP FI has repeatedly brought together these parties (along with regulators and supervisors) to support the adoption of climate scenarios in financial decision-making.”

These three reports on climate risk analysis complement previous guidance on this topic which also covered climate risk disclosure practices as well as high-level transition-risk heatmapping and sectoral analysis.

In 2021, UNEP FI launched its latest TCFD programmes for banks and investors, building on the key learnings and achievements of prior pilots. These new programmes will bring new joiners up to speed on the fundamentals of climate risk assessment, while exploring such topics as climate scenario analysis, integrating physical and transition risk analysis and road-testing some of the commercially available climate risk tools identified in ‘The Climate Risk Landscape’. By leveraging the convening power of the United Nations, UNEP FI’s TCFD programme will engage regulators, climate experts, and financial practitioners to empower the financial sector to manage its climate risks and play a positive role in the low-carbon transition.

Further Resources

Download a copy of ‘Decarbonisation and Disruption

Download a copy of ‘Pathways to Paris

Download a copy of ‘The Climate Risk Landscape


Notes to Editors

About UNEP FI’s TCFD Programmes for banks, insurers and investors

The Task Force on Climate-Related Financial Disclosures (TCFD) was created in 2015 by the Financial Stability Board (FSB) to develop consistent climate-related financial risk disclosures for use by companies, banks, and investors in providing information to stakeholders. Increasing the amount of reliable information on financial institutions’ exposure to climate-related risks and opportunities will strengthen the stability of the financial system, contribute to greater understanding of climate risks and facilitate financing the transition to a more stable and sustainable economy.

Following the publication of the final recommendations by FSB’s TCFD in June 2017, UNEP FI began a series of ‘TCFD Pilot Projects’ for banks, investors, and insurers. Participants in these pilots explored physical and transition risks (and litigation risks for insurers) and also pioneered practical approaches for evaluating these risks using climate scenario analyses. Almost 100 financial institutions (banks, investors, and insurers) from all around the world have participated in these pilots. These institutions have been supported by nearly a dozen technical partners from climate modelers to climate risk experts.

These experiences have allowed UNEP FI to take a leadership role in developing good practices regarding climate risk in the financial sector. The pilot programmes have created numerous tools, frameworks, and guides to empower both participating institutions and those throughout the financial industry to better manage and disclose their climate risks.

By systematically engaging global stakeholders, UNEP FI’s newest TCFD programmes (starting Q1 2021) will help financial institutions add depth, granularity, and nuance to their climate risk assessments, consolidate best practices in climate risk management, and help standardize climate disclosures across the industry.

Read more about UNEP FI’s work implementing the TCFD Recommendations.

About UNEP FI’s collaborating partners

CICERO is Norway’s foremost institute for interdisciplinary climate research. CICERO delivers new insights that help address the climate challenge and strengthen international climate cooperation by predicting and researching society’s climate challenges. They are a globally recognized leader in assessing climate transition scenarios and exploring the implications of climate on finance and society.

Oliver Wyman is a leading global management consultancy. The firm combines deep industry knowledge with specialized capabilities in strategy, operations, risk management, and organization transformation. Oliver Wyman has been a leader in climate risk assessment, working with UNEP FI on its Phase I TCFD Programme for Banks and helping clients around the world to address physical and transition risks.

Net-Zero Asset Owner Alliance calls on asset managers to support blended finance

16 February 2021

The UN-convened Net-Zero Asset Owner Alliance has issued a call to asset managers to collaborate in driving the development of blended finance vehicles, with the aim of drastically ramping up investment in climate solutions.

One working area of the Alliance is focused on financing transition of the real economy, which focuses on identifying priority investment segments to scale-up climate solution investments and technologies for tomorrow. Blended finance de-risks investments in climate solutions and market segments that for now do not have the appropriate risk-return profile to attract large-scale institutional capital. They allow public financiers and other donors to use a small amount of their own resources as a first loss to mobilize large amount of private capital to reach large number of underlying climate projects needed.

Alliance members will work with a number of select asset managers to design vehicles that meet certain core criteria and support them in refining their strategy to fit institutional investors’ needs.

Capital flows to required climate projects and respective investment vehicles must be aligned with the net-zero transition and asset owners’ fiduciary duty with regards to attractive risk-return profiles. The Alliance is looking for blended finance vehicles at least in the range of $300-500 million and open to both its members and non-members.

All vehicles must also: focus on climate solution investments; invest in financially viable and sustainable underlying business models; have strong risk (downside) mitigation mechanism for private investors; be suitable for large institutional investors in their set up; be managed and executed by experienced and established fund managers; and not hamper other SDG goals and/or follow high ESG standards.

While engagement is crucial to the process of moving away from a carbon-intensive economy, so too is Financing Transition of the real, as laid out in the 2025 Target Setting Protocol published in January.

Guenther Thallinger, Alliance Chair and Member of the Board of Management Allianz SE said:

We need to ensure asset managers are supporting us in achieving our climate-related targets. Asset management must change and fully incorporate these climate-related targets. Our interactions from the Request for Proposal (RFP), to mandate definition and then to performance dialogues will cover climate impact.”

UNEP FI Head Eric Usher said:

“The accelerating climate crisis and the need to support developing countries overcome the challenges of investing in climate solutions means it is now even more imperative that blended capital is delivered in a climate-smart and net-zero-compatible manner. Through the work of the Alliance’s Financing Transition workstream, and through this call to action, the Alliance is helping ensure this happens at the required scale and pace.”

Fiona Reynolds, CEO PRI, said:

“We will not achieve the target of net zero by 2050 without investments in climate solutions and in the new technologies that will power the green economy of the future. The finance sector has an essential role to play in scaling up investment opportunities. Asset owners are looking for investment solutions and wanting to work with innovative fund managers to design the investment vehicles of the future. Without the investment community, the transition to a zero-carbon future, will not happen with scale or the urgency that is required.”

Follow this link for more information and to submit your proposal.

Members of the UN-convened Net Zero Asset Owner Alliance have committed i) to transitioning their investment portfolios to net-zero GHG emissions by 2050 consistent with a maximum temperature rise of 1.5°C above pre-industrial levels; ii) to establishing intermediate targets every five years; and iii) to regularly reporting on progress.

Media contact:

Oliver Wagg, Communications Lead, Net-Zero Asset Owner Alliance

Oliver.Wagg@UN.org

New UNEP FI report tests the application of the EU Taxonomy to core banking products: with 26 major banks

26 January 2021

UNEP FI and the European Banking Federation (EBF) have launched a unique report assessing the extent to which the EU Taxonomy on Sustainable Activities could be applied to core banking products for labelling or disclosure purposes. This report is the result of a project with 26 major banks, seven banking associations and five observing organisations working together to test, pilot and assess the complexities of applying the EU Taxonomy, which is aimed mainly at investors, to core banking products.

From March to August 2020, banks participating  in the project  tested the EU Taxonomy on more than 40 live or recently closed transactions and existing client relationships, across a large spectrum of sectors and economic activities, and a diverse set of banking products, clients’ corporate structures and geographical locations providing unique insight and information value.

The objective of “Testing the application of the EU Taxonomy to core banking products: High level recommendations” was to develop an initial understanding of the application of the EU Taxonomy to banking products and propose a set of recommendations to enhance applicability and address the identified practical and conceptual challenges. It shares key insights from the information collected, including case studies and subsequent discussions between participating banks, focusing on the benefits and challenges experienced by banks whilst also proposing high level principles to follow in order to apply the EU Taxonomy to retail banking, SME lending and corporate banking, including trade, export and project finance. 26 of the case studies, covering a representative sample of various banking products, are available in the published report.

“At UNEP FI we see the EU Taxonomy as the backbone of a truly transformative agenda. By increasing market transparency and pointing to what is ‘good enough’ from a sustainability perspective, the EU Taxonomy has the potential to direct the flow of finance necessary towards green and sustainable innovation in the economy. We are fully committed to supporting banks throughout their sustainability journey and towards implementing the EU Taxonomy in line with the European agenda for sustainable finance.” – Eric Usher, Head, UNEP FI

The testing exercise also led to eight recommendations directed to legislators, regulators, owners of environmental and social standards and frameworks, labels and certification schemes used by banks to address the identified challenges, and to the banks themselves. UNEP FI and the EBF trust that this report will foster further discussions and facilitate the implementation of the EU Taxonomy in the banking sector.

