Holiday Countdown

Holiday Countdown

2020 has been a challenging year for everyone, and so we wanted to bring some optimistic and inspiring messages from the world of green finance to your inbox as we count down to the holidays.

Every day we will share insights from our friends, collaborators and partners, with a few of our own sprinkled among them. Simply click today’s window. We hope you enjoy them.

From all of us here at the Green Finance Institute, we wish you and your loved ones a very merry holiday season and a happy, healthy, green and sustainable New Year!

December 24th

We hope you have enjoyed our Holiday Countdown. Today, in our final offering, we reflect on all of the insights and share a holiday message of thanks to all our contributors, partners, friends and supporters. As we head off on a break, we wish you a happy and healthy holiday period and look forward to continuing our work with you with renewed vigour in 2021!

When the severity of COVID-19 began to dawn in February this year, it was wondered whether a global health crisis would diminish our capacity to address the global climate crisis – whether the climate action laid out by business leaders at Davos just one month prior would be shelved. As we look back at the year, however, it’s clear this was not the case. Amid the human and economic devastation of the pandemic, large steps have still been taken towards meeting our global net zero goals – many of which our guest contributors have highlighted in their insights shared during our Holiday Countdown.

We have, for example, witnessed positive headway from the two largest economies most responsible for carbon emissions – the US and China. Deborah Lehr, vice chair at the Paulson Institute shared with us the green finance strategies that China has been implementing to reach its 2060 net zero target, while Ed Barbier, professor at Colorado State University discussed President-elect Joe Biden’s Build Back Better Plan that could result in the largest net positive green stimulus package in the world. Here in the UK, minister of state for business, clean energy and growth, Kwasi Kwarteng spoke about the UK’s own green finance initiatives such as mandating TCFD, issuing a sovereign green bond, launching a National Infrastructure Bank and a Green Jobs Taskforce. There is a growing recognition by governments that we can recover our economies from the global health crisis and ensure jobs are created, while simultaneously meeting our net zero goals.

Efforts have been no less in the private sector. Indeed, Mark Carney, former governor of the Bank of England, shared that he has seen resolve “redouble” this year and that “every major systemic bank, the world’s largest insurers, its biggest pension funds and top asset managers are calling for the disclosure of climate-related financial information through their support of the TCFD.”

There is much more to do he points out, including a worldwide mandating of climate-related financial disclosures. As Claire O’Neill, managing director for climate and energy, and natural climate solutions at the World Business Council for Sustainable Development reminds us in her message, “despite [..] efforts, the emissions curve just keeps on rising”.

Throughout our Holiday Countdown messages we have heard the need to double our efforts in the year ahead. Among the areas highlighted for greater focus lie the decarbonisation of the energy sector and transport sector, as well as dramatically improving the energy efficiency of our built environment – particularly housing stock. As Joe Garner, chief executive at Nationwide shared: “Our homes are where we can have the biggest individual impact on climate change.”

But reducing carbon emissions alone will not allow us to reach our climate goals in the time frame we have set out. We need to sequester carbon. Standard Chartered group executive, Bill Winters highlighted nature as a solution, and the need for scaling voluntary carbon offsets.  Andrew Mitchell, co-founder of the Task Force for Nature-related Financial Disclosures (TNFD) reminded us that nature’s role is also far greater than providing a carbon sink. Biodiversity loss, he shared, is a risk that must be tackled at the same time as climate. It is something we highlight here at the Green Finance Institute – that nature and climate are two sides of the same coin.

Over 2020 the drumbeat that capital needs to be mobilised if we are to meet these goals has grown louder. That became clear at the Green Horizon Summit in November we co-hosted with the Lord Mayor and City of London Corporation in partnership with the World Economic Forum. We need to move capital at a scale that exceeds even the trillions mobilised for stimulus packages resulting from Covid-19.  As Richard Curtis, film director and co-founder of Make My Money Matter, shared with us – finance is key, and the path to achieving our environmental and social ambitions requires all of us working collaboratively.

At the Green Finance Institute, working in collaboration and mobilising capital lie at the heart of what we do, and in the year ahead we will be doubling down on our efforts through the work of our Coalition for the Energy Efficiency of Buildings (CEEB) and its Zero Carbon Heating Taskforce as it broadens its scope to flood resilience and into Europe. Our Coalition for Decarbonisation of Road Transport (CDRT) will work to identify and unlock the barriers to financing infrastructure for electric vehicles. In nature our work continues as co-chair of the Informal Working Group of the TNFD that will launch next year; under Sir Roger’s leadership of the finance workstream for the Dasgupta Review; our continued leadership to the Global Resource Initiative’s finance workstream, and our work with partners in both the public and private sector to unlock investments in UK nature-based projects. And to support governments in their efforts to mobilise capital by derisking net zero industries, we will continue our work with partners, Rocky Mountain Institute and the Natural Resources Defense Council, in the development of green banks through our green bank design platform.

As we prepare to take a break to refresh for the year ahead and spend time with family and friends, we would like to take this moment to extend our gratitude to all of our partners, friends, supporters and inspiring contributors this year and wish you too a happy holiday period. We look forward to continuing our work with you with renewed vigour in 2021.

From all of us here at the Green Finance Institute, we wish you a very merry Christmas and a happy and healthy New Year.

