Digital library on sustainable finance
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This report provides an overview of conceptual issues related to climate-related financial risk measurement and methodologies, as well as practical implementation by banks and banking supervisors.
According to the report, climate-related financial risks entail unique features, which means that sufficiently granular data and forward-looking measurement methodologies are needed to address them. To date, measurement of climate related financial risks has centred on mapping near-term transition risk drivers into bank exposures. Credit risk measurement has attracted the most effort, with a lesser focus on other risk categories. Initial scenario analyses and stress tests have in many cases focused on selected portfolios or exposures for transition risks, and selected hazards for physical risks. Key areas for further analysis relate to gaps in data and risk classification, as well as methodologies to address uncertainties associated with the nature of climate change and the potentially longer time horizon for risks to manifest.
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Climate-related financial risks - measurement methodologies - EN
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This report provides insights into the implications of climate change for the operations, governance and role of central banks. It covers initiatives such as the EU Action Plan and their impact on global central banking, central bank mandates to respond to climate-related risks, an overview of measures already being taken by selected central banks and a matrix assessing the impact of proposed measures on the divisions of central banks. The paper also makes recommendations how central banks can introduce changes to portfolio management and monetary policy, risk management and financial stability and additional supporting measures.
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The seventh edition of the Global Green Finance Index (GGFI 7) was published on 29 April 2021. GGFI 7 provides evaluations of the depth and quality of the green finance offerings of 78 major financial centres around the world and serves as a valuable reference into the development of green finance for policy and investment decision-makers.
The GGFI is compiled using 140 instrumental factors. These quantitative measures are provided by third parties including the World Bank, the Economist Intelligence Unit, the OECD and the United Nations. The instrumental factors are combined with financial centre assessments provided by respondents to the GGFI online questionnaire, using 4,536 assessments from 739 respondents.
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This report, published by the Climate Bonds Initiative, assesses the scale and depth of the green, social, and sustainability debt markets as of the end of 2020. The market analysis examines the changes in the debt markets during 2020 and also includes a forward-looking spotlight section, which explores the development of transition, green recovery finance and EU green market leadership, three themes that will continue to influence market growth into the 2020s.
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Buildings account for 36% of global greenhouse gas emissions and are therefore key for reaching the carbon targets pledged within the context of the Paris Agreement. Through its investment and financing activities, the financial system is closely intertwined with the building industry.
For the effective integration of sustainability considerations into finance, a "technical" discussion around which buildings can be classified as climate-friendly and sustainable is thus important. Against this background, this report identifies criteria for determining the environmental sustainability of buildings in Switzerland. In doing so, reference is made to the work of the EU's Technical Expert Group on Sustainable Finance and the international Climate Bond Initiative.
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Kriterien für klimaverträgliche Gebäudefinanzierung in der Schweiz - DE
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This final report covers the information to be provided by non-financial undertakings and asset managers to comply with their disclosure obligations under the Non-Financial Reporting Directive (NFRD).
The recommendations define the Key Performance Indicators (KPIs) disclosing how, and to what extent, the activities of businesses that fall within the scope of the NFRD qualify as environmentally sustainable under the Taxonomy Regulation. The key recommendations relate to the definitions to be used by non-financial undertakings for the calculation of the turnover KPI, the CapEx KPI and the OpEx KPI, and the KPI that asset managers should disclose.
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Final Report. Advice on Article 8 of the Taxonomy Regulation - EN
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This seminal guidance is a market-first practical toolkit for financial institutions to pivot their activities towards financing a sustainable blue economy.
Designed for banks, insurers and investors, the guidance outlines how to avoid and mitigate environmental and social risks and impacts, as well as highlighting opportunities, when providing capital to companies or projects within the blue economy. Five key ocean sectors are explored, chosen for their established connection with private finance: seafood, shipping, ports, coastal and marine tourism and marine renewable energy, notably offshore wind.
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Turning the Tide: How to Finance a Sustainable Ocean Recovery - EN
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Disclosure of climate-related financial risks greatly helps investors assess companies’ prepared-ness for climate change. Voluntary disclosures such as those based on the recommendations ofthe Task Force for Climate-related Financial Disclosures (TCFD) are being hailed as an effective measure for better climate risk management.
The authors of this paper ask whether this expectation is justified. With the help of a deep neural language model, they come to the conclusion that the firms’ TCFD support is mostly cheap talk and that firms cherry-pick to report primarily non-material climate risk information. From the analysis, the authors conclude that the only way out of this dilemma is to turn voluntary reporting into regulatory disclosures
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In the absence of a comprehensive regulatory framework, international recommendations and best practices on corporate responsibility in the area of climate change are emerging. Due to their financial materiality, climate change risks have recently gained widespread recognition by international organizations and financial regulators. Accordingly, sound corporate governance requires companies to have regard to climate change issues. The authors of this report propose the term ‘Corporate Climate Responsibility’ to frame various trends in legal doctrine and market developments.