This report is being delivered at the time of an unprecedented transformation within the banking industry. Globally, banks are progressively committing to accelerating the transition to a net zero carbon economy. Individually or collectively, banks are setting sustainability targets and aligning their business operations and strategies with the SDGs and the Paris Agreement as demonstrated for example by the 200 signatories to the Principles for Responsible Banking. The decisions banks and their clients make today will steer the economy for years to come and define the societies and the quality of the environment for future generations.

Download the report here.

The project was sponsored by BBVA, BNP Paribas, Credit Suisse, Danske Bank, Deutsche Bank, FMO, ING, SEB, Société Générale, Standard Chartered, UBS and UniCredit.


CEO quotes

“The EU Taxonomy will be a game changer on our common path to fulfil the Paris Agreement, and I am convinced that this will lead to a major shift when used in practice. Since banks play a key role in this transition, it is important that the EU Taxonomy recognises the specificities of core banking products, and that compatibility between EU Taxonomy and other applicable regulations is ensured. We are proud of having participated in its development, and as a sponsor of the joint UNEP FI and EBF project, I now look forward to the future work on developing detailed guidelines.”

Johan Torgeby, President and CEO at SEB and Chairman of the Executive Board, Swedish Bankers’ Association

 

“The EU’s Sustainable Finance Taxonomy plays a critical role in defining sustainable economic activity within Europe and beyond, thus delivering sustainable finance where it matters most. Standard Chartered’s participation in this pilot project has enhanced our preparedness and capacity to support our clients with the EU Taxonomy over the coming years.”

Bill Winters, Group Chief Executive, Standard Chartered

 

“At ING we are more than happy to contribute to the development of the fantastic work of UNEP-FI and the European Banking Federation on the EU Taxonomy. We see the Taxonomy as a sustainable finance tool not only for asset managers but also for banks, as we can play an important role in financing the transition to a low carbon economy. This will certainly help us in steering our lending portfolio towards the Paris Agreement’s climate goals, which we call our Terra approach.”

Steven van Rijswijk, CEO, ING

 

“Helping our clients transition towards a sustainable future is a strategic priority for BBVA. Banks can play a key role providing advice and channelling funds to big corporates, but also to SMEs and households. The EU Taxonomy is a fundamental step in this direction and the pilot project promoted by UNEP FI and EBF is a great starting point to test and facilitate its applicability.”

Carlos Torres Vila, Chairman, BBVA

 

“Banks should play a crucial role in accelerating the necessary global transition to sustainable, low-carbon and socially inclusive economies. Our aspiration at Deutsche Bank is to support our clients in their transition. But we also need other stakeholders— and especially the European Union—to pave the way and establish common standards. We were one of the first banks in Europe to operate a taxonomy linked on a best effort basis to the EU Taxonomy, and as one of the sponsors of this UNEP FI and EBF initiative we promote a broader discussion and application of the EU Taxonomy.”

Christian Sewing, CEO, Deutsche Bank

 

“Société Générale is fully supportive of the objective of the EU Taxonomy. Having common definitions is critical for strengthening the confidence of investors in sustainable finance. Industry guidelines will assist the application of the Taxonomy to the specific nature of banking activities and should further reflect transition activities. Over time, the Taxonomy has the potential to become a mainstream tool for steering efforts to reach the goals of the Paris Agreement and inspire methodological convergence across jurisdictions.”

Diony Lebot, Deputy CEO, Société Générale


Contact:

Mustafa Chaudhry, Communications, UNEP FI – mustafa.chaudhry@un.org


About the United Nations Environment Programme Finance Initiative

United Nations Environment Programme Finance Initiative (UNEP FI) is a partnership between UNEP and the global financial sector to mobilize private sector finance for sustainable development. UNEP FI works with more than 350 members—banks, insurers, and investors—and over 100 supporting institutions– to help create a financial sector that serves people and planet while delivering positive impacts. We aim to inspire, inform and enable financial institutions to improve people’s quality of life without compromising that of future generations. By leveraging the UN’s role, UNEP FI accelerates sustainable finance.

About the European Banking Federation

The European Banking Federation (EBF) is the voice of the European banking sector, bringing together national banking associations from across Europe, with active members in 32 countries. The EBF is committed to both promoting a thriving European economy underpinned by a stable, secure and inclusive financial ecosystem, and contributing to a prosperous society in which financing is available to fund the dreams of citizens, businesses and innovators across the globe.

Ten UNEP FI members call on governments to step up on adaptation finance, make climate risk reporting commitments

25 January 2021

Ten UNEP FI members are calling for greater action to boost adaptation finance and have made commitments on climate risk reporting. At the Climate Adaptation Summit 2021, ten financial institutions from banking, investment and insurance delivered a statement calling for greater action on assessment, reporting and management of the physical risks of climate change, and asking policy makers to deliver mandatory disclosure requirements on climate risk. The statement signatory firms are the European Bank for Reconstruction and Development, Rabobank, Rockefeller Asset Management, Standard Chartered Bank, Yes Bank, ABN Amro, Danske Bank, ING, AXA XL and LinkREIT. They have all committed to publish climate risk disclosures relating to their business within two years.

As highlighted in UNEP’s 2020 Adaptation Gap report, the scale of action required to adapt societies to the increasing impacts of climate change is considerable, and even though adaptation finance is slowly rising, it is still well below the levels required. This funding gap can only be met by private finance but will require governments to level the playing field for financial institutions and encourage adaptation finance by making climate risk disclosures mandatory as well as increasing the availability of robust data.

 “Financial firms will only be able to adapt their businesses to a hotter world by understanding the long-term risks of climate change. It is only with this data and analysis that they will be able to identify market vulnerabilities and discuss climate risks with their clients. Crucially, it may help financial institutions to identify opportunities in climate resilient innovation and technology.” Eric Usher, UNEP FI Head.

Ways in which financial institutions are adapting their business and helping customers address climate change risk include action such as that taken by Netherlands-based Rabobank which has been assessing the impact of increasing droughts on wooden foundations in pre-1950s buildings. Potential financial risk estimates currently vary widely from €5bn to €54bn and Rabobank is currently developing a strategy to help its clients address this issue. In southern Africa, meanwhile, Standard Bank of South Africa is piloting climate risk assessment methods to estimate the potential impact of increasing wildfire risks due to climate change on its mortgage lending portfolio.

There are signs of greater ambition on climate risk reporting. As of late 2020, over 1,500 corporates had become supporters of the TCFD and initial climate disclosures have been released by the leading financial institutions over the past two years. In September, New Zealand became the first country to commit to signing climate-related risk disclosure into law, and a number of other countries are likely to follow, including the United Kingdom and Switzerland.

Global financial institutions have clients and portfolios across all sectors of the economy and can therefore have a powerful influence on the way that investments are made, and projects are financed. But responding to climate change impacts requires a systemic, risk-based approach to decision making, and to be fully effective, climate disclosures have to become the norm rather than the exception. In the run up to COP26 in Glasgow, action on the part of financial institutions will be crucial. However, it must be supported by fresh policy from governments around the world.

Download the Physical Risks and Resilience Statement.

Link to additional information on the Physical Risks and Resilience initiative and quotes from financial institutions.

Link to register for UNEP FI’s side event at the Climate Adaptation Summit 2021.

Read more about UNEP FI’s work on adaptation finance here.

New report sheds light on sustainable financing in Arab region and provides policy recommendations

20 January 2021

A new UNEP FI report provides the first in-depth analysis of  sustainable finance practices in a part of the world most vulnerable to the effects of climate change: the Arab region. Issues such as water scarcity, rising sea levels, drought, land degradation and desertification will have serious repercussions for food, energy and water security in this area. Implementing the Sustainable Development Goals – in particular those that help deal with the interlinked water-energy-food challenges – will be key to build resilient, fairer economies.

Promoting Sustainable Finance and Climate Finance in the Arab Region” concludes that the adoption of sustainable finance practices can provide numerous benefits to financial institutions and wider access to finance for climate-vulnerable communities. The study also emphasizes the importance of sustainable finance resources to transition from mainstream economic systems to responsible and resilient ones. It highlights the reform measures that financial sector governance bodies would need to consider in order to scale up sustainable finance and provides policy recommendations to tackle the challenges.

The report investigates the most prevalent sustainable finance practices in six countries in the Arab region: Egypt, Jordan, Morocco, Bahrain, the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA). It provides insight into developments in this area over the past two decades and consolidated data on how all six countries have adopted green growth strategies. It also includes insights from policy makers, as well as feedback from practitioners in the focus countries. Policy recommendations include:

  • Strengthening governance, legislative and regulatory frameworks including issuing and enforcing green finance guidelines, building capacity and incorporate gender awareness in sustainable and climate financing;
  • Raising awareness of the merits of sustainable finance and strengthening the capacity of financial sector stakeholders;
  • Developing a pool of bankable green projects
  • Raising national readiness for climate change and finance reform measures to address institutional weaknesses, planning gaps as well as technical capacity and expertise constraints.