Sir Roger, Rhian-Mari, Holly, Emma, Dan, Brendan, Karim, Jonny, Daisy, Ryan, Helen, Vicky, Andy, Kishan and Lauren.

December 23rd

Today, we’re delighted to feature The Road to Net Zero report prepared for the UK’s Climate Change Committee and a message from its author Professor Nick Robins, professor in practice of sustainable finance at the London School of Economics. The Institute was pleased to participate in the advisory group that input into Professor Robins work and we view this report and its 15 recommendations as a must-read for everyone interested in how we make investing in the net-zero economy core to the purpose of the UK’s financial system.

 

The drive to the net-zero economy offers huge potential for an investment-led recovery from COVID-19. In the decade ahead, net-zero investments need to grow five-fold from £10bn a year in 2020 to £50bn a year in 2030, according to the Climate Change Committee (CCC). Doing this is entirely achievable concluded a finance advisory group that I chaired for the CCC, but this will require a fundamental shift in both mindset and behaviour. By committing to become the world’s first net-zero financial system, the UK can bring clarity and direction to its banks, investors and capital markets, thereby mobilising the financing it needs at lower cost and with more co-benefits in terms of jobs and innovation. Our report sets out 15 recommendations that build on the current net-zero momentum and take this to scale in terms of financial practice and policy frameworks.

December 22nd

Today we are pleased to bring you insights from Joe Garner, chief executive of Nationwide Building Society. In this short article, Joe shares Nationwide’s commitment to decarbonize the built environment, and the need for business, government and civil society to build long-term shared plans and incentives for homeowners, landlords and renters.

Tackling climate change was meant to dominate 2020 as the central convening focus for government, business and society. Everyone was listening and change was at last starting to happen.

In early 2020, we announced our ambition to help our members reduce the carbon footprint of their homes. We made £1 billion available for cheaper borrowing linked to green home improvements.

Weeks later, everything changed. The impact of the pandemic became apparent.  We adapted to new ways of working, many people faced financial uncertainty and handled the pressure of not seeing friends or family. The country’s focus on green was put on the backburner while we dealt with the imminent threat.

We may be far from the end of this crisis but there is now a sense of optimism that encourages us to start to pick up from where we left. With president-elect Joe Biden committing to re-enter the US into the Paris Climate Accord, it is once again clear that the world’s focus on reducing emissions has resumed play.

As we head into next year there’s a unique opportunity to rebuild better and greener. Some 46 per cent of people believe a green recovery would benefit the economy[1]. Our personal appreciation for our environment and nature has grown this year. The value of parks, gardens and open spaces have taken on a new importance as the only safe haven for many to meet friends and family and escape the confines of lockdown. We’ve also become more aware than ever of the heating inefficiencies, carbon impact of our homes and, for many, the rising costs of heating bills. More clearly than ever before our houses are more than just bricks and mortar and our environment is something we must protect and enhance.

Our homes are where we can have the biggest individual impact on climate change, with residential properties accounting for 15 per cent of all emissions. Yet only a fraction of new homes are built to the highest environmental standards. We would like this to change and it is possible to make a difference. Our own Oakfield housing development in Swindon is leading the way in proving that it is possible to build homes to the highest environmental standards – with an ambition to create 239 EPC A-rated homes. At the same time, we’ve helped members reduce their carbon footprint through our partnership with Switchd. Over 1,600 members have changed provider so far, saving on average £260 per household and more than 852 tonnes of carbon.

In 2021, we’ll continue to help reduce the carbon emissions of the UK’s housing stock. We’ll play our part by setting an initial target of ensuring 50 per cent of our mortgage book is rated EPC C by 2030. This is no easy task; we’ve more than 1.5 million homes on our mortgage book.

But we cannot affect change on our own and financial incentives can only be part of the solution. Leaders across business, government and civil society must build long-term shared plans and incentives for homeowners, landlords and renters. It’s promising to see the Government’s 10-point plan and the Prime Minister’s commitment to the green agenda. However, we need further motivation to go green: more incentives, financial support, housing built to higher environmental standards. It also needs to be easier for consumers to plan green home improvements.

As a building society we’re designed to work together with others on solutions for the future. We’ll be forging new partnerships and leaning on existing relationships as we progress. We believe that lasting change can only ever be created through consensus and collaboration, which is why we support and are proud members of the Green Finance Institute’s Coalition for Energy Efficiency of Buildings, as we hopefully head into a better, brighter and greener 2021.

[1] https://www.ipsos.com/sites/default/files/ct/news/documents/2020-11/state_of_the_state_final.pdf

December 21st

Today we share with you a message from William Russell, Lord Mayor of the City of London and Catherine McGuinness, chair of the Policy and Resources Committee at the City of London Corporation. Catherine and William share the importance of collaboration to achieve a green economic recovery, and the City of London’s own plans to reduce their carbon emissions.

London and the UK face profound long-term challenges. The global pandemic and the impact of climate change pose distinct threats to our future prosperity. However, these twin crises also present a once in a generation opportunity to grow our economy back in a more sustainable way. This has been our focus throughout 2020.

At the City Corporation, we are proud to have set ambitious net zero targets, that will tackle our direct and indirect emissions across and beyond the Square Mile. These targets have been established to support and complement the fantastic work the GLA and the London Boroughs are already doing across the capital, to ensure London reaches net zero.