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Corporate Climate Responsibility — The Rise of a New Governance Issue - EN
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This report assesses 9 options available to central banks to factor climate-related risks into their operational framework.
For the report, practitioners from the central bank community reviewed collateral and counterparty policies, asset purchases and credit operations with a view to offering a menu of options for climate-related adjustments in more concrete terms. The analysis showcasespossible changes to three of the most important policy fields for central bank: credit operations, collateral policies, and asset purchases. The review concentrates on potential measures on the asset side of a central bank’s balance sheet.
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Adapting central bank operations to a hotter world. Reviewing some options - EN
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This report reviews the full range of policies and initiatives that an ideal green central bank would adopt across four categories: Research and Advocacy, Monetary Policy, Financial Policy, and Leading by Example. Based on this literature review, expert consultation, and bilateraliinteractions with central bankers and supervisors, it develops a system to score and rank G20 countries on the green policies and initiatives of their monetary and prudential authorities.
The results, displayed as a ‘scorecard’, show that actions are failing to match up with words, as the vast majority of countries score full marks in Research and Advocacy while performing poorly across the other three categories.
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The Green Central Banking Scorecard. How Green Are G20 Central Banks And Financial Supervisors? - EN
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The survey at the centre of this report aims to capture the current status of climate investing, as well as the challenges and opportunities that climate change presents for investors. More than 300 institutional, wholesale and insurance investors accounting for about 20% of global assets participated in the survey.
The results of the survey indicate thathalf of all assets under management will be committed tonet zeroin the coming years, with 86% of investors saw climate change as a significant factor in their investment policy over the next two years. Most also believe that renewable energy forms part of the solution: 81% said solar, wind and hydrogen power would lead the way in switching from fossil fuels. 66% stated they would focus portfolio decarbonization efforts on global equities as their preferred asset class for achieving this over the next one to two years.
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While sustainable investing is no longer a new kid on the block, investment strategies that take an integrated gender and climate lens to investment decisions are still relatively new. This report highlights five foundational reasons for gender and climate investing. It showcases how this can be applied through three deep-dive sectoral analyses in energy, agriculture and infrastructure.
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Gender & Climate Investment: A strategy for unlocking a sustainable future - EN
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This study describes the state of the play of the sustainability-related products and services market in Europe; establishes an inventory and classification of market actors, sustainability products and services available in the market; and analyses the use and quality of sustainability-related products and services by market participants.
The study explores how the reliability and quality of assessment of sustainability-related data, ratings and research by third party providers can be enhanced and provides recommendations to stimulate demand and improve the quality of supply. The research is based on a combination of desk research and stakeholder engagement with various actors across the value chain.
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Study on sustainability-related ratings, data and research - EN
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The Joint Committee of the three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) published its final report on the content, methodologies and presentation of disclosures under the EU Regulation on sustainability-related disclosures in the financial services sector (SFDR). The report also covers the the draft Regulatory Technical Standards (RTS), which aim to strengthen protection for end-investors by improving Environmental, Social and Governance (ESG) disclosures to end-investors on the principal adverse impacts of investment decisions and on the sustainability features of a wide range of financial products.
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This guide explains how to understand and apply climate scenarios in a financial risk context. It also provides a series of recommendations for enhancing the development and application of Integrated Assessment Models (IAMs) by financial institutions based on perspectives of participating banks that used UNEP FI’s transition risk methodology. This paper also contains case studies from participating banks that capture their experiences using climate scenarios.
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Dieser Report der Klima-Allianz zeigt auf, dass wenn Pensionskassen ihre Investitionen nicht aus fossilen Energien und Industrien mit grossem CO2-Ausstoss zurückziehen, ein Rentenkollaps droht. Die Autoren legen dar, dass Schweizer Pensionskassen im Durchschnitt mit einem Verlust 10% auf ihrem Vermögen innert 15 Jahren rechnen müssen. Dies unter der Annahme, dass die bisherige laxe weltweite Klimapolitik («Business as usual») fortgesetzt wird. Die Klima-Allianz stützt sich für diese Studie auf den Untersuchungsansatz der G20.