“Only by understanding the barriers that are inhibiting the financing of sustainable business activities in the region will we be able to change policy and practice”, said Eric Usher, UNEP FI Head. “This is the first research to consolidate this kind of information in the region and contributes to narrowing the data gap on sustainable and climate finance. It will be an essential tool for policymakers and financial institutions in the MENA.”

In Arab countries, the financing gap for achieving the SDGs is estimated to be at least USD 230 billion annually (AFED 2018). That is why it is important to enhance the role of the financial system in the region to support their transition towards sustainable development by bridging the green financing gap, mobilizing resources, and re-directing financial flows towards more sustainable and responsible investment.

Sustainable finance practices in the Arab region are still in the early development phase but are expected to deepen in the years ahead. The report also assesses the status and the development in national strategies for climate finance in four countries in the Arab region: Egypt, Jordan, Iraq and Tunisia. It includes recommendations for policy makers, financial institutions and financial regulators on strategies to achieve the SDGs.

This report was conducted under the auspices of two ongoing UNEP FI projects in the region with the League of Arab States and with the UNDP. The latter being the SDG Climate Facility Project: Climate Action for Human Security to which the League of Arab States is also a partner agency.

Download a copy of the report

 

About UNEP Finance Initiative

United Nations Environment Programme Finance Initiative (UNEP FI) is a partnership between UNEP and the global financial sector to mobilize private sector finance for sustainable development. UNEP FI works with more than 350 members—banks, insurers, and investors—and over 100 supporting institutions– to help create a financial sector that serves people and planet while delivering positive impacts. We aim to inspire, inform and enable financial institutions to improve people’s quality of life without compromising that of future generations. By leveraging the UN’s role, UNEP FI accelerates sustainable finance.

About the League of Arab States

The League of Arab States (LAS) is a regional intergovernmental organization established on 22 March 1945. The main goal of the organization is to “Draw closer relations between member States and coordinate collaboration between them, to safeguard their independence and sovereignty, and to consider the interests of the Arab countries“ with a focus on developing the economy, resolving disputes and coordinating political issues. The League of Arab States aims at improving the standards of living of the Arab citizens through developing and enhancing economic and social policies to achieve Arab integration within the framework of the Arab conventions, charters, and strategies adopted in all areas. In response to the Sustainable Development Agenda 2030, the Secretary-General of the League of Arab States issued resolution 91/1 in April 2016 to establish the Sustainable Development and International Cooperation Department (SDIC) within the structure of the Secretariat to support Arab efforts in implementing the sustainable development goals 2030. LAS-SDIC main challenges in achieving sustainable development are water scarcity, climate change, high rates of illiteracy, increased population rates, low level of infrastructure, and conflicts.

About SDG Climate Facility Project: Climate Action for Human Security:

Focused on the nexus between climate action and human security, the SDG Climate Facility Project: Climate Action for Human Security seeks to enhance the capacity of regional and national institutions in the Arab States to effectively take climate action in a way that brings benefits across SDGs and for crisis prevention/recovery efforts, including support to scale-up climate finance for innovative local solutions. The objectives of the project are to i. conduct regional level assessments to produce evidence-based data on the impact of climate change on vulnerabilities, and their implications for regional strategies and policies aimed at meeting the SDGs, thereby increasing the awareness of key stakeholders on the benefits of a nexus approach, ii. design innovative tools and approaches to integrate climate action into crisis recovery and development responses at the country level, and iii. mobilise and scale up climate finance—public and private—to enable countries to put in practice the integrated approach. Underlying these objectives is the intention to establish an SDG-Climate Facility, which will take forward to nexus approach and agenda beyond the life-cycle of the project. The project, which runs until December 31, 2021 brings together multi-lateral institutions in the region such as the League of Arab States (LAS) and the Arab Water Council (AWC), and leading UN system partners active on climate actions in the region, including the UN Development Programme (UNDP), the UN Environment Programme Finance Initiative (UNEP FI), the UN Human Settlement Programme (UN-Habitat), the UN Office for Disaster Risk Reduction (UNDRR), and the World Food Programme (WFP).

First guidance enabling insurers to identify and disclose risks from climate change launches

19 January 2021

A group of 22 leading insurers and reinsurers convened by UNEP FI has published the first comprehensive guidance for the insurance industry to identify and disclose the impact of climate change on their businesses. Over the past year, the group has collaborated under the auspices of UN Environment Programme’s (UNEP) Principles for Sustainable Insurance Initiative (PSI) to pilot ground breaking methodologies that insurers can use to implement the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosure (TCFD). Disclosing both the risks and opportunities faced by insurers from a changing climate in line with the recommendations in this framework allows insurers to build a picture of how their business will be challenged both now and in the future, and how to respond.

With USD 30 trillion in assets under management and USD 5 trillion in world premium volume, the insurance industry holds around a third of global economic assets and liabilities on their balance sheets making it one of the largest global industries. As risk managers, insurers and investors can play a big leadership role in building climate-resilient communities and in accelerating the transition to a net-zero global economy.

“The work captured in this report represents the largest collaborative effort by market participants to pilot some of the most challenging TCFD recommendations” said Eric Usher, UNEP Finance Initiative Head. “It also represents a strong collective signal from market participants on what climate change means to the insurance business, what the key challenges are, and what can be done to better understand, manage and disclose climate-related risks and opportunities efficiently and effectively.”

The overall aim of the pilot was to develop consistent and transparent analytical approaches that can be used to identify, assess and disclose climate change-related risks and opportunities in insurance underwriting portfolios. Assessing climate change-related risks based on forward-looking information and scenarios is a central component of the TCFD’s recommendations and is arguably the most challenging to implement. Climate scenarios provide a cornerstone for the analyses presented here, with their use consistently applied across risk classes.

Potential climate change-related risks and opportunities that insurers could face can be classified into three categories:

  • Physical risks related to changes in weather patterns, temperature and hydrological conditions.
  • Transition risks as the world moves towards a net-zero emissions economy and related fundamental changes in, for example, energy, food and transport systems.
  • Potential litigation risks pertaining to climate change and breach of underlying legal frameworks on both the business and corporate levels.
  • The report recognizes that the insurance industry needs to assess climate change risks in an integrated manner, not only at an underwriting level but also in terms of its investments. It is recognized that to do so is a difficult task and represents a long-term objective. In this vein, the project assessed climate-related physical, transition and litigation risks in underwriting portfolios, with a focus on scenario analysis. While linking insurance underwriting and investment portfolios is ultimately needed, it remains an opportunity for future work.

Download the report here.

 

UNEP FI’s work with the insurance industry

United Nations Environment Programme Finance Initiative (UNEP FI) is a partnership between UNEP and the global financial sector to mobilize private sector finance for sustainable development. UNEP FI works with more than 350 members – banks, insurers, and investors – and over 100 supporting institutions – to help create a financial sector that serves people and planet while delivering positive impacts.

Launched at the 2012 UN Conference on Sustainable Development, the UNEP FI Principles for Sustainable Insurance serve as a global framework for the insurance industry to address environmental, social and governance risks and opportunities.

Endorsed by the UN Secretary-General, the Principles have led to the largest collaborative initiative between the UN and the insurance industry—the PSI Initiative. Over 140 organisations worldwide have adopted the four Principles for Sustainable Insurance, including insurers representing more than 25% of world premium volume and USD 14 trillion in assets under management. The Principles are part of the insurance industry criteria of the Dow Jones Sustainability Indices and FTSE4Good.

Asset owners set and commit to report on 2025 targets to support 2050 net-zero emissions

13 January 2021

Geneva, 14th January 2020 – Following the hottest year on record in 2020, thirty-three of the world’s largest investors have committed to setting and reporting on 2025 targets to support the transition to net-zero greenhouse gas emissions by 2050. The final Net-Zero Asset Owner Alliance’s Inaugural 2025 Target Setting Protocol raises the curtain on the release of individual member targets

The result of over two months of public consultation on the preliminary 2025 Target Setting Protocol published 13th October 2020 comes as individual members of the Alliance begin to publish their own 2025 decarbonization targets within a 16-29 per cent range. Target-setting through the Protocol was developed by members of the Alliance and follows a very ambitious, rigorous and unique approach.

