Climate change context
In a world with a changing climate and increasingly frequent and impactful climate hazards, financial institutions have a critical role to play in accelerating the climate transition. By taking part in climate action through initiatives while integrating climate risks into their business strategy, financial institutions have the power to anticipate the impacts of climate change by adapting to new realities and bringing different industries together. This includes putting in place robust governance to integrate these climate risks and link them to financial risks and potential market opportunities.
Disclosure frameworks such as the Task Force on Climate-related Financial Disclosure (TCFD) and the Task Force on Nature-related Financial Disclosure (TNFD) are tools for addressing climate change in financial and non-financial reporting. The proposed methodology encompasses four essential pillars of an organization: governance, strategy, risk management, and setting targets and progress measures. In addition to being a benchmark, the TCFD is becoming the standard in terms of disclosure and meets all market expectations.
Taking part in collective action
In order to accelerate the transition, many international initiatives and tools have emerged to engage financial institutions and encourage them to make public commitments. In addition to helping them take part in the transition, these initiatives help define decarbonization strategies, guide institutions and regulate the market. For example, through knowledge sharing and best practices, committing institutions are required to set science-based targets for their greenhouse gas emissions, including all Scope of emissions, in the medium and long term.
These initiatives for financial institutions include:
- International Sustainability Standards Board (ISSB): a standards board that provides a global basis for sustainability-related standards, including corporate sustainability risks and opportunities, for financial markets;
- The Glasgow Financial Alliance for Net-Zero (GFANZ): an initiative that brings together over 450 international financial sector members committed to achieving net-zero emissions by 2050 and provides guidance and a framework for decarbonization
- Bankers for Climate: an international movement for bankers to address climate change and transform the industry through collaboration and a multi-sectoral approach to the sector.
- The Responsible Investment Association (RIA): a subscription for financial advisors and panelists, providing information and education on the responsible investment market.
- The Net-Zero Advisory Body: an initiative established by the Government of Canada, represented by an independent panel of experts that guides Canada in achieving its net-zero emissions goals.
- The Net-Zero Banking Alliance (NZBA): an alliance of banks representing 40% of the world’s banking assets that are committed to aligning their lending and investment portfolios with the net-zero goal by 2050.
- The Net-Zero Asset Managers Initiative: an international gathering of asset managers who are committed to supporting net-zero by 2050;
- UN Environment Program – Finance Initiative (UNEP-FI): the United Nations network of banks, insurance companies and investors that aims to accelerate sustainable development and provide recommendations for the financial market;
- Green Bond Principles (GBP): a set of high-level recommendations to increase the information, disclosure and transparency of the green bond market and support projects for a net-zero economy.
Take action now
More and more financial institutions are using their leverage to meet the needs of today’s marketplace and adopt a better understanding of climate issues and risks.
Integrating the climate transition into business strategies is an opportunity for financial institutions to reach new growth markets as well as increase their impact. The cost of inaction is an important variable to consider when prioritizing institutions’ strategic actions. Investing in decarbonation now is a sign of anticipation that will have a positive impact on the financial health of financial institutions, on the resilience of organizations and on their recognition in the market to act as a leader in the transition.
CCG can help you develop your reduction targets and transition plans to meet the requirements of the various international initiatives so that you can invest in the climate transition now.
Become a player in the transition by adapting to the reality of climate change and adopting decarbonization strategies that will have an impact on both your organization and society.