Collaboration is fundamental to achieving a green economic recovery, and we recognise that if we are to meet the ambitious global targets set by the 2015 Paris Agreement; government, business and civil society must be joined up in their approaches.

To drive this green economic recovery, and in the spirit of collaboration, we are working closely with the financial and professional service sector to mobilise capital and demonstrate how private finance is ideally placed to address wider environmental and societal challenges.

The Green Finance Institute is doing a fantastic job in developing new and innovative ways with which to mobilise green finance for the transition to a net-zero economy.  For example, its work on financing the retrofitting of homes across the UK to improve their energy efficiency, demonstrates how private finance can help deliver a real term green impact. We’re pleased at the international interest this project is attracting, and are proud to support the Institute, with its approach of showcasing practical solutions in London and the UK ahead of exporting them to other jurisdictions.

Sustainable finance is also about international collaboration and coordinated action, and our economic recovery from COVID-19 will be global. We were therefore delighted, in collaboration with Green Finance Institute and supported by the World Economic Forum, to help bring stakeholders from across the world together last month to discuss how we utilise green finance. The Green Horizon Summit showcased how green finance is fundamental to the post-COVID recovery.

Moving forward, climate action will set in motion new technologies and will create the next generation of jobs, and this will be key to our recovery. This requires financial investment, and the City of London’s own climate action strategy is committed to delivering this level of investment.

Our strategy will see us finance several changes to our built environment, and importantly create 800 green jobs. For instance, it will mean planning regulations will ensure new developments include carbon reduction plans in their designs and encourage more sustainable buildings which factor in green roofs and walls.

Climate action requires more than just holding challenging conversations. The City Corporation is committed to playing its part, and along with friends and colleagues, supporting London in achieving this aim as we look to 2021 and beyond.

December 20th

Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.

December 19th

Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.

December 18th

Today we share with you insights from Dr Rhian-Mari Thomas OBE, chief executive of the Green Finance Institute. Rhian-Mari shares the importance of a coherent strategy for financing nature in the UK, and how climate and nature need to be recognised as two sides of the same coin.

This opinion piece originally appeared here on the Green Alliance blog, Insidetrack.

Climate and Nature - Two Sides of the Same Coin

Climate risk is increasingly being recognised as financial risk and this is a positive development. But climate risk is not the only risk in town.

The release of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) report last year informed us, for example, that one million animal and plant species are now threatened with extinction due to land use change, pollution and climate change. It also highlighted a heightened risk of flood, drought and climate change due to biodiversity loss.

It is time for us to ensure that our current understanding of the environmental risks posed to the financial system also includes biodiversity loss and the depletion of natural resources. We need to start recognising climate and nature as two sides of the same coin.

At a local level here in the UK we are bearing witness to this interconnectedness between climate and nature. Recent research from Rewilding Britain shows we are heating up at a rapid rate and our wildlife cannot keep up, largely because we have replaced natural corridors with agricultural land, housing, roads and railways.

We have failed to give nature a value, as the Dasgupta Review released soon will surely confirm, and as a result we have witnessed decades of disinvestment. The UK now finds itself ranked 189th out of 218 countries for biodiversity ‘intactness’.

We know the actions to take, the targets are laid out in the 25 year environment plan. What we don’t have, however, is a plan to finance it.

Public spending and the generosity of conservationists and foundations cannot alone provide the billions of pounds needed. We have to mobilise private capital.

In terms of a national framework that would support nature-based green finance, we need disclosures and reporting standards, so that financial institutions – and those they lend to or invest in – assess and communicate their dependencies (or risks) and impacts on nature, moving beyond climate and carbon alone. At a global level, this work has commenced with the development of the Task Force for Nature-related Financial Disclosures (TNFD) and should be further supported by the findings of the Dasgupta Review.

This regulatory framework should encourage the development of an underlying ecosystem of providers of metrics, methodologies and, above all, decision-useful data.

To see a reallocation of capital towards nature-positive investments, we also need to complement this top down approach with on the ground financial solutions such as scaled and liquid markets for the buying and selling of carbon credits, biodiversity credits, phosphorous and nitrogen credits, and stormwater retention credits, as well as a supply of nature-based investment products for retail customers, impact investors and pension funds.

Positively, some of these developments are already happening in the UK. NGOs, wildlife trusts and local authorities are working with data providers to assess carbon and biodiversity credit inventories. Water utilities are working with farmers around nutrient reductions. UK-based companies are exploring the possibility of paying for ecosystem services. Policy makers are examining potential levers to support project developers. Our academic institutions are embedding biodiversity within sustainable finance curricula, and banks, investors and intermediaries are determining the commercial viability and investment opportunity that nature presents.

There are, however, barriers that we need to overcome.

The first is fragmentation. While the UK is alive with different projects and participants, there is a lack of connectivity and we risk a duplication of efforts and a lack of scale. We need to turn local projects into regional and national projects by working together.

The second barrier is the lack of a pipeline that can see projects through the journey from receiving grant funding for the technical scoping of ideas and exploration of potential revenue streams, through to investment readiness and all the way to capital investment. We need to ensure there is funding available for each phase so that, as investor appetite grows, there will be a large supply of projects to greet those investors and meet their risk and return requirements.

