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September 2020: Latest research in Green Finance

While climate activists and large corporations have frequently been seen as opposing forces, the imperative for them to work together is rapidly accelerating– for the sake of both the planet and the economy. Concern over the climate crisis is no longer dismissed as a virtuous crusade by eco-warriors but is instead being recognised as the social, economic and existential threat that it is.  Increasingly, the banking industry is beginning to understand the significant financial risks posed by climate change and the necessity for green finance and sustainable investment. Additionally, offering ethical investment opportunities and responsible banking can win customer loyalty and meet an increasing demand for purpose-driven banking.

We’ve taken a look at the latest reports in Green Finance and summarised the research here:

KPMG

According to KPMG, sustainable finance will have a significant effect on the entire investment value chain, from portfolio allocation, to risk management, disclosures and ESG data management. Measuring the actual impact of investments is essential in demonstrating that a positive ESG impact is made and the report talks about how this can be achieved.

https://home.kpmg/lu/en/home/insights/2020/02/sustainable-finance-growth-ESG-risk-action-time-luxembourg.html

Goldman Sachs

In 2019, Goldman Sachs committed to putting $750 billion into sustainable financing, investment and advisory activity by 2030. Focusing on commercial solutions that included climate transition and inclusive growth, the firm outlines a clear strategy to focus on the following themes:

  • Clean energy
  • Sustainable transport
  • Sustainable Food and Agriculture
  • Waste and Materials
  • Ecosystem Services
  • Accessible and Innovative Healthcare
  • Financial inclusion for underserved populations
  • Accessible and Affordable Education
  • Communities

https://www.goldmansachs.com/s/sustainability-report/index.html

The World Bank Group

In June 2020, the World Bank Group published a report discussing the need for public climate finance to be deployed in a more transformative and effective manner to support low-carbon resilient development. Developing countries are still inadequately positioned to cope with climate impacts and this has been further impacted by the global pandemic. The report highlights eight strands that are crucial to drive climate action within the financial services:

  • project based investments
  • financial sector reform
  • fiscal policy
  • sectoral policies
  • trade policy
  • innovation and technology transfer
  • carbon markets
  • climate intelligence

The research explains how climate finance is currently used to support each strand and improvements that can be made to strengthen and evolve the process.

https://openknowledge.worldbank.org/bitstream/handle/10986/33917/149752.pdf?sequence=2&isAllowed=y

Politico

Politico looks at the risk to long term financial stability as a result of climate change and explores the idea of subjecting banks to a climate stress test to manage and assess potential threats. Ideas such as corporate disclosure of climate change risks, stricter regulatory intervention and increased international coordination are examined as potential solutions.  

https://www.politico.com/news/agenda/2020/07/14/federal-reserve-climate-change-341820

Finextra / Politico

As the climate crisis worsens, such concerns will naturally be at the forefront of consumers’ minds. It is only a matter of time before we see banks and other services stepping up to provide sustainable and eco-friendly options to an increasingly responsible customer base. Finextra take a look at the new account from Bank of the West with 1% of net revenues generated from each account donated to environmental not-for-profit organisations. The account also includes a biodegradable card and carbon footprint information for each purchase made.

Similarly, Politico reports how Morgan Stanley will become the first major US bank to disclose how much its banking practices are affecting climate change. This move towards data and transparency is crucial to ensuring financial organisations accept accountability and make a shift towards remedial action.

https://www.finextra.com/newsarticle/36247/bank-of-the-west-launches-new-account-to-combat-climate-change

https://www.politico.com/news/2020/07/20/morgan-stanley-climate-impact-371696

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