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Pensionskassen auf fossilem Crashkurs. Klimabedingt droht Rentenverlust bis zu 32 Prozent - DE
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Meta-studies examining the relationship between environmental, social, and governance (ESG) and financial performance have a decades-long history. Almost all the articles they cover, however, were written before 2015. Those analyses found positive correlations between ESG performance and operational efficiencies, stock performance and lower cost of capital. Five years later, we have seen exponential growth in ESG and impact investing – due in large part to increasing evidence that business strategy focused on material ESG issues is synonymous with high-quality management teams and improved returns.
In collaboration with Rockefeller Asset Management and Casey Clark, CFA (MBA '17), the NYU Stern Center for Sustainable Business examine the relationship between ESG and financial performance in more than 1,000 research papers from 2015 – 2020.
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ESG Paper Aug 2021 (pdf 1.7 MB)Summary
This academic article offers an examination of the different different terms used to describe investments in the sustainability context, particularly of the impact investment terminology and its different definition.
To offer (re-)orientation from an academic perspective, the authors derive a new typology of sustainable investments. This typology delivers a precise definition of what impact investments are and what they should cover and proposes distinguishing between impact-aligned investments and impact-generating investments. Based on these insights, the authors hope to lay the foundation for future research and debates in the field of impact investing by practitioners, policymakers, and academics alike.
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This report explores the increasing sophistication with which impact investors are approaching decision-making and provides insights into financial performance. Specifically, it finds that impact investing is showing signs of maturing, with investors exercising a multi-dimensional approach to their decision-making to achieve satisfactory financial and impact performance in line with their goals.
Drawing on data from six of the industry’s existing financial performance studies, the report also offers a synthesis of impact investment financial performance and additionally analyzes the GIIN’s 2020 Annual Impact Investor Survey responses of 161 impact investors seeking risk-adjusted, market-rate returns.
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Impact Investing Decision-making: Insights on Financial Performance - EN
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This policy consultation response and Consultation on regulations lays out the UK government's plans to require pension schemes to disclose their carbon footprint and governance structure, and undertake detailed climate scenario analysis.
It sets out the government's proposals to require pension funds will to commence climate reporting in line with recommendations from the Task Force on Climate-related Financial Disclosures (TCFD) from 2021. Initially, the obligations will only apply to schemes with more than £5bn in assets, but the threshold will fall to £1bn from October 2022. Under the current plans, pension scheme trustees will be required to carry out detailed scenario analysis, exploring the effects and implications of various climate scenarios such as a rise in global temperatures or the introduction of a high carbon price. The analysis must include at least two scenarios involving an increase in the global average temperature, one of which must be between 1.5°C and 2°C.
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This report presents the findings from an in-depth assessment of actions in 24 financialhubs, all members of the UN-convened International Network of Financial Centres for Sustainability (FC4S) across Africa, the Americas, Asia and Europe. The FC4S assessment framework allows for an effective evaluation of each financial centre’s alignment with the Paris Agreement and the UNSDGs, for the identification of areas which require further work, and for the development of strategic advice for each one of them to apply, considering current best practices.
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This report outlines state-of-the-art approaches—particularly the use of climate change scenarios—to better assess climate-related physical, transition and litigation risks in the insurance business. It captures the key findings of the project of UN Environment Programme’s Principles for Sustainable Insurance Initiative to pilot the TCFD recommendations, which was collaborative effort by 22 insurance companies representing over 10% of world premium volume and USD 6 trillion in assets under management.
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This report maps the current state of ocean finance revealing trends in lending, underwriting and investment activities which impact the ocean. Moreover, it outlines the frameworks and financial instruments that are successfully addressing ocean sustainability and highlights new opportunities and gaps in the market. It looks across five major ocean-linked sectors chosen for their established connection with private finance: seafood, ports, shipping, coastal and marine tourism and marine renewable energy.
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Dieses Gutachten im Auftrag des vzbv argumentiert, dass nachhaltig beworbene Geldanlagen nicht automatisch zu mehr Nachhaltigkeit führen. Zwar können nachhaltige Geldanlagen durchaus eine positive Wirkung entfalten, wahrscheinlicher sind dabei allerdngs indirekte Effekte, zum Beispiel, wenn Verbraucher über eine Geldanlage für das Thema Nachhaltigkeit sensibilisiert werden. Direkte Effekte über den Kapitalmarkt sind möglich, aktuell aber kaum nachweisbar. Prinzipiell können sie über einen Verzicht auf Rendite durch Verbraucher erreicht werden, zum Beispiel, wenn in Folge der Geldanlage in bisher nicht rentable regenerative Energien investiert wird. Angebote der Finanzindustrie, die mit einem direkten Beitrag ihrer Anlageprodukte zu bestimmten Nachhaltigkeitszielen werben, und zugleich marktübliche Renditen versprechen, müssten demnach kritisch hinterfragt werden.
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