Inherent in this pipeline development is patient or concessionary capital that can help derisk some of these projects. Nature-based projects are unfamiliar and typically come with little track record. This is anathema to any lender or investor that has a fiduciary duty to its own clients to assess risk. Therefore, financial support mechanisms are needed to build in comfort for private investors, such as government guarantees. Nature should be afforded the same support as other emerging green sectors like offshore wind and green hydrogen. There is an opportunity, for example, for the recently announced National Infrastructure Bank to play a role in mobilising capital into nature-based solutions.

Finally, there are barriers, in the form of policy issues that have to be overcome for revenue streams to be developed, and to instil confidence and support the establishment of nature-based markets.

All of these barriers can be unlocked, but they have to be looked at together. This needs businesses, finance, government and environmental NGOs to collaborate on the creation of a coherent strategy.

Now is the time for the UK to show leadership not just on one side of the coin, but on both.

December 17th

Today Richard Curtis, film director, screenwriter and co-founder of Make My Money Matter speaks with the Green Finance Institute’s Helen Avery and Ryan Jude about the global campaign to move the trillions of pounds in pension funds into sustainable investments, as well as his hopes for COP26 and which of his holiday film characters would be make the most likely environmental ambassador…

December 16th

Today we are pleased to bring you insights from Claire O’Neill. Claire is the managing director for climate and energy, and natural climate solutions at the World Business Council for Sustainable Development (WBCSD) and was previously the UK cabinet minister for Energy and Clean Growth. In this short article, Claire shares the important climate action milestones that have been achieved so far and calls on businesses and governments to work better together to accelerate the key solutions for a net zero world.

As we come to the end of a year marked by a global health crisis, it’s a good moment to take stock of our efforts to fight the world’s climate crisis.

Last Saturday, 12 December, marked the five-year anniversary of the signature of the Paris Agreement on Climate Change at COP21 – a landmark moment in the international efforts to hold global temperature increases to safe levels. To mark the event the UN, along with COP26 host countries UK and Italy, held a virtual Climate Ambition Summit  for world political leaders for an urging all nations to strengthen their commitments for a Net Zero world.  Net Zero was the “landing zone” for the COP26 Action plan that I helped develop as President-designate, and it was so good to see multiple speakers recognizing the target, raising ambition and committing to real action.

Over the past five years we have seen real progress at the government level with the UK, France and many other countries legislating for climate neutrality by 2050, China setting a net Zero pathway and countries such as South Korea, Japan and the EU accelerating their ambitions and setting out clear pathways.  And businesses, including many WBCSD members, are going further than governments in many respects, with thousands of companies setting science-based decarbonization targets, committing to climate risk disclosure and aligning their investments and governance with ambitious strategies and plans.  It has also been great to see the focus and effort towards greening the financial system  - one of the things I am most proud of from my time in Government is the creation and empowerment of the Green Finance Institute.

But despite these efforts, the emissions curve just keeps on rising – at 410ppm, CO2 levels are the highest they have been in at least the past 800,000 years.  We are conducting an unparralled chemical experiment with the global atmosphere upon which all life depends and the implications for nature, health, land use, migration, settlement patterns and investment become clearer every year. To keep the world at a safe operating space with no more than a 1.5 °C temperature rise we must halve GHG emissions every decade between now and 2050.  Without rapid, urgent and collaborative action between business, governments (and the financial system and citizens) we will not reach these targets.

So on this important anniversary and at a crucial turning point for climate action, WBCSD calls on business and governments to “double down” on their commitments to implementing bold, sustained climate action.

To turn all commitments and targets into reality, with COP26 as one of the upcoming key milestones, we call on businesses and governments to work better together to accelerate the key solutions for a Net Zero world:

  • We need to accelerate the energy transition
  • It’s time to decarbonize mobility and accelerate the shift to electric vehicles
  • We need to put a high price on carbon and develop regulated carbon markets
  • We need to mainstream climate transparency and green financial markets: Companies need to transparently disclose their targets and plans, and report progress towards those. The TCFD recommendations and ESG developments are important to implement
  • Investing in nature-based solutions such as natural climate solutions is critical to reducing emissions while protecting nature.

WBCSD’s new membership criteria set the bar for climate ambition for business but all of us can set our targets high and join forces to put climate action at the top of the agenda –  as we head to COP26 in 2021 and as we plan for the years ahead. There has never been more at stake, and the role of business is more urgent than ever to move from ambition to action.

December 15th

Today, we are delighted to bring you a message from former Bank of England governor, UN special envoy for climate action and finance, and Prime Minister Johnson’s finance adviser for COP 26, Mark Carney. Mark shares the importance of private finance in reaching global net zero goals, why investors and companies need transition plans, and actions to be taken by the financial sector and governments before COP 26.

In February this year, we met in a packed Guildhall to map the Road to Glasgow for COP26. Almost immediately, Covid intervened, the journey went virtual and its timetable was extended.  Some might have become concerned, but the resolve of the private sector redoubled.  Come November, with 30,000 people packed onto the virtual Green Horizon Summit, we were able to report on the enormous progress and publish the COP 26 private finance strategy. The strategy sets out how to build a framework to ensure that every financial decision takes climate change into account.

