US$130 Tri Coalition Leads Climate Debate to Financial Sector

Banks, insurance companies and investors that together control US$ 130 trillion said on Wednesday (3) that they will put the fight against the climate crisis at the center of their actions and promised to improve the quality of investments in the environmental area.

The financial institutions responsible for about 40% of the world’s capital have announced that they are committed to taking a “fair share” in the effort to rid the world of fossil fuels.

The main objective of the negotiations at COP26 (UN conference on climate crisis, which is being held in Glasgow, Scotland) is to guarantee countries sufficient promises to reduce greenhouse gas emissions — mainly caused by coal, oil and gas — keeping the global average temperature rise at 1.5 °C.

But how to fulfill these promises is still under discussion and will require a lot of money.

UN climate envoy Mark Carney, who created the Glasgow Financial Alliance for Net Zero (GFANZ) [Aliança Financeira de Glasgow para Zero Líquido], estimated the figure at $100 trillion (BRL 560 trillion) over the next three decades and said the financial sector must find ways to raise private money to take the effort far beyond what states alone can do.

“The money exists, but this money needs projects aligned to net zero [de emissões], e [assim] there is a way to turn this into a very powerful virtuous circle — that’s the challenge,” the former Bank of England chairman said at the summit.

Carney’s comments reflect a problem often cited by investors who, given the myriad climate-related risks, need to make sure they are accounted for in a transparent and, preferably, globally standardized way.

“Some of the key pieces of the financial puzzle are now falling into place,” said Nick Robins of the Grantham Institute for Research on Climate Change and the Environment.

Another important piece is where public money will come from to help the transition from carbon-intensive energy and industry. On Wednesday, the United States said it will support a mechanism to raise new financing for clean energy and sustainable infrastructure in emerging markets.

US Treasury Secretary Janet Yellen said the United States will join the UK in supporting the new Climate Investment Funds Capital Market Facility (CIF), which will help attract new funds. private climates and would provide $500 million a year to CIF’s Clean Technology Fund, as well as its new Accelerating the Coal Transition investment program.

“I’m here because climate change isn’t just an environmental issue, it’s not just an energy issue. It’s an economic, developmental and market-stabilizing issue, and I wouldn’t be doing my job if I didn’t take it seriously enough.” , said Yellen.

Gaps

However, others were not convinced by the progress of COP26.

“These happy headlines hide a series of loopholes and backtracking opportunities that we cannot afford if we are to prevent climate degradation,” the Foundation for Environmental Justice said in a statement.

“Liquid zero promises mean nothing without divestment in fossil fuels. It’s time for financial institutions to put their money where it’s needed and stop funding climate-destroying fossil fuels,” added NGO Chief Executive Steve Trent.

Carney has been leading a movement to ensure that financial institutions are accountable and disclose all weather risks of their loans or investments, forcing the economy at large to price costs that until now have been largely hidden.

This includes not only the direct effects of extreme weather events, but also any loss of government subsidies for fossil fuels, or the environmental and health costs of greenhouse gas emissions.

Kristalina Georgieva, president of the International Monetary Fund, said it was crucial to incorporate weather data into regular macroeconomic reports.

The vice chairman of the Global Financial Stability Board, Dutchman Klaas Knot, said there is a need for a mandatory global minimum standard of disclosure of climate risks for financial stability and the provision of sustainable finance.

The change in private sector financial institutions was commended by COP26 President Alok Sharma. “What we’ve seen in the last few years is a big shift in the private sector and the financial services sector to go green… in the 1990s, it was clearly not common for climate finance, to invest in green. I think it’s the mainstream today. dominant,” he said.

China’s central bank president Yi Gang said Beijing is working on a new monetary policy mechanism to provide cheap funds to financial institutions that support green projects.

Jane Fraser, chief executive of Citigroup, a member of the GFANZ, said the initiative needs scale to work. “If you don’t work together, you’re going to make a lot of beautiful speeches, but you’re… at risk of divorce from reality,” she said.

Investors will support the launch of a global standards body to prevent companies from portraying a positive image of their climate policies and business practices in a global market that has already reached many trillions of dollars for funds aimed at environment, society and governance .

“If you don’t have basic information on a globally comparable basis… it greatly increases the risks of ‘greenwashing’,” said Ashley Alder, president of IOSCO, the global body of securities regulators.

The private sector’s enthusiasm for mobilizing climate-friendly investments also needs reassurance that governments are setting ambitious emission reduction targets sufficient to meet the 1.5 °C target — which may not happen by the end of COP26 , on November 12th.