scholarly journals Climate finance and disclosure for institutional investors: why transparency is not enough

2019 ◽  
Vol 160 (4) ◽  
pp. 565-589 ◽  
Author(s):  
Nadia Ameli ◽  
Paul Drummond ◽  
Alexander Bisaro ◽  
Michael Grubb ◽  
Hugues Chenet
Keyword(s):  
Climate Change ◽  
Institutional Investors ◽  
Financial Stability ◽  
Task Force ◽  
Efficient Market Hypothesis ◽  
Inadequate Response ◽  
Climate Finance ◽  
Implicit Assumption ◽  
Low Carbon ◽  
Theoretical Frameworks

Abstract The finance sector’s response to pressures around climate change has emphasized disclosure, notably through the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). The implicit assumption—that if risks are fully revealed, finance will respond rationally and in ways aligned with the public interest—is rooted in the “efficient market hypothesis” (EMH) applied to the finance sector and its perception of climate policy. For low carbon investment, particular hopes have been placed on the role of institutional investors, given the apparent matching of their assets and liabilities with the long timescales of climate change. We both explain theoretical frameworks (grounded in the “three domains”, namely satisficing, optimizing, and transforming) and use empirical evidence (from a survey of institutional investors), to show that the EMH is unsupported by either theory or evidence: it follows that transparency alone will be an inadequate response. To some extent, transparency can address behavioural biases (first domain characteristics), and improving pricing and market efficiency (second domain); however, the strategic (third domain) limitations of EMH are more serious. We argue that whilst transparency can help, on its own it is a very long way from an adequate response to the challenges of ‘aligning institutional climate finance’.

Key Drivers and Barriers for the Mobilization of Institutional Investment in Climate-Related Projects

2021 ◽  
Vol 26 (11) ◽  
pp. 1236-1244
Author(s):  
S. I. Nikulina
Keyword(s):  
Climate Change ◽  
Institutional Investors ◽  
Climate Finance ◽  
Low Carbon ◽  
Financial Policies ◽  
Institutional Investment ◽  
Responsible Investment ◽  
Climate Risks ◽  
Change Projects ◽  
Key Drivers

The presented study focuses on the problem of increasing the participation of institutional investors in climate finance.Aim. The study aims to identify key drivers and barriers for increasing the participation of institutional investors in climate finance.Tasks. The author considers the transformation of the concept of the fiduciary debt of institutional investors; examines international efforts to address climate risks and mobilize institutional investment in low-carbon projects; analyzes factors preventing wider engagement of institutional investors in climate finance.Methods. This study used general scientific methods of cognition, such as synthesis and analysis.Results. The transformation of the concept of the fiduciary debt of institutional investors is described and its modern interpretation is provided. Factors facilitating the consideration of climate risks and increasing the role of institutional investors in climate finance are identified. The main barriers to considering climate change issues in the investment decisions made by institutional investors are identified.Conclusions. Common approaches to financial policies and regulations are being actively developed at the international level to help mobilize institutional investment in climate change projects. Credible international structures in the field of responsible investment, such as PRI, have a significant influence on the way investors address climate-related risks and opportunities when making decisions. Along with the drivers for institutional investment, numerous barriers still remain.

scholarly journals Climate Change: EU taxonomy and forward looking analysis in the context of emerging climate related and environmental risks

2020 ◽  
Vol 3 (2020) ◽  
pp. 48-64
Author(s):  
Giuliana Birindelli ◽  
◽  
Vera Palea ◽  
Luca Trussoni ◽  
Fabio Verachi ◽  
...  
Keyword(s):  
Climate Change ◽  
Financial Stability ◽  
Global Economy ◽  
Financial Risk ◽  
Task Force ◽  
Low Carbon ◽  
Stress Tests ◽  
Low Carbon Economy ◽  
The Impact ◽  
Forward Looking