The good news is that private finance is moving fast.  They recognise that green is the future, and that the transition to net zero is the greatest commercial opportunity of our time. They are demanding information about company’s exposures to, and management of, climate risks.  Every major systemic bank, the world’s largest insurers, its biggest pension funds and top asset managers are calling for the disclosure of climate-related financial information through their support of the TCFD. This support is truly global, stemming from almost 80 countries and with a market cap of $16 trillion and financial institutions responsible for assets of £156 trillion.

The UK’s announcement last month to make TCFD reporting mandatory by 2025 was foundational. By COP 26, we want more governments to publish similar pathways to mandatory disclosure. And we want companies and governments to work with the IFRS to create a new sustainability accounting board.

The COVID crisis has also reinforced the financial sector’s focus on resilience.  That’s why 80 central banks, covering 75% of global emissions are now members of the NGFS, a group dedicated to improving the management of climate risk, and 18 of the largest central banks are in the process of stress testing their banks to ensure their strategies are resilient physical and transition risks from climate change.

Meanwhile, some of the world’s largest global banks, like Morgan Stanley and Barclays, have committed to net zero by 2050 on a scope three basis, which means bringing all of their financed emissions in line with net zero.  More will follow.

For Glasgow, we’re calling on more central banks to conduct climate stress tests, and firms to commit to net zero on a scope three basis. 

Given that climate change is an existential risk, it follows that those companies that are part of the solution to climate change will create enormous value.  The financial sector is increasingly focused on this opportunity of a lifetime…which is also, in fact, the opportunity for our lifetimes.

To expose how businesses will respond, they need to publish transition plans. Already, investors are calling for these plans: Climate Action 100+, an investor group with almost $50mn in AUM, wrote to the world’s 160 largest companies to demand they publish strategies to reach net zero by 2050.

The absence of transition plans can be seen as either an intention to wind down the business or, an assertion that business is separate from society.  The former may be logical, the latter unforgiveable.

Any such measure needs to be: forward looking, giving appropriate credit to efforts by companies to decarbonise; anchored in real-world climate targets; and dynamic, to show progress over time and accommodate new technologies. These criteria encourage engagement with companies across the economy that are seeking to decarbonise.  We won’t get to net zero in a niche nor will divestment alone deliver the whole economy transition that we need.

Last month, the TCFD issued a consultation on such forward looking metrics with an accompanying report from David Blood, Founder of Generation Investment Management, on ways to measure portfolio alignment.

We want firms to respond to the TCFD consultation and read David’s report, because for COP26, the industry will need to agree a way forward on these measurements.

Finally, as companies develop transition plans, some will include an element of offsetting until technologies in their industry become viable. A transparent, credible market structure will turn the current $300 million spent on these projects into tens of billions of dollar every year. We’ve brought together experts from across the financial sector, from 40 firms, to solve this problem. Chaired by Bill Winters, CEO of Standard Chartered and sponsored by the IIF under Tim Adams’ leadership, this group  issued a consultation in November and will publish the blueprint a carbon market infrastructure early next year.

I have only highlighted a few vehicles in the private finance caravan to Glasgow.  You can learn about them all in the detailed private finance strategy.

For now, I want to thank the very many of you from thousands of organisations around the world in the private sector, governments, the standard setters and the NGOs who are working tirelessly to make this journey as success.

There is an old proverb: if you want to go fast, go alone. If you want to go far, go together. 

As we head into a new year, I look forward to continuing our work together to make the Glasgow COP26 a success.

December 14th

Today, Dr Rhian-Mari Thomas OBE, chief executive of the Green Finance Institute, Paul Bodnar, managing director of Global Climate Finance at the Rocky Mountain Institute and Douglass Sims, director and senior advisor of the Green Finance Centre at the Natural Resources Defense Council share their insights on the need for Green Banks: an implementable, practical, proven solution that can drive forward answers to two major challenges we face – a post-COVID recession and climate change.

State of Green Banks 2020: A Global Movement in the Making

While the attention of the world is on a rapid and sustainable COVID recovery, increasing climate change risks continue to loom large. Recovery will require investments that create jobs and ensure not only immediate green recovery, but also long-term sustainable development. We need ready solutions that promote local development of climate-resilient infrastructure and utilize capital and innovation from the private sector to advance public objectivesWe need green banksan implementable, versatile answer for sustainable economic recovery. 

Many countries are on their way to making this solution a reality. Green banks are most often publicly owned, commercially operated, specialized financing institutions or facilities that act as focal points for scaling up domestic investment in climate-friendly, sustainable projects. The recently launched State of Green Banks 2020 report, the first comprehensive survey, aggregation, and analysis of global green bank activity, found that a growing number of countries worldwide are exploring green banks.  

Twenty-seven green banks already exist in 12 countries and another 25 jurisdictions are actively exploring the modelto implement nationally determined contributionscatalyze local green markets, and create jobs. Existing green banks have shown an impressive track record to date, investing nearly $25 billion of their own capital since their respective inceptions and supporting projects with a total value of $70 billion as of mid-2020. More than $45 billion (or 64%) of this sum came from the private sector.1 Though existing green banks are predominantly situated in high-income countries, the green bank model is by no means limited to developed nations. Emerging green banks are located in 25 countries across income levels and geographies around the world.  

Green Banks Need Support to Grow 

However, survey respondents confirm that this budding ecosystem will need support to flourish. An overwhelming majority of emerging green banks indicated they will need support from multilateral and bilateral organizations for initial capital. Notable barriers to green bank establishment include lack of embedded technical expertise and difficulties in accessing outside technical assistance.  