The targets are structured in four pillars: engagement; portfolio decarbonization targets; sectoral targets; and climate positive investments. With asset owners at the pinnacle of the investment universe, establishing visible targets for engagement with asset managers, corporates, industry groups and policymakers, is the most impactful way to influence the real economy towards a 1.5°C global goal.

Günther Thallinger, Alliance Chair and Member of the Board of Management Allianz SE, said:

“The founding of the Alliance and the publication of the Protocol has set the net-zero implementation ball rolling. Investors and companies across the globe must follow by publishing their own rigorous, science-based and accountable targets. We, the Alliance members, start out by truly changing ourselves today and then work with other companies to achieve change.”

“Business needs to become sustainable, actually capitalism needs to become sustainable. By changing investment decision-making and including climate neutrality as a shorter-term objective, asset owners are making a big contribution”.

A pioneering initiative based on partnerships

The Alliance has inspired other initiatives to commit to net zero and asks financial institutions, sovereign wealth funds as well as companies operating in high-emitting sectors to commit to net zero, to set science-based targets for 2025 and report against those. The use of science-based short-term targets will be an important guide to inform individual corporate and portfolio trajectories as well as drive engagement action.

The Alliance is working alongside UNEP FI initiatives such as the Principles for Responsible Banking’s Collective Commitment for Climate Action (CCCA) and is part of the high-level COP campaign the Race to Zero.

Writing in the foreword of the Protocol, former UNFCCC Executive Secretary and Founding Partner of Global Optimism, a strategic and scientific partner of the Alliance, Christiana Figueres said:

“Issuing transparent, rigorous and realistic targets, and then committing to report against them in the next 4 years, is at once an extraordinary – and also essential – demonstration of ambition by private sector leaders who exist at the pinnacle of our financial systems.

The Protocol covers multiple asset classes and encompasses even the hardest-to-abate sectors. Taking a sectoral approach means that these investors will be stepping up their work to move high-carbon companies to make the changes required for the net-zero transition.

About the UN-convened Net-Zero Asset Owner Alliance

Convened by UNEP FI and the Principles for Responsible Investment, and supported by Global Optimism and the WWF’s Finance Practice, we are an international group of 33 institutional investors (as of 14th January 2020) delivering on a bold commitment to transition our investment portfolios to net-zero GHG emissions by 2050. Representing $5.1 trillion assets under management, the Alliance shows united investor action to align portfolios with a 1.5°C scenario, addressing Article 2.1c of the Paris Agreement. The Alliance is part of the UNFCCC Race to Zero campaign.

United Nations-convened Net-Zero Asset Owner Alliance

Media contact

Oliver Wagg, UNEP FI oliver.wagg@un.org

 

Collective Commitment to Climate Action: 38 banks report on their first steps

8 December 2020

Geneva, 8 December 2020 – Today, UNEP FI published a summary of the first reporting from the 38 banks that are signatories to the Collective Commitment to Climate Action (CCCA) – the most ambitious global banking sector initiative supporting the transition to a net zero economy by 2050. The banks from across six continents and who collectively represent US$ 15 trillion in assets are all signatories to the Principles for Responsible Banking.

One year after the launch of the commitment, the report provides an overview of the concrete measures taken by the CCCA signatory banks in the first 12 months to deliver on their commitment to support the transition to a net-zero economy by 2050. The measures fall into six categories:

  1. Assessing portfolio alignment
  2. Supporting clients’ reductions of GHG emissions
  3. Assessing climate-related transition risks
  4. Strengthening exclusion policies
  5. Growing green customer base
  6. Building capacity to support the transition

The report shows that overall there is a growing use of scientific climate scenarios in banks’ strategies and many banks have announced exclusion policies reflecting the timelines imposed by science for achieving “well-below 2 degrees” of global warming. While most banks still have some way to go before they can publish a full assessment of their portfolios’ alignment and publish scenario-based targets, all 38 banks have committed to doing so within three years of signing the Collective Commitment.

The CCCA members are a leadership group among the signatories of the UN’s Principles for Responsible Banking. The guidance and frameworks the CCCA banks are developing collectively will be used by the banks in the wider coalition implementing the Principles for Responsible Banking. By the end of the first quarter of 2021, the CCCA banks are planning to publish agreed principles and standards for assessing portfolio alignment and setting and reporting on targets.

Find more information and download the report here: www.unepfi.org/climate-pledge

Read the full text of the Collective Commitment to Climate Action.

 

For more information contact Simone Dettling and Remco Fischer.

 

About the Collective Commitment to Climate Action

The Collective Commitment to Climate Action (CCCA) is the most ambitious global banking sector initiative supporting the transition to a net zero economy by 2050. It brings together a leadership group of 38 banks from all six continents who have committed to align their portfolios with the global climate goal to limit warming to well-below two degrees, striving for 1.5 degrees Celsius.

The CCCA banks, representing more than USD 15 trillion in assets, are fast-tracking the commitment all Principles for Responsible Banking signatories have made to align their business strategy with the goals of the Paris Agreement on Climate Change. Visit www.unepfi.org/climate-pledge

 

About the Principles for Responsible Banking

The Principles for Responsible Banking are a unique framework for ensuring that signatory banks’ strategy and practice align with the vision society has set out for its future in the Sustainable Development Goals and the Paris Climate Agreement.

200 banks have now joined this movement for change, leading the way towards a future in which the banking community makes the kind of positive contribution to people and the planet that society expects.

These banks represent more than a third of the global banking industry. This is a journey of unprecedented scale and scope at a time when such ambition is urgently needed.

For more information, please visit www.unepfi.org/responsiblebanking

200 banks worldwide have now signed the Principles for Responsible Banking

4 December 2020

200 banks across 58 countries and 6 continents have now signed UNEP FI’s Principles for Responsible Banking, thereby committing to align their strategy and practice with the goals of the Paris Agreement on Climate Change and the Sustainable Development Goals. 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!

Embedding sustainability at the strategic, portfolio and transactional levels, and across all business areas, the Principles for Responsible Banking provide a framework for a sustainable banking system. The six Principles require banks to analyse the current impact they have on people and planet, set targets to improve their impact, and publicly report on progress.

Since the launch of the groundbreaking framework, eleven Working Groups comprised of staff members from the signatory banks have been created to develop tools and guidance, and provide support to assist banks on their journey. In July, signatories voted for a new governance structure, agreed individual and collective progress review processes, as well as a process for dealing with signatories who fail to deliver on their commitments. To ensure the credibility of the new framework, signatories agreed that a civil society advisory body should be created to help monitor collective progress, advise the Banking Board on strategic matters and help maintain the relevance of the framework. The Civil Society Advisory Body is unique – no other sustainable finance framework has proposed such robust involvement of civil society organisations and UNEP FI is in the process of recruiting members. Details can be found here and watch a video from civil society organizations explaining the significance of their involvement here.

One year on from the first anniversary of the launch of the Principles for Responsible Banking signatories shared their thoughts, experiences and progress in implementing the Principles for Responsible Banking in a series of videos and online content. Find out more about the banks’ sustainability journey here.

Read about the Principles for Responsible Banking at www.unepfi.org/responsiblebanking

 

Implementing Holistic Impact Analysis: Learnings from early adopters, tool updates and new user guide

29 October 2020

29 October 2020 | Implementing Holistic Impact Analysis- Learnings of early adopters, Tool Updates and New User Guide

In April 2020 UNEP FI launched two ground-breaking tools: 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 Portfolio Tool enables a top-down portfolio level analysis for banks, in particular signatories to the Principles for Responsible Banking (PRB), while the Corporate Tool enables a bottom-up review of financial institutions’ main and systemically important clients.

After six months of 6 months implementation by practitioners, UNEP FI releases a detailed user Guide as well as the first updates to its in-built country needs assessment framework, one of several unique in-built resources of the Tools.

So what’s new?

  • We are releasing a detailed Guide to Holistic Impact Analysis aimed at supporting users of the Portfolio Impact Analysis Tool for Banks;
  • We have made exciting updates to the Tools’ in-built country needs assessment framework, one of several unique in-built resources of the Tools;
  • And we are busily preparing new features as well as additional holistic impact analysis tools to be released in 2021.

Access the guide, tool and demo here.

Property sector perspectives on ESG, COVID‑19, and managing crises

6 May 2020

The UNEP FI Property Working Group (PWG) convened virtually for two discussion forums to share information on how institutions are managing the public health and economic crisis from COVID-19, and thoughts on how institutions need to plan and operate for a post-crisis recovery.