Climate change is causing substantial structural adjustments to the global economy. Several sectors, such as coal and steel, are undergoing severe problems related to the inevitable transition to a low-carbon economy, while others such as renewables and new environmental adaptation technologies are benefiting substantially. In this context, regulators are beginning to intervene on the legislation, while investors, customers and civil society are looking for alternatives to mitigate, adapt and make these issues more transparent. This article aims to analyze the impact that these changes will inevitably have on banks' balance sheets, introducing new risks but also opportunities. The final purpose is to help banks integrate climate risks into their organizational framework and to provide guidance on the implementation of the recommendations published by the Task Force on Climate-related Financial Disclosures (TCFD) within the broader Financial Stability Board (FSB) objectives and the UN Environment Finance Initiative (UNEP FI). Starting from a long-term perspective, the work suggests considering climate risk as a financial risk, overcoming traditional approaches that focus on reputational risk. This change implies the integration of climate change risk into the logic of Risk Management (Credit, Market and Operational risks) and a consequent sharing of responsibilities with the structures of Corporate Social Responsibility (CSR). The TCFD recommendations urge banks to use forward looking scenario analyzes, including stress tests, to evaluate and disseminate the "actual and potential impacts" of climate-related risks and opportunities, suggesting in particular to consider the consequences in terms of two categories of risk: physical and transition risk

scholarly journals CLIMATE FINANCE AND ITS GOVERNANCE: MOVING TO A LOW CARBON ECONOMY THROUGH SOCIALLY RESPONSIBLE FINANCING?

2009 ◽  
Vol 58 (3) ◽  
pp. 597-626 ◽  
Author(s):  
Benjamin J Richardson
Keyword(s):  
Climate Change ◽  
Clean Energy ◽  
Business Case ◽  
Current Approach ◽  
Potential Contribution ◽  
Climate Finance ◽  
Low Carbon ◽  
Socially Responsible ◽  
Responsible Investment ◽  
Low Carbon Economy

Abstract‘Climate finance’ is becoming an important feature of the emerging legal and policy regimes to address global warming. However, the current approach largely confines the financial sector to a transactional agent to mobilise capital for clean energy and to broker emission allowance trading. The sector's potential to leverage more sweeping positive changes in the economy as sought historically through the movement for socially responsible investment (SRI) has been insufficiently acknowledged. Indirectly, by regulating greenhouse gases the legal system is helping to create a business case for investors to respond to climate change threats. However, the potential contribution of SRI to address climate change problems more comprehensively is presently limited owing to inadequate governance frameworks, as well the sector's increasing abandonment of its traditional ethical agenda.

scholarly journals The Costs and Trade-Offs of Green Central Banking: A Framework for Analysis

Energies ◽  
2021 ◽  
Vol 14 (16) ◽  
pp. 5168
Author(s):  
Radu Șimandan ◽  
Cristian Păun
Keyword(s):  
Climate Change ◽  
Environmental Sustainability ◽  
Financial Stability ◽  
Central Banks ◽  
Central Banking ◽  
Smooth Transition ◽  
Low Carbon ◽  
Low Carbon Economy ◽  
Macroprudential Policies ◽  
Trade Offs

The participation of central banks in the fight against climate change has recently been advanced in several academic articles and policy papers. Since the emerging consensus is that climate change poses financial risks, the envisaged green central banking has a responsibility to address environmental sustainability as a means of promoting financial stability—an increasingly accepted goal of central banks in the post-financial crisis world. Thus far, the pro side of the argument is well represented in the literature, though often the benefits remain implicit: with the help of central banks via monetary and macroprudential policies, a smooth transition to a low-carbon economy would be somehow beneficial to all of us. With this article, we aim to add to this literature by looking at the costs and trade-offs of this course of action in light of the observation that the con side of the proposal has been only marginally addressed. We put forward a framework for the analysis of the costs and trade-offs of green central banking and exemplify the applicability of this framework by studying three cases of central banks for which the transition to green operation has been advanced. We find evidence that if costs and trade-offs are taken into account, the case in favor of greening central banks becomes less straightforward than is currently conveyed in the literature.

Analysis of External Climate Finance Access and Implementation: CIF, FCPF, GCF and GEF Projects and Programs by the Inter-American Development Bank

2021 ◽  
Author(s):  
Sofía Viguri ◽  
Sandra López Tovar ◽  
Mariel Juárez Olvera ◽  
Gloria Visconti
Keyword(s):  
Climate Change ◽  
Scale Up ◽  
Transformational Change ◽  
Lessons Learned ◽  
Climate Finance ◽  
Low Carbon ◽  
Global Environment Facility ◽  
Climate Action ◽  
External Sources ◽  
Resilient Infrastructure