An initiative dedicated to helping countries overcome these roadblocks, the Green Bank Design Platform, is currently under development. The Platform, a collaboration between the Green Finance Institute, the Natural Resources Defense Council, and Rocky Mountain Institute, intends to help countries navigate the entire process and provide, coordinate, or facilitate access to an array of services that target specific barriers to green bank establishment. These include providing knowledge products, securing funding and technical assistance for market assessmentsassisting with capital recruitment, and advising on institutional design.  

Deploying capital into local low-carbon and sustainable development solutions is paramount for ensuring sustainable COVID recovery as well as for curbing emissions before 2050. For recovery, green banks can help channel and leverage fiscal resources to investments that provide near-term relief (e.g., through construction jobs) and long-term prosperity (e.g., by lowering energy costs and spurring new industries). For climate, Climate Policy Initiative estimates that between $1.6 and $3.8 trillion will be required every year through 2050 for supply-side energy generation onlycompared to $546 billion actually deployed globally in 2018.  

Green banks can help to fill this gap as trusted local partners that attract new and varied pools of capital. By serving as focal points for climate finance within a country, they can tap into both domestic and international sources of capital: from pension and sovereign wealth funds to multilateral development banks and climate funds. In addition, green banks can flexibly address market gaps by deploying a wide range of financial instruments including guarantees, long-term debt, equity, subordinated debtwarehousing and securitization, and othersSimultaneously, green bank investments in unproven technologies or underserved communities often serve as market demonstrators, thus removing barriers to green investment. 

Green banks are also an answer to burning question in climate diplomacy: how can developing nations chart their own course to a zero-carbon future instead of relying on developed country funding? By centering climate finance in a domestic institution, green banks create a powerful vehicle for blending concessional support from sources such as the Green Climate Fundnon-concessional instruments from development finance institutions, and co-investment from the private sector.  

Green Banks Create Jobs 

Importantly, green banks can be critical conduits for green recovery and job creation. By supporting the development of green sectors and attracting private investment into climate-resilient projects, green banks support the health of the broader economy. For example, the UK Green Investment Bank, founded in the aftermath of the 2008 economic crisis, nearly tripled investment in UK green infrastructure within three years of establishment and made the UK the largest offshore wind market in the world within five years.2  

Following on this success, the UK Chancellor recently announced the creation of the new National Infrastructure Bank (NIB). The role of the NIB will be to support the financing of the National Infrastructure Strategy, which Prime Minister Boris Johnson has stated reflects the UK Government’s environmental agenda 

In additiona recently published report exploring the potential of a federal green bank in the United States found that it could create over 5 million new job-years within five years of establishment: over 3.3 million direct and 2.2 million indirect. In Mongolia, the Green Climate Fund approved funding for the Mongolia Green Finance Corporation this November. In India, Tata Cleantech Capital Limited executives report that renewable energy has been one of the most resilient sectors of the economy during the pandemic.  

Developed Nations Can Catalyze Green Bank Establishment 

Developed nations could help provide the needed support for global green bank development. Collaboratively, they could spur green bank establishment worldwide by directing development finance institutions, multilateral development banks, and climate funds that they support to 

  1. establish dedicated fund or otherwise contribute capital to green finance institutions in developing countries, 
  2. alleviate technical assistance barriers by embedding expert personnel into new green banks, 
  3. provide grant funding to help in the due diligence and project preparation phases of creating a green bank, and  
  4. support the establishment of the Green Bank Design Platform. 

We have in front of us an implementable, practical, proven solution that can drive forward answers to two major challenges we face: a post-COVID recession and climate change. In this critical moment and in the run-up to COP26, we must take leadership and act decisively to ensure a sustainable future; if we take action to support their growth, green banks can show us the way. 

December 13th

Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.

December 12th

Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.

December 11th

Today, Kwasi Kwarteng, Minister of State for Business, Energy and Clean Growth, talks to the Green Finance Institute's Helen Avery and Ryan Jude about the role of green finance including plans for a UK green sovereign bond and the National Infrastructure Bank, as well as the importance of a UK green recovery.

December 10th

Today, we bring you a short film to celebrate the first anniversary of the Green Finance Institute's Coalition for the Energy Efficiency of Buildings. Over the past 12 months, the Coalition has brought together over 200 global experts from finance, business, policy and civil society to bring to market the practical financial mechanisms, policy levers and data tools to create a greener, more resilient built environment. Catch up on our journey to date and hear our plans for 2021 and beyond.

December 9th

Today we bring you a message from Bill Winters, group chief executive of Standard Chartered Bank and chair of the Taskforce on Scaling Voluntary Carbon Markets. Bill shares the work of the Taskforce and why now, in the lead up to COP26, is the moment to establish the infrastructure for effective carbon markets.

The need for climate action, and tools to mobilize finance for the low-carbon and resilient transition, grows more urgent by the day. To achieve the Paris goals to limit global warming to 2˚C or lower, the global community needs to reach ‘net zero’ emissions by no later than 2050. This will require a whole-economy transition — every company, every bank, every insurer and investor will have to adjust their business models, develop credible plans for the transition and implement them.

