Green Finance Strategy – Transforming Finance for a Greener Future

by Adrienne Lawler
July 12, 2019

At the risk of sounding like a Turkey voting for Christmas, it’s not all about events. No really. Let’s be honest, if you’re going to stand up and speak to a crowd of a 1,000 (or more people) you are going to do your level best to ‘say the right thing’. The important question however, is what you do afterwards.

Deeply impressed by what I heard and saw a the recent – packed – Green Finance Summit in London, I wanted to know more about the detail about the challenges and opportunities facing Responsible Investors within the UK Finance Industry. In the report issued post event, here’s a quick blast of what the UK Government has to say…..

“Transforming the Financial System As the financial risks and opportunities from the low carbon transition become apparent, a second, equally important, transformation is also underway: that of the financial system. This transformation moves beyond just funding green projects to ensuring climate and environmental factors are fully integrated into mainstream financial decision making across all sectors and asset classes.

And here too, the UK has led the way. The Green Finance Taskforce report, published in March 2018, was a landmark in the development of UK green finance. The Bank of England has played a pivotal role, both domestically and internationally, to ensure climate change is considered a mainstream and far-reaching financial risk, as well as one that requires action today. UK firms have also played a leading role at home and abroad, with banks, insurers, asset managers and pension funds in the vanguard of green financial innovation, supported by a rich ecosystem of civil society, business, academia and technical experts. 

  • In 2017, there were $320 bn in insurance losses from climate related events, such as floods, storms and wildfires.  What were 1-in-100 year events are now nearer 1 in 25 

  • Top 24 European energy utilities, still largely dependent on fossil fuel generation have lost nearly 50% of their market capitalisation in the last 10 years 

  • It has been estimated that in order to meet the IPCC’s 1.5 – 2% target, 60-80% of existing fossil fuel reserves will have to stay in the ground (at a time when global energy demand is rapidly growing with population growth) 

  • As a result, there will likely be great future increases in “stranded assets”, from coal-and oil-fired power stations to manufacturing facilities for petrol and diesel-fuelled cars, as EVs build market share – this obsolescence poses a massive financial risk to lenders and investors 

  • Shipping will also need massive changes given that 200 of the world’s largest ships emit more sulphur than all the world’s cars    

  • Oil & gas companies are (no matter how slowly) changing their portfolio mix towards green, and even changing names eg. BP no longer British Petroleum, Statoil/Equinor, DONG/Orsted etc 

  • Norway’s sovereign wealth fund (the world’s largest) has recently announced it is completely pulling out of fossil fuel investments even though oil was the source of its wealth originally – a sign of the times 

  • So, the trend is clearly there for all to see- we are in a global race to decarbonise and it’s only heading in one direction.  However, it’s going to take a massive amount of private and public sector collaboration to make a serious dent in the problem – “Bravery, Government and Greed are all going to be needed to cut emissions” – said Mitch Reznick of Hermes at a recent conference 

The full report can be viewed here and is definitely worth reading.

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