There is strong consensus that institutions with deeply ingrained approaches to integrating Environmental, Social and Governance (ESG) considerations and that view sustainability as core to asset value and financial performance will weather the present crisis better relative to peers. They will be better positioned to address a range of societal challenges related to health, environment, social connections and norms, and economic equity moving forward. But ‘business as usual’, and even ‘best practice as usual’ will not be sufficient. ESG integration will surely need to evolve and will be even more critical in investor and lender decision-making.

With input from more than 20 financial institutions and external (non-financial institution) advisors to the Property Working Group, the PWG has published a short thought leadership bulletin on how good ESG integration is helping institutions respond to the present situation and will be critical to institutional structure and operations post-crisis. These PWG forums affirm that the response to COVID-19 and ESG integration are inseparable, and offered views on trends that will shape sustainable practices as institutions move forward into an altered risk and value-creation landscape. For more details, please download the bulletin, or contact the UNEP FI Secretariat, Matthew Ulterino or our PWG co-chairs Anna Murray and Calvin Kwan directly.

Banks share responses to COVID-19 crisis: Call to members to tell us about your company’s experiences

6 April 2020

UNEP Finance Initiative is providing a platform for banks to exchange experiences and ideas as they take responsible action to support society and businesses in this unprecedented crisis. UNEP FI is encouraging its members to share their experiences and contact their regional coordinator to tell us how they are responding. 

To help support their customers and in turn communities in the most effective ways, UNEP Finance Initiative’s coalition of over 200 banks from over 60 countries has been sharing practices, solutions and lessons learned as they respond to the COVID-19 crisis and its economic impacts.

Delivering on their commitments under the global sustainable banking framework, the Principles for Responsible Banking, UNEP Finance Initiative member banks and signatories around the world are playing a crucial role in supporting our societies through the current crisis. They are taking extraordinary measures to support their corporate clients, retail customers, governments and communities and UNEP Finance Initiative is helping to facilitate a global knowledge exchange so that banks can learn from one another and rise to the challenges across the world. We have gathered a selection of examples from Principles for Responsible Banking signatories in every region around the globe of how they are:

  • Supporting companies, large and small, to sustain their business during and beyond this crisis in line with Principle 3 of the Principles for Responsible Banking which commits banks to “work responsibly with clients and customers to encourage sustainable practices and enable economic activities that create shared prosperity for current and future generations.”
  • Partnering with governments in managing the economic and social impacts of the measures taken to contain the spread of the virus in line with Principle 4, to “proactively and responsibly consult, engage and partner with relevant stakeholders to achieve society’s goals.”
  • Ensuring access to the key financial services and infrastructure that society relies on for everyday life.

Read the responses here.

Contact your regional coordinator to share the measures your company is taking to respond responsibly to COVID-19.

About the Principles for Responsible Banking

The Principles for Responsible Banking were developed by a core group of 30 founding banks through an innovative global partnership between banks and the UNEP Finance Initiative (UNEP FI). UNEP FI is the UN-private sector collaboration that includes membership of more than 240 finance institutions around the globe. More than 170 banks from around the world have now signed the new framework.

For more information, including infographics and videos, please visit the Principles for Responsible Banking webpages.

UNEP FI Contacts:

Simone Dettling.

Sally Wootton.

 

Wespath joins the UN-convened Net-Zero Asset Owner Alliance

20 March 2020

7th April 2020 – Wespath Benefits and Investments , the largest single pool of faith-based pension assets in the world, has become the 22nd member of the UN-convened Net-Zero Asset Owner Alliance.

The new member, with US$26 billion assets under management (AUM), brings the Alliance’s total AUM to over US$4.6 trillion. Wespath is the second US-based asset owner and second faith-based asset owner after the Church of England to join the Alliance.

The group of pension funds and insurers has pledged to decarbonize their portfolios to net-zero emissions by 2050 to avoid a global temperature increase above the 1.5°C Paris target. This will not be attained through divestment, but rather the Alliance will work closely with portfolio companies to change their business models, adopting climate friendly practices and setting a net-zero target based on what science tells us is necessary in order to strive for a 1.5°C world.

CEO and General Secretary Barbara Boigegrain said: “As the steward for the largest single pool of faith-based pension assets in the world, Wespath has a long history of investing in ways that deliver strong investment returns and pursuing efforts to promote building a sustainable economy. As a prudent fiduciary to our pension participants and institutional investors, we endeavor to align investment activities with efforts to achieve long-term, sustainable economic growth.”

Wespath CIO Dave Zellner said “The Alliance and other similar investor coalitions are essential for influencing the change necessary to achieve a sustainable economy. Together, we can collectively influence the development of stable financial markets, resilient companies and a healthier world for all of us.”

Over the coming months, Alliance members will focus on developing the reporting guidelines and targets aligned with the Paris Climate Agreement required to establish a course for reaching the commitment in the stated timeline. The Alliance is actively recruiting other asset owners to make the net-zero commitment and to collaborate in developing these next steps.

Notes to Editors

Net-Zero Asset Owner Alliance

Convened by UNEP’s Finance Initiative and the Principles for Responsible Investment (PRI), the Net-Zero Asset Owner Alliance is supported by WWF and is part of the Mission 2020 campaign, an initiative led by Christiana Figueres, former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC).

Launched in September at the UN Secretary General’s Climate Action Summit, the Alliance was initiated by Allianz, Caisse des Dépôts (CDC), La Caisse de dépôt et placement du Québec (CDPQ), Folksam Group, PensionDanmark, and Swiss Re, who were joined by Alecta, AMF, CalPERS, Nordea Life and Pension, Storebrand and Zurich as founding members.

In November, AXA, Aviva, CNP Assurances and Fonds de Réserve pour les Retraites (FRR) joined. The Church of England’s investment bodies, Generali joined in January, followed by Munich Re in February, and ERAFP and KENFO in March.

Wespath

Wespath is a non-profit agency of the United Methodist Church, Glenview, Illinois, with US$ 24.9 billion in assets as of 31 December 2019.

New platform gives MENA-based financial institutions tools and insight to help build resilience to climate change

27 February 2020

Financial institutions based in the Middle East and North Africa can now find the tools and insight to transform the region’s financial system to one that addresses the funding of the Sustainable Development Goals (SDGs). The knowledge platform: “Financing the climate transition in the MENA” is a key deliverable of a new programme, the SDG Climate Facility. It has been initiated by a group of organisations who are working to enhance the capacity of Arab regional and national institutions to effectively integrate climate change into development, crisis prevention and recovery actions. They are also aiming to scale up public and private finance to support solutions that build resilience to climate change and strengthen the capacity of the region to adapt.

The collaboration between the UN Environment Programme Finance Initiative (UNEP FI), UN Development Programme (UNDP), World Food Programme (WFP), UN Habitat, Arab Water Council, the League of Arab States (LAS), and UN Disaster Risk Reduction (UNDRR) aims to engage key financial sector actors in the Arab region where climate change has emerged as one of the most important factors exacerbating poverty and human insecurity. Managing climate risk will be key to maintaining regional financial and political stability. This platform provides the knowledge for financial institutions in the Arab region to better understand the risks and opportunities of climate change and how to address not only the impact but also the transition.

Financial institutions can find news and insight into financing the energy transition, as well as more information on frameworks that can help banks and investors achieve the Sustainable Development Goals and the Paris Climate Agreement such as UNEP FI’s Principles for Responsible Banking and guidance on implementing the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Relevant training courses are also listed.

Explore the new platform here.

The SDG Climate Facility is financially supported by Sweden Sverige (SIDA).

High-Level Recommendations on the Voluntary Application of the EU Taxonomy to Core Banking Products

5 December 2019

The European Banking Federation (EBF) and the United Nations Environment Programme Finance Initiative (UNEP FI ) are launching a project to assess the extent to which the EU Taxonomy on Sustainable Activities could be applied to core banking products.

The objective of the project is to:

  1. Provide a high-level feasibility assessment of the EU Taxonomy to selected banking products
  2. Share best practices
  3. Develop use cases where appropriate
  4. Issue recommendations based on the project findings

A Working Group composed of 24 banks, 5 banking associations and 3 observers is working on developing these guidelines. The project is sponsored by BBVA, BNP Paribas, Credit Suisse, Danske Bank, Deutsche Bank, FMO, ING, SEB, Societe Generale, Standard Chartered, UBS and UniCredit.