Stakeholders across the global economy are stepping up to this challenge. Investors, executives, policymakers, and consumers have realized the role they can play and have promoted or committed to strategies to achieve net zero or net negative. To identify the risks and opportunities arising from this transition, investors are demanding transition plans and granular information about how companies plan to reach these targets.

To achieve our emissions reductions targets, all stakeholders must do all they can to limit their own emissions.  This will not be enough, though, and many companies, especially in hard-to-abate sectors, will need to offset emissions as they achieve their decarbonization goals, creating a surge in demand for credible offsets. The credibility of voluntary carbon credits in transition plans will be open to increased scrutiny. To facilitate this global decarbonization there is a need for a large, transparent, verifiable and robust voluntary carbon market. The scaling up of markets has the potential to help support financial flows to developing countries, as activities and projects in these countries can provide a cost-effective source of these carbon emission reductions.

The Taskforce on Scaling Voluntary Carbon Markets was convened in September, bringing together experts from across the carbon markets value-chain, from over 20 sectors of the economy and six continents, and with experience of the full history of these markets. Supported by a consultation group covering an even broader set of experts and observers, it has worked at pace to draw up a roadmap to build the market infrastructure needed for a fully functional voluntary market. This consultation document sets out their findings, and the Taskforce is inviting feedback on the roadmap, ahead of the publication of the final blueprint.

The Taskforce’s recommendations aim to identify the infrastructure solutions necessary to scale the voluntary carbon markets. These are recommendations for the private-sector developed by both current and potential market users to ensure this market can deliver to the needs of its participants without compromising the integrity of decarbonization. The Taskforce has found six key areas where efforts are required to achieve a large, transparent, verifiable and robust voluntary carbon market: these themes are establishing core carbon principles, exchange traded core carbon reference contracts, infrastructure, offset legitimacy, market integrity and demand signalling.

Now is the moment to establish the infrastructure for effective carbon markets. New rules are expected to be agreed on in the next round of the United Nations Framework Convention on Climate Change (UNFCCC) climate negotiations at the 26th meeting (COP26) in Glasgow in late 2021. There, parties are due to submit plans with increased ambition for national emissions reductions, and to agree on international accounting and transfer rules for mitigation outcomes under Article 6 of the Paris Agreement. The Taskforce will focus exclusively on the voluntary market and not offer views on possible outcomes to the Article 6 deliberations.  In any case, we believe the voluntary market will prove a helpful complement to anything governments agree.

This is truly a historic opportunity to contribute to getting the world to net zero, and we encourage participants across the economic value chain to engage with the Taskforce’s recommendations to deliver the real growth of these markets.

December 8th

Today we release a report from the Green Finance Institute's Coalition for the Energy Efficiency of Buildings: Financing zero carbon heat: turning up the dial on investment. This comprehensive analysis explores the current blockers to heat decarbonisation in the UK, and presents a portfolio of innovative financial solutions and policy, regulatory and data enablers to catalyse change.

December 7th

As co-chair of the Informal Working Group of the Taskforce on Nature-Related Financial Disclosures (TNFD), we are delighted to share with you today a message from Andrew Mitchell, co-founder of the TNFD and chief executive of Equilibrium Futures on the urgent role of central banks and regulators in addressing nature-based risk and impact.

After Climate comes Nature – what should central bankers do?

Something very strange is happening. Central bankers are talking about nature - not in the park, but as a risk to our economic system. It has taken almost 20 years for regulators to get their heads around climate and to start mandating climate risk reporting. But nature has taken just two years to appear on their radar screen.  The Dutch Central Bank is already looking at biodiversity risk and I predict it will soon be on the agenda of the banks and supervisor’s Network for Greening the Financial System (NGFS). Who will be next?

A number of factors have led to this. A catalyst was the pincer movement of the Paris Agreement, combining with the Taskforce on Climate-related Financial Disclosures (TCFD). The first signalled that 200 governments could actually agree on climate and were about to get serious. The second offered a framework to understand how to report and react, across business and the financial sector. Bloomberg and Carney made a convincing duo, catalysing action. Five years later Rishi Sunak announced that all businesses and the finance sector in the UK will have to use the TCFD to disclose their climate risks by 2025. This will lead to pension funds with temperature gauges on them. Do I want my pension fund to have a high one? I don’t think so.

Then, late in 2019, the whole world began to catch a different kind of fever. The evidence that our economy was unwell was everywhere – but we did not want to believe it, just like climate.  In 2020, the World Economic Forum, stated that over half ($44Tn) the world’s GDP was dependent upon services from nature. At the same time WWF reported that, 2/3 of the species populations that ultimately underpin these global services, have been lost. Numerous other reports had been published earlier highlighting a pill, that nobody wanted to swallow; a realisation that the combination of our economic dependency and brutal impacts on nature might, in the medium term, de-stabilise our economic system. Few believed it would be fast, it could hit many sectors, it could be bigger than climate. Most economists I spoke to said: “I think nature can wait”. But Nature was already opening its jaws.

COVID-19 is an exemplar of exactly the kind of un-recognised risk that gives central bankers nightmares, and it has come from an invisible speck of nature, just 100 nanometres across. In April 2020, I wrote that this was nature’s US$10 trillion wake up call to the financial sector. Few believed the number. Today governments have deployed around US$12.5 trillion to support failing economies, due to COVID 19. This is not about a few butterflies and bees anymore; it is now about life and death. So, what should central bankers do?

