At Ortec Finance we were thrilled to see the announcements coming out of the COP26 Finance Day. The momentum for climate-related financial risk management, alignment to net zero and disclosure remains relentless. The global community’s expectation of the investors to act has reached new heights. See our recap of main events below.
NGFS: Coalition of the committedOn Wednesday, the NGFS (the Central Banks and Supervisors Network for Greening the Financial System) reiterated their willingness to contribute to the global response required to meet the objectives of the Paris Agreement. In their “NGFS Glasgow Declaration: Committed to Action” the group announced that in the three years since its foundation, its membership has grown from 8 to 100 central banks and supervisors, and 16 observers.
In their declaration, the NGFS stated that in the coming years, because of ‘the urgency and seriousness of climate change and environmental issues’, they will expand and strengthen their collective efforts to improve the resilience of the financial system to climate-related and environmental risks, and encourage the scaling up of the finance flows needed to support the transition towards a sustainable economy. They will:
- Further enhance and enrich the climate scenarios, thus providing on a regular basis an important public good for a broad range of stakeholders, both public and private
- Deepen the analysis on integrating climate change considerations into monetary policy strategies and frameworks, in the context of the mandates of its members
- Intensify the work to bridge the data gaps that currently hinder the identification, management and mitigation of climate-related risks
- Supplement the set of NGFS practical guides with guidelines on TCFD-aligned reporting for central banks
The Glasgow Financial Alliance for Net ZeroDuring a panel discussion on the progress of the GFANZ (the Glasgow Financial Alliance for Net zero)1 in Glasgow, Günther Thallinger of Allianz and chair of the Net Zero Asset Owner Alliance complimented Mark Carney, the UN’s special envoy on climate action and finance, on his GFANZ leadership and indicated that without Carney the initiative would not have gained so much momentum. Thallinger said: ‘We should really appreciate here what you [Mark Carney] have achieved here, together with us, in two years’ time.’2
Since its official establishment in April 2021, GFANZ — a group of 450 banks, insurers and asset managers across 45 countries — has committed itself to allocating 130 trillion dollar of private capital for hitting net zero emissions targets by 2050.
There is some controversy around GFANZ because most in its members are currently invested in fossil fuels, in particular coal companies. Carney recommends that financial institutions commit to phasing out financing coal and ‘address the implications of the IEA’s net zero analysis’.
GFANZ also announced on Wednesday that Michael Bloomberg, the former New York mayor, would join Carney as co-chair of the organization. The group will report on its work periodically to the G20’s Financial Stability Board. Mary Schapiro, former chair of the US Securities and Exchange Commission, will become vice-chair. The announcement of Bloomberg and Schapiro joining GFANZ could be seen as a sign that Carney is looking for leverage as they are both already involved in another Bloomberg-Carney initiative: The Task-Force on Climate-Related Financial Disclosures (TCFD).
Establishment of IFRS Foundation’s new International Sustainability Standards Board (ISSB)We were delighted see the IFRS Foundation announce the launch of a standards board specifically dedicated to sustainability called the International Sustainability Standards Board (ISSB). The board is tasked to develop a globally comprehensive sustainability reporting standard(s) amidst a currently fragmented and rapidly evolving reporting space.
One of the two prototype standards that IFRS has tasked ISSB with is to rapidly build upon existing frameworks such as the well-known guidance from the Task-Force on Climate-Related Financial Disclosures (TCFD). This initiative to consolidate standards by the IFRS Foundation was welcomed with open arms by the UK, Finance Ministers, and Central Bank Governors spanning 37 countries (including the EU) and 6 continents.