The Working Group is expecting to issue recommendations around Q3 2020. It may adjust its timeline in line with EC-related Taxonomy developments and processes in 2020.

The Working Group is composed of:

Banks

  • ABN AMRO
  • Barclays
  • BBVA
  • BNP Paribas
  • BPCE
  • CaixaBank
  • Credit Agricole
  • Credit Suisse
  • Danske Bank
  • Deutsche Bank
  • FMO
  • ING
  • Intesa Sanpaolo
  • Jyske Bank
  • KB Financial Group (Korea)
  • OP Financial Group
  • Piraeus Bank
  • SEB
  • Santander
  • Société Générale
  • Standard Chartered
  • Swedbank Group
  • UBS
  • Unicredit

Banking Associations

  • ABI
  • Finance Denmark
  • Finance Norway
  • Finance Latvia
  • Swiss Banking Association

Observers

  • European Commission
  • European Banking Authority
  • EFRAG
  • European Investment Bank / European Investment Fund

Sponsored by:


Contacts:


About the European Banking Federation (EBF)

The EBF is the voice  of the European banking sector, uniting 32 national  banking associations in Europe that together  represent some 3,500 banks – large and small,  wholesale and retail, local and international –  employing about two million people. The EBF  promotes:

  • A thriving European economy underpinned by a stable, secure and inclusive financial ecosystem.
  • A flourishing society where stable and secure financing is available to finance the dreams of citizens, businesses and innovators  everywhere.

About UN Environment Programme Finance Initiative (UNEP FI)

UNEP FI is a partnership  between UNEP and the global financial sector to  mobilize private sector finance for sustainable  development. UNEP FI works with more than 300  members – banks, insurers, and investors – and  over 100 supporting institutions – to help create a  financial sector that serves people and planet  while delivering positive impacts. We aim to  inspire, inform and enable financial institutions to  improve people’s quality of life without  compromising that of future generations. By  leveraging the UN’s role, UNEP FI accelerates  sustainable finance. Find out more about UNEP FI’s banking, investment and climate change work.

Guidance developed on an impact-based approach to finance for real estate investors and asset managers

12 February 2019

The UNEP FI Property Working Group, in collaboration with RICS, PRI, and members of the Global Investor Coalition on Climate Change, have produced a practical, action-oriented framework to accelerate a new financing paradigm for the delivery of the global SDGs.

The 25 leading institutional investors and asset managers of the UNEP FI Property Working Group – alongside partners RICS, PRI, IIGCC, AIGCC, and IGCC[1] – have published a new guide for developing and executing an impact-based approach in real estate finance and management. The Positive Impact Real Estate Investment Framework responds to finance sector interest in investment outcomes for productive, equitable, healthy, and resilient economies and societies.

Positive Impact posits a holistic approach to finance, requiring an appraisal of both positive and negative impacts; consideration of all three dimensions economy, society and environment; and transparency and assessment of methodologies and impact achieved. The Positive Impact Real Estate Investment Framework offers a process tool for institutions to identify impact ‘areas of influence’ and corresponding investment opportunities, measure ex-ante and ex-post impact, and ultimately re-orient institutional capacities and capital for intentional delivery of outcomes that support the Sustainable Development Goals (SDGs). It draws upon the UNEP FI Impact Radar, guidance that translates the SDGs into meaningful terms for businesses and financing impact assessment.

For dissemination and uptake of the Positive Impact Real Estate Investment Framework, UNEP FI and its collaborating partners will run a series of webinars and events targeting real estate investors in several global regions in the first half of 2019. Further activities for 2019 will include a call for case studies for investments that have applied the Positive Impact Real Estate Investment Framework. For more information, please contact Matthew Ulterino, Property Investment Project Coordinator at UNEP Finance Initiative: matthew.ulterino@un.org.

Quotes from investors and collaborators:

“The real estate framework is a must-read for all property lenders and investors looking to increase their impact. It’s also a testament to the power of collaboration between institutions advancing sustainable finance.” Eric Usher, Head, UNEP Finance Initiative

“Through impactful investment frameworks real-estate investors can intentionally deliver social and environment outcomes that support the delivery of the UN Sustainable Development Goals’ target. We do this in Hermes by focusing on selected impactful investment themes – place making, climate and resource efficiency, health & well-being. The Real Estate Impact Framework is a useful tool for investors to map and select the most relevant actions they can take to support the SDGs suiting their specific investment strategies.” Tatiana Bosteels, Director Responsibility, Hermes Investment Management and chair UNEP FI Investment Commission

 “The real estate and built environment sector more broadly can absolutely implement the UN Sustainable Development Goals. We will only get results on sustainability if we help the sector prioritise looking at investments by both their positive and negative impacts, and initiatives like this framework are a tangible way we are supporting professionals to do so.” Sean Tompkins, CEO Royal Institution of Chartered Surveyors (RICS)

“As a long-standing member of the UNEP FI Property Working Group, PRI is pleased to have contributed to the development of this report. It provides a useful guide for any real estate investor looking to implement an impact-based strategy. “ Fiona Reynolds, CEO, Principles for Responsible Investment

“We welcome the publication of this guide, which will be an important tool for investors looking to increase the impact of their real estate investments in supporting the implementation of the Sustainable Development Goals and in contributing to a low carbon future.” Stephanie Pfeifer, CEO of the Institutional Investors Group on Climate Change (IIGCC)

“Investors in Asia are increasingly looking to align their portfolios to the SDGs, and this framework is an essential tool helping investors readily identify where they can add impact to their strategies in real estate.” Rebecca Mikula-Wright, Director, Asia Investor Group on Climate Change

“This Framework provides a useful tool for Australian investors looking to better assess the impact of their capital allocation decisions and really drive sustainable outcomes in real estate.  We need new ways of thinking to better tackle the challenges we face. Guides like this will support greater investor action and ambition”, Investor Group on Climate Change (IGCC) Emma Herd, CEO, Investor Group on Climate Change

Notes to Editors

The Real Estate Investment Framework was published alongside other Model Frameworks from the Positive Impact Initiative, covering financial products for corporates with unspecified use of funds, as well as for project-related finance. For more information about the Positive Impact Initiative please contact, Careen Abb or Jérôme Tagger: careen.abb@un.org / Jerome.tagger@un.org

 

About United Nations Environment Programme – Finance Initiative.

UNEP FI is a partnership between United Nations Environment and the global financial sector created in the wake of the 1992 Earth Summit with a mission to promote sustainable finance. More than 230 financial institutions, including banks, insurers, and investors, work with UN Environment to understand today’s environmental, social and governance challenges, why they matter to finance, and how to actively participate in addressing them.

UNEP FI’s work also includes a strong focus on policy – by facilitating country-level dialogues between finance practitioners, supervisors, regulators and policy-makers, and, at the international level, by promoting financial sector involvement in processes such as the global climate negotiations. For more information, see https://www.unepfi.org/

About the Asia Investor Group on Climate Change.

AIGCC is an initiative to create awareness among Asia’s asset owners and financial institutions about the risks and opportunities associated with climate change and low carbon investing. AIGCC provides capacity for investors to share best practice and to collaborate on investment activity, credit analysis, risk management, engagement and policy. For more information, see http://aigcc.net/

About the Investor Group on Climate Change.

IGCC is a collaboration of 60 institutional investors and advisors, managing over $1 trillion and focusing on the impact that climate change has on the financial value of investments in Australasia. The IGCC aims to encourage government policies and investment practices that address the risks and opportunities of climate change, for the ultimate benefit of superannuate and unit holders. One of IGCC’s streams of work is focussed on climate change risk and opportunities in the built environment, as well as considerations around climate change adaptation and resilience. For more information, see www.igcc.org.au

About the Institutional Investors Group on Climate Change.

The Institutional Investors Group on Climate Change (IIGCC), is the pre-eminent European forum for investor collaboration on climate action and the voice of investors taking action for a prosperous, low carbon, future. It has 153 mainly mainstream investors across 12 countries with over €21 trillion assets under management (including nine of the top ten largest European pension funds or asset managers). IIGCC’s mission is to mobilise capital for the low carbon transition by working with business, policy makers and investors to encourage public policies, investment practices and corporate behaviours that will address the long-term risks and opportunities associated with climate change. Members consider it a fiduciary duty to ensure stranded asset risk or other losses from climate change are minimised and that opportunities presented by the transition to a low carbon economy – such as renewable energy, new technologies and energy efficiency – are maximised. For more information, see www.iigcc.org and @iigccnews

About the Principles for Responsible Investment (PRI).