A vaccine can be a fix, but it will not remove the cause of the disease. Central bankers need first to understand where COVID 19 came from. Many reports are now linking the turbo charging of zoonotic viruses transferred from animals to humans, like SARS-CoV-2, to the finance behind the expansion of infrastructure and agriculture, that drives much of the degradation of nature. In the tropics, this has spawned access to forests and drives an illegal trade in animals to wildlife markets, where the virus emerged. In the case of pangolins, a potential intermediary for the transfer of the virus to humans, along with other species, this reached 100,000 animals per year, chopped up on the slab, alongside many other exotic species, for rich diners. The mixing of such novel blood and body fluids is a potent soup, in which viral strangers meet, and mutate. And don’t be fooled into blaming the messenger. It’s not the animals that are at fault, it’s the way we abuse nature that needs to change.

The second is to run the numbers. Is there something systemic here, or is nature risk a one-off? The Dutch Central Bank is the first to undertake a comprehensive study of nature-related risk. To do it they used a tool called ENCORE that allows 167 business sectors to be examined for their dependency on 21 ecosystem services, provided by 8 primary assets from nature. The results were quite a surprise. In its report “Indebted to Nature”[1], they found 36% of the portfolio studied, was exposed to EUR 510Bn of financial risk. If other Central Banks did the same, what would they discover? They will have some inkling soon, from the forthcoming UK funded Dasgupta Review on the Economics of Biodiversity.

The third thing they should do, is to support the emergence of a framework for disclosing nature-related risk in the financial sector. What is needed is a twin to the TCFD, and it’s already emerging. Indicating alignment, it is called the TNFD, the Taskforce on Nature-related Financial Disclosures. An Informal Working Group setting up the TNFD, has 73 senior representatives from financial institutions, governments, corporations and others working together to scope, resource and launch TNFD in 2021[2].

The opportunity ahead is for central banks and regulators to fundamentally change the movement of money away from being nature-negative and towards becoming nature-positive. If we do not do this, we will continue to finance ourselves into extinction. And none of these efforts will be effective without the eventual strong winds of regulation to fill their sails.

Andrew Mitchell is the Co-Founder of the Taskforce on Nature-Related Financial Disclosures and is CEO of Equilibrium Futures.

[1] De Nederlandsche Bank (DNB) and PBL Netherlands Environmental Assessment Agency 2020)

[2] https://tnfd.info/

December 6th

Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.

December 5th

Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.

December 4th

Today, listen to Deborah Lehr, vice chair and executive director at the Paulson Institute as she speaks to the Green Finance Institute's Helen Avery about China's green finance strategy from national carbon markets to green fintech, as well as the broader work of the Paulson Institute in conservation finance.

December 3rd

Today we are pleased to bring you insights from Sir Ian Cheshire. Sir Ian is a non-executive director and chairman of Barclays UK, and is also the chair of the Global Resource Initiative (GRI). In this short article, Sir Ian shares the achievements of the GRI and its work to remove deforestation from the UK’s international supply chains.

2020 has been a challenging year for us all. The coronavirus pandemic has brought our relationship with the environment into sharp focus and has tragically demonstrated the profound impacts that nature related tail risks can have on our businesses and economies. However, its impacts will be dwarfed by the unfolding crises of climate change, biodiversity loss and deforestation which present multiple risks, including to the commodities such as soy, cocoa and palm oil that we consume.

The WWF and Leeds University published a report in April highlighting that nearly half of the UK’s carbon footprint is released overseas to satisfy UK-based consumption. Deforestation, land conversion of habitats, the associated carbon footprint from production, as well as human right violations are the hidden costs of our consumption. Continuing as we are is not sustainable and could be disastrous.

In March this year, as the first lockdowns were taking effect across the globe, the Global Resource Initiative (which I chair) published a package of recommendations which offered a new strategic approach to tackling deforestation and land conversion. The recommendations offered a framework for, the much needed, greater collective action between producer and consumer governments, business, finance, institutions, civil society, farmers, foresters, forest communities and indigenous peoples. Despite the launch of these recommendations during the pandemic, there has already been progress and the UK Government have responded to the report’s headline recommendation with world-leading legislation to address the sustainability of the UK’s supply chains and clamp down on illegal deforestation.  Only last month, the UK Government responded with a full update on progress.

The progress is commendable, considering the circumstances. However, as we enter 2021, with the UK hosting COP26 and holding the presidency of the G7, there is an unprecedented opportunity to heighten our ambition and accelerate our progress. The GRI Taskforce will continue our efforts, working in partnership with the Green Finance Institute to focus on the role both public and private finance can play to support businesses to eradicate deforestation and land conversion in our supply chains.

December 2nd

Today, the Green Finance Institute's Helen Avery and Ryan Jude speak with Professor Ed Barbier about what a Biden Administration will mean for US climate policy, global climate action and financial markets in 2021 and beyond. Ed is an environmental economist, distinguished Professor of Economics at Colorado State University and author of multiple United Nations reports on green recoveries.

December 1st

Season's Greetings! Today, Green Finance Institute chief executive Dr Rhian-Mari Thomas OBE introduces our Holiday Countdown and, hot off the press, we share with you our Insights Paper on the Role of the UK National Infrastructure Bank in a Green Recovery and its potential focus for investment.