In response to the Paris Agreement and the Sustainable Development Goals (SDGs), the IDB Group Board of Governors endorsed the target of increasing climate-related financing in Latin America and the Caribbean (LAC) from 15% in 2015 to 30% of the IDB Groups combined total approvals by 2020. Currently, the IDB Group is on track to meet this commitment, as in 2018, it financed nearly US$5 billion in climate-change-related activities benefiting LAC, which accounted for 27% of total IDB Groups annual approvals. In 2019, the overall volume and proportion of climate finance in new IDBG approvals have increased to 29%. As the IDB continues to strive towards this goal by using its funds to ramp-up climate action, it also acknowledges that tackling climate change is an objective shared with the rest of the international community. For the past ten years, strategic partnerships have been forged with external sources of finance that are also looking to invest in low-carbon and climate-resilient development. Doing this has contributed to the Banks objective of mobilizing additional resources for climate action while also strengthening its position as a leading partner to accelerate climate innovation in many fields. From climate-smart technologies and resilient infrastructure to institutional reform and financial mechanisms, IDB's use of external sources of finance is helping countries in LAC advance toward meeting their international climate change commitments. This report collects a series of insights and lessons learned by the IDB in the preparation and implementation of projects with climate finance from four external sources: the Climate Investment Funds (CIF), the Forest Carbon Partnership Facility (FCPF), the Green Climate Fund (GCF) and the Global Environment Facility (GEF). It includes a systematic revision of their design and their progress on delivery, an assessment of broader impacts (scale-up, replication, and contributions to transformational change/paradigm shift), and a set of recommendations to optimize the access and use of these funds in future rounds of climate investment. The insights and lessons learned collected in this publication can inform the design of short and medium-term actions that support “green recovery” through the mobilization of investments that promote decarbonization.

The application of climate adaptation algorithm to physical climate risk assessment and management of the TCFD

2020 ◽  
Author(s):  
Iwen Liu ◽  
Ching-pin Tung
Keyword(s):  
Climate Change ◽  
Risk Assessment ◽  
Risk Management ◽  
Value At Risk ◽  
Financial Stability ◽  
Climate Adaptation ◽  
Task Force ◽  
Financial Disclosure ◽  
Climate Risk ◽  
Climate Scenarios

<p>The Financial Stability Board (FSB) published “Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)” in 2017 to assist companies in assessing climate-related risks and opportunities and financial disclosure. However, the integration between climate scenarios and the corporate risk management system and the financial quantification of climate-related risks are still the challenges for corporate practice. To collect the climate scenarios mentioned in TCFD and integrate the relevant factors in corporate operations, the study will use the framework of TCFD: Governance, Strategy, Risk management, Metrics and Targets, introduce the first three steps of the Climate Change Adaptation (CCA Steps): "identifying problems and establishing objectives", "assessing and analyzing current risk", "assessing and analyzing future risk", and use climate risk template which use  Hazard, Exposure and Vulnerability as risk assessment factors to establish a framework for the evaluation and analysis of risk. After establishing a complete method for climate risk and opportunity assessment, in response to the "financial disclosure", the study will link to the financial statement items, referring to related concepts such as “Value at Risk” and “stranded assets”, to strengthen the integrity and transparency of corporate financial disclosure. At last, the study will select a specific climate physical risk in a industry for case study by the analysis of literature, international reports and historical events and introduce a climate risk assessment framework to verify the practicality of this framework. The study's results will be applied to the risk management of business operations. At the same time, the framework of climate risk can assist companies to put climate change factors into their decisions, maintaining the sustainable competitiveness in a low-carbon economy.</p><p>Key words: climate risk assessment, TCFD, enterprise risk management</p>

scholarly journals Climate Finance and Its Role towards the Transition to Low-Carbon, Climate-Resilient Development in Ethiopia

2019 ◽  
Author(s):  
Zelalem Dendir
Keyword(s):  
Climate Change ◽  
Sustainable Development ◽  
Climate Adaptation ◽  
Rainfall Variability ◽  
Strong Relationship ◽  
Developed Countries ◽  
Gdp Growth ◽  
Climate Finance ◽  
Low Carbon ◽  
Recent Emergence