The PRI works with its international network of institutional investor signatories to put the six Principles for Responsible Investment into practice. Its goal is to understand the investment implications of environmental, social and governance issues and to support signatories in integrating these issues into investment and stewardship decisions. The six Principles were developed by investors and are supported by the UN. There are over 2,100 signatories from over 50 countries representing US $ 81.7 trillion of assets (as of April 2018). The six Principles are voluntary and aspirational, offering a menu of possible actions for incorporating ESG issues into investment practices. In implementing the Principles, signatories contribute to developing a more sustainable global financial system. For more information, see www.unpri.org

About the Royal Institution of Chartered Surveyors (RICS).

RICS promotes and enforces the highest professional qualifications and standards in the valuation, development and management of land, real estate, construction and infrastructure. The RICS name promises the consistent delivery of standards – bringing confidence to markets and effecting positive change in the built and natural environments. For more information, see www.rics.org

 

[1] United Nations Environment Program Finance Initiative; Royal Institution of Chartered Surveyors; Principles for Responsible Investment; Institutional Investors Group on Climate Change; Asia Investor Group on Climate Change; Investor Group on Climate Change

New Guide Launched In Zurich Empowers Banks To Assess Natural Capital Risk

16 January 2019

A week before the World Economic Forum in Davos, where global financial leaders will discuss society’s most pressing issues, the Natural Capital Finance Alliance (NCFA) has launched the world’s first step-by-step guide to help financial institutions conduct a rapid natural capital risk assessment.  The Natural Capital Finance Alliance engaged with PwC to produce the guide.

The guide has already been piloted by five banks, including First Rand in South Africa who said it “enabled us to look at our portfolio in a new way”. It promotes the use of the recently launched ENCORE tool (Exploring Natural Capital Opportunities, Risks and Exposure), which enables financial institutions to understand and assess their exposure to natural capital risks.

The guide aims to fully unlock the power of ENCORE and, as part of the Advancing Environmental Risk Management (AERM) project, helps global banks to better understand how the pollution of oceans or destruction of forests, for example, may affect their financial future. AERM is a wider project by NCFA to help financial institutions understand and integrate the risks they face because of environmental degradation into their risk assessment methods and decision-making tools.

The guide has two core elements:

  • Rapid Natural Capital Risk Assessment, which allows an institution to quickly identify the areas of highest natural capital risk.
  • Sector/Asset Analysis, which uses data on drivers of environmental change and the state of natural capital assets, to assess the likelihood of disruption of relevant ecosystem services. This could help financial institutions in their climate scenario analyses as recommended by the TCFD.

By combining a comprehensive knowledge base with environmental scenarios and location-specific asset data, financial institutions can assess and manage their natural capital risk in qualitative and quantitative terms. This insight can be incorporated into existing risk processes, for example, by combining internal data on client location with environmental data to improve strategic scenario planning and credit risk management.

Attendees at today’s event, held in Zurich and co-organised by Swiss Sustainable Finance (SSF), will receive an overview of ENCORE, as well as an introduction to the broader AERM project, both funded by the Swiss State Secretariat for Economic Affairs (SECO) and the MAVA Foundation. The guide also includes case studies of how financial institutions globally are using the power of ENCORE to assess their dependence on nature.

Liliana de Sá Kirchknopf, Head of Private Sector Development Division, State Secretariat for Economic Affairs in Switzerland (SECO), said:

“The degradation of natural ecosystems poses a material threat to future economic growth. Until now, the financial community was not able to systematically assess and manage such risksThat is changing thanks to our collaboration with the NCFA to create a natural capital framework for financial institutions.  Practical tools like ENCORE define the link between environmental change and economic consequences, so market players are empowered to make sustainable financing decisions.” 

Niki Mardas, Executive Director at Global Canopy, said:

“This timely report sends a powerful message that when financial leaders consider the environment at Davos next week they must consider not just greenhouse gases, but also how to build wider ecosystem resilience from rainforests to coral reefs. If we are to build more sustainable capital markets, financial institutions must be able to easily integrate their dependence on nature into existing risk management. That’s why today’s launch of NCFA’s natural capital risk assessment framework is so important. Using it alongside the ENCORE tool, financial institutions can now systematically identify natural capital risks and act on them.”

Madeleine Ronquest, Head of Environmental and Social Risk, Climate Change at FirstRand Limited, said:

“The South African economy has a deep dependence on nature, and is particularly vulnerable to extreme climatic events, which are becoming more frequent and intense. The severe challenges around the availability and supply of drinking water in Cape Town is just one example of this. The AERM project enabled us to look at our portfolio in a new way, looking at thresholds and exposure, especially in the case of water-related risk. It can help us forecast and has opened up potential new opportunities. It has brought our teams together in a valuable learning journey. We are very happy with the outcomes of the testing phase and got far more out of it than expected.”

Jon Williams, sustainability and climate change partner at PwC UK, said:

Our work with NCFA and its partners makes a further and material advance in environmental and social risk management in banks. The report provides practical guidance and tools for managing natural capital risks, present in many banking portfolios but often hard to identify, assess and mitigate. By piloting the approach with the banks involved in this project, we believe this provides a tested risk management framework that can be adopted by other financial institutions. Given the increasing erosion of natural capital and the increasing risks that businesses and their financiers face, this report is a timely addition to the tools available to risk managers.”

 

Produced by the Natural Capital Finance Alliance (NCFA) in collaboration with PwC, the guide is the second phase of the Advancing Environmental Risk Management (AERM) project. Download the report here.

The report from the first phase can be found here.

 

About NCFA

The Natural Capital Finance Alliance (NCFA) is a finance sector-led initiative, providing expertise, information and tools on material aspects of natural capital for financial institutions. It works to support these institutions in integrating natural capital considerations into their risk management processes and products as well as helping them to discover new opportunities. The NCFA secretariat is run jointly by the UN Environment Finance Initiative and Global Canopy.

About Global Canopy

Global Canopy is an innovative environmental organisation that targets the market forces destroying tropical forests. Our mission is to accelerate progress towards a deforestation-free global economy – through improved transparency, innovative finance and strategic communications. Since 2001, we have catalysed new thinking and action by leading governments, companies and investors worldwide. For more information, see www.globalcanopy.org.

About UNEP FI

The United Nations Environment Finance Initiative (UNEP FI) is a unique global partnership between United Nations Environment and the global financial sector founded in 1992. UNEP FI works closely with over 230 financial institutions who have signed the UNEP FI Statements as well as a range of partner organisations to develop and promote linkages between sustainability and financial performance. Through peer-to-peer networks, research and training, UNEP FI carries out its mission to identify, promote, and realise the adoption of best environmental and sustainability practice at all levels of financial institution operations. For more information, see www.unepfi.org

About SSF

Swiss Sustainable Finance (SSF) strengthens the position of Switzerland in the global marketplace for sustainable finance by informing, educating and catalysing growth. The association, founded in 2014, has representation in Zurich, Geneva and Lugano. Currently SSF unites 108 members and network partners from financial service providers, investors, universities and business schools, public sector entities and other interested organisations. An overview of Swiss Sustainable Finance’s current members and network partners can be found here.

About PwC

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 158 countries with over 250,000 people who are committed to delivering quality in assurance, advisory and tax services. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. PwC UK, PwC South Africa, PwC Colombia and PwC Peru were engaged with the Natural Capital Finance Alliance in this work.

 

 

Climate Success at COP24: after intense negotiations new rulebook breathes life into Paris Agreement but much more decarbonisation ambition needed

18 December 2018

 

On Saturday, following two weeks marked by dramatic rhetoric and intense negotiations over legal language, close to 200 Governments bridged a deep global divide and agreed on the set of rules meant to steer countries worldwide in implementing the historic 2015 Paris Agreement on climate change. UNEP FI’s Climate Lead, Remco Fischer gives more detail on the decisions made at COP24 and provides a summary of UNEP FI’s events and inputs including recordings of sessions, which helped facilitate a strong presence from the financial industry.

 

The Rulebook of the Paris Agreement

The finance sector – including over 400 investors –asked for a Paris Agreement rulebook. COP24 in Katowice delivered this. 

By defining nations’ responsibilities for tackling climate change, reporting their progress – both reductions in greenhouse gas emissions as well as in the provision of financial resources – and upping their efforts for decades to come the Rulebook puts the Paris Agreement into action.

Two common threads ran through each of the areas in the Rulebook. First, whether to agree a single set of rules for all countries – with flexibility for those that need it – or to maintain the current and historic divide between rules for developed countries and rules for developing countries. This is commonly referred to as “differentiation”.

