The World Economic Forum’s Global Risk Report 2019 ranks environmental risks, including extreme weather events, biodiversity loss and ecosystem collapse, and failure of adaptation and mitigation to climate change, among the top ten global risks in terms of both likelihood and impact. It is hard to overstate the effects this will have on economies, businesses, and society. Governments, individuals, enterprises, and financial institutions must take action now to brace for the impact.
The Paris Climate Agreement and the UN Sustainable Development Goals (SDGs) offer a valuable roadmap to guide us to a sustainable future, and 175 national governments are on board. How can financial executives and institutions stay relevant in this global context? They must find innovative ways to play an active role in the sustainable transformation.
This is not tree hugging. This is business. With customers and business in mind, the private sector needs to reallocate capital to inclusive green solutions.
The good news is there will not be a lack of opportunity; financing the SDGs and the Paris Agreement commitments on climate requires investments amounting to trillions of dollars per year for the coming decade and beyond. What can the financial sector do to leverage the opportunities that lie ahead? Where can they find practical guidance to ensure that their efforts are fruitful?
The soon-to-be-launched Green Finance Platform (GFP) – led by the Global Green Growth Institute (GGGI), OECD, UN Environment, UNIDO, and the World Bank under the Green Growth Knowledge Partnership – will provide a wealth of practical knowledge for greening the financial sector, targeted towards banks, investment and insurance firms, as well as opportunities for collaboration on green finance initiatives.
The platform will feature a comprehensive sets of guiding principles for the financial sector, including the UN Principles for Responsible Banking, which are currently under development by the United Nations Environment Programme Finance Initiative (UNEP FI), in collaboration with a small group of banks. These principles emphasize the importance of transparency, ownership, and ambitious target setting, and offer valuable guidance for financial institutions that aim to ensure their relevancy going forward. Key steps include:
- Aligning business strategies with the Paris Climate Agreement, the Sustainable Development Goals and targets, and relevant national and regional frameworks;
- Demonstrating ambition and accountability by setting publicly-available targets;
- Working responsibly with customers and partnering with relevant stakeholders to achieve broader social, environmental and climate-related goals;
- Focusing sustainability efforts where they will have the most impact in terms of operations, products, and services;
- Contributing through effective governance to a culture of responsible banking;
- Being transparent about – and accountable for – positive and negative environmental and social impacts.
It is important to emphasize that the entire financial industry needs to act on these sets of principles and good practices to effect real change. Industry leaders are already taking big and important steps towards sustainability, more innovative financial products are hitting the market, and the uptake is truly remarkable. We now need to accelerate and scale this transition to meet real-world and ecological needs.
The finance industry is uniquely placed to contribute to the green economic transformation, since it is truly a global creature that interconnects with all sectors. Banks and other financial institutions manage enormous amounts of capital, which, in essence, is the number one tool to drive change, by reallocating this capital to sustainable solutions.
Being a banker myself, I want to do my part to push the financial sector forward by addressing the knowledge gap and low levels of engagement amongst my colleagues. That is why I have founded the fully independent non-profit “Bankers for Climate” initiative, a climate change movement for all employees in the global financial industry. The purpose is to drive change from within and show the world that we can unite and collaborate for a more sustainable future.
I am grateful for the many fantastic sources for inspiration around the world. Smart, driven, powerful people who, at a very early stage, understood the importance of the private sector’s involvement in addressing climate change. I am thinking about Al Gore, Christiana Figueres, and Erik Solheim, among others. Closer to me, I have had the privilege to learn from Ylva Hannestad and Snorre Storset, sustainability champions at Nordic bank Nordea. I would like to honor the wisdom and the long-termism of these individuals, who seem to have conquered egoism and short-termism. I “woke up” to the sustainability challenge and opportunity much later than these pioneers, but I’m now charging full speed ahead, with grit and determination to change the system.
Please check out www.bankersforclimate.com and help me spread the word!
Thanks,