Achieving and sustaining stability for economic growth remain the greatest and most immediate development challenge for Ethiopia. For natural resource-based economies especially maintaining stability and growth depends fundamentally upon climate change adaptation and mitigation. The close links between climate and Ethiopia’s economy are reflected by the strong relationship between GDP growth rate and rainfall variability. A study by the World Bank projects that unless steps to build resilience are effective, climate change will reduce Ethiopia’s GDP growth by between 0.5 and 2.5% each year. Along with the challenges posed by climate change, a number of development opportunities are emerging in response to climate change which includes access to international climate finance. The international response to climate change in the form of external development finance plays a key role to support developing countries in their transition to a low-carbon, climate-resilient and sustainable development pathway. Therefore, this study was conducted to assess the flow and the overall contribution of climate finance to sustainable development in Ethiopia. Specifically, focused on outlining how climate finance is currently reconciled in the existing Ethiopian climate change governance and its contribution to sustainable development. In order to achieve these objectives, data were collected from different sources. The Rio Marker methodology applied to review climate financial flow over the 5 year period. The result reveals that, climate change is central to development agendas despite its recent emergence in the mainstream, with various initiatives under way to combat or reduce its impacts in Ethiopia. In addition, the amount of climate finance from the developed countries to Ethiopia shows some fluctuation for the past five years. In general, the overall flow of climate finance mostly targeted climate adaptation actions which spur and enable the transition towards climate-resilient growth and sustainable development.

Successes and challenges financing projects on climate in Chile

2021 ◽  
pp. 33
Author(s):  
Dmitry N. Ershov
Keyword(s):  
Climate Change ◽  
Institutional Investors ◽  
State Policy ◽  
Financial Resources ◽  
Climate Finance ◽  
Negative Effects ◽  
National Initiatives ◽  
Combat Climate Change ◽  
Successes And Challenges

The article presents Chile's experience in mobilizing financial resources to combat climate change, mitigate its negative effects and adapt to climate change. An overview of the accompanying factors is briefly presented and the process of formation of state policy to support climate finance and the reasons that restrain it are analyzed. The main institutions, mechanisms, sources and directions of climate finance are listed. International and national initiatives and measures to mobilize resources from institutional investors are presented and barriers to funding are analyzed. The conclusion is made about the expediency of studying the experience of Chile in the context of the development of climate finance in Russia.

The Managing Director’s Statement on the Role of the Fund in Addressing Climate Change

Policy Papers ◽  
2015 ◽  
Vol 15 (75) ◽  
Author(s):  
Keyword(s):  
Climate Change ◽  
Financial Stability ◽  
Critical Role ◽  
Greenhouse Gas Mitigation ◽  
Low Carbon ◽  
Economic Resilience ◽  
Macroeconomic Policies ◽  
Carbon Pricing ◽  
Economic Agents ◽  
Low Carbon Economy

The Fund has a role to play in helping its members address those challenges of climate change for which fiscal and macroeconomic policies are an important component of the appropriate policy response. The greenhouse gas mitigation pledges submitted by over 160 countries ahead of the pivotal Climate Conference in Paris in December represent an important step by the international community towards containing the extent of global warming. Strategies for reducing emissions will reflect countries’ differing initial positions, political constraints and circumstances. Carbon pricing can, however, play a critical role in meeting in the most efficient and effective way the commitments that countries are now entering into; it can also raise substantial revenues that can be used to reduce other, more distorting taxes. Through its incentive effects, carbon pricing will also help mobilize private finance for mitigation activities and spur the innovation needed to address climate challenges. Finance ministries have a key role to play in promoting and implementing these policies and ensuring efficient use of the revenue raised. The process of climate change is set to have a significant economic impact on many countries, with a large number of lower income countries being particularly at risk. Macroeconomic policies in these countries will need to be calibrated to accommodate more frequent weather shocks, including by building policy space to respond to shocks; infrastructure will need to be upgraded to enhance economic resilience. It will be important that developing countries seeking to make these adaptations have access to sufficient financial support on generous terms. Financial markets will play an important role in helping economic agents and governments in coping with climate change-induced shocks. And heightened climate vulnerabilities and the structural adjustments associated with a shift towards a low-carbon economy over the medium-term will have important implications for financial institutions and financial stability. This paper identifies areas in which the Fund has a contribution to make in supporting its members deal with the macroeconomic challenges of climate change, consistent with national circumstances. It draws on materials contained in a forthcoming Staff Discussion Note (Farid et al. 2015) and has benefited from the discussions at informal Board meetings on IMF work on climate change held on September 30 and November 24, 2015.

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