Overall, the COP decisions made on Saturday tend towards single sets of rules for all countries, with some latitude for those that lack the capacity to meet them. On finance, the rules are relatively permissive, giving flexibility to developed countries in what and how they report their contributions. More details on the various decisions made on the Rulebook are provided further below.

 

The Ratchetting-up of Ambition

The finance sector – including over 400 investors –  have demanded that countries up their climate ambition to align with the long-term objectives of the Paris Agreement. COP24 in Katowice delivered momentum for more ambition, as well as the mechanisms for more ambition, but no country has stepped up yet.

In addition to the challenge of operationalizing the Paris Agreement through the Rulebook another key theme at COP24 was the climate and decarbonization ambition that countries have shown in their climate pledges to date and – given the persistent lack of collective ambition and, as a result, the still enormous ‘emissions gap’ – the avenues at hand to increase it.

According to UN Environment’s Emissions Gap Report, launched at UNEP FI’s Global Roundtable in Paris, the ‘emissions gap’ is the difference between “where we are likely to be and where we need to be”. As the emissions gap assessment shows, the current level of ambition in countries’ climate pledges needs to be roughly tripled for the 2°C scenario and increased around fivefold for the 1.5°C scenario.

To that effect, and in addition to the Rulebook, COP24 delivered the Talanoa Dialogue Call for Action, as well as dramatic appeals from UN Secretary-General António Guterres, Sir David Attenborough, and Swedish schoolgirl Greta Thunberg.

However, COP24 did not yield any increased country ambition yet. This is an urgent need now and the UN Secretary General’s Summit in September of 2019 will focus on meeting that need.

Financial institutions, as well as their clients and investees, also need to increase their own ambition by phasing out fossil fuels in ways that minimize impacts for workers and communities, scaling-up low-carbon financing, and ultimately aligning their portfolios with the Paris Agreement and a 1.5 degrees-compatible global economy.

 

The COP decisions in detail

In more detailed and specific terms, COP24 agreed:

On NDC guidance – Article 4

  1. That countries’ climate pledges – the so-called nationally Determined Contributions (NDCs) – will be recorded in a public, and ‘searchable’, registry based on the current interim registry.

 

  1. That, in their reporting on NDC progress, all countries shall use the latest emissions accounting guidance from the Intergovernmental Panel on Climate Change (IPCC). This is meant to make it easier to compare pledges, to monitor progress over time, and to add them to global aggregates.

 

  1. That NDCs should cover a common timeframe from 2031, with the number of years included in such a timeframe to be agreed on later on. Some current pledges at the moment cover five years while others cover 10.

On Climate Finance Reporting – Article 9

  1. That developed countries ‘shall’ and developing ‘should’ report on any climate finance they provide, as demanded for developing country Governments, but heavily caveated by loose wording such as: “Enhanced information to be provided […] as available” or “An indication of new and additional resources to be provided”. Also, countries are allowed to report the full value of loans they provide as climate finance, rather than the “grant-equivalent” portion of the total, which is a departure from established practice in development finance & assistance, and as such is being criticized heavily by civil society organizations.

On Transparency – Article 13

  1. That – when it comes to countries’ reporting on their climate efforts including emissions reporting, NDC progress, adaptation to physical climate change, climate finance provided or received – a single set of rules shall apply to both developed and developing countries. This had been a key issue and key red line for the US and EU, which had wanted to hold the likes of China to the same reporting standards that they face. Still, this single set of rules is to be applied with flexibility for “those developing country parties that need it in the light of their capacities”, with developing countries themselves “self-determining” whether they need flexibility, but also with them stating why they need it, how long they expect to continue needing it, and what they plan to do to stop needing it. Despite this flexibility, it is widely recognized that the new rules will translate into a substantial intensification of biannual reporting requirements under the UNFCCC and a key departure from the current practice of only having the 44 developed nations under the Convention report biannually.

 

  1. That these new reporting rules will kick in from 2024, one year after the first global stock-take of progress.

Global stock-take – Article 14

  1. On the ground rules of the Global Stock-takes through which: i) every five years, countries are meant to come together and take stock of progress towards the long-term Paris goal of avoiding dangerous global warming, and then, with this global stock-take in hand, ii) countries go home and return with enhanced climate pledges to fill gaps in ambition.

 

  1. On the structure of the stock-take process which is to be divided into three stages – i) Information collection; ii) Technical assessment: iii) Consideration of outputs – with the technical assessment being key as a step meant to ‘de-politicize’ and ‘objectify’ the stock take deliberations and their outcomes.

 

On Market mechanisms – Article 9

 

  1. To defer most decisions related to Market Mechanisms (Article 6) to 2019, which includes the extent to which countries can ‘trade’ their NDC-related overachievement, the extent to which individual projects can generate carbon credits for sale (in manners resembling the Kyoto Protocol’s Clean Development Mechanisms – CDM) , and related measurers to avoid ‘double-counting’ of emissions reductions.

 

Other matters

  1. To set up an expert compliance committee to enable monitoring of countries’ compliance with their NDCs with this committee being “facilitative in nature…non-adversarial and non-punitive”. The committee will be able to investigate countries that fail to submit climate pledges. Regarding transparency reports covering climate finance or emissions and progress in cutting them, the committee “may, with the consent of the party concerned, engage in a facilitative consideration of issues in cases of significant and persistent inconsistencies of the information”.

 

UNEP FI’s Input and Involvement at COP24

UNEP FI helped facilitate a strong presence from the financial industry through a range of events and inputs, many of which were recorded and can be viewed below.

 

  • Side event hosted by the International Chamber of Commerce on Climate Finance – Next steps for climate action with participation from the German Federal Ministry for Economic Cooperation and Development (BMZ), the ICC, the NewClimate Institute, WWF, and UNEP FI.

 

  • A cross-cutting roundtable convened by the UN Climate Secretariat on Climate-Action and Finance Mobilizing climate-aligned investment

 

 

  • A European Commission-hosted event on Public finance for low-carbon transitions: Changing paradigms, policies and practices in Europe and the G20, with participation from the European Investment Bank, IPEEC, and UNEP FI.

 

  • A side event on Adaptation finance and the TCFD recommendations convened by Acclimatise and the European Investment Bank, with participation from the EIB, the EBRD, the AFD, the IDB, the Global Commission on Adaptation, and UNEP FI. A recording of the session can be viewed here.

 

 

  • A WWF-hosted session focused on Financial regulation as a lever for driving the shift of financial flows. A recording of the session can be viewed here.

For more information contact Remco Fischer.

Visionary solutions to the Sustainable Development Goals’ funding gap from UNEP FI’s Positive Impact Initiative

26 November 2018

Paris, 26 November 2018 – How to achieve the Sustainable Development Goals?

UNEP FI’s Positive Impact Initiative proposes a new approach: social, economic and environmental impacts have an as-yet under explored potential to generate financial revenues: impact-based business models can be developed, with the delivery of positive impacts as a driver of sustainable business growth and long-term enterprise value. This could be game-changing: by making it cheaper to deliver sustainability outcomes, less risky to finance and would stimulate the private sector to create new business solutions that focus on positive impacts. In fact, this shift to an impact-based economy is already under way, and the finance sector has a strategic interest in understanding impacts, not only to meet stakeholder needs, but also to capture new opportunities that support this transformation. Accordingly, it is critical for banks and investors to improve their capacity to understand and analyze impact.

UNEP FI’s Positive Impact Initiative (PI) makes these arguments in “Rethinking Impact to finance the SDGs: a position paper and call to action” –  released on 26 November at UNEP FI’s 2018 Global Roundtable in Paris.

According to Ligia Noronha, Director Economy Division, UN Environment: “Rethinking Impact to Finance the SDGs” is a major contribution to solving the sustainable development puzzle.  It will transform the way we think about business and finance.”

Supporting this release are several game-changing tools for impact analysis and management: The PI Impact Radar translates the SDGs into meaningful terms for business and finance. PI Model Frameworks provide guidance to apply holistic impact analysis across different financing products and asset classes, as a pragmatic application of PI’s Principles for Positive Impact Finance, for decision-making, for the development of financial products, and for the overall review of portfolios.

Download Rethinking Impact to Finance the SDGs

Download the executive summary in German
Download the executive summary in Chinese (Mandarin)
Download the executive summary in French
Download the executive summary in Arabic

Download the PI Radar

Download the Model Framework for unspecified use of funds
Download the Model Framework for specified use of funds
Download the Model Framework for real estate investment