The Jesuits in Britain are one of 15 institutional investors with a combined US$2.4 trillion in assets under management that have filed a climate change resolution at HSBC, alongside 117 individual shareholders.
In an annual letter to CEOs earlier in 2020, BlackRock Chairman and CEO Larry Fink said “climate change has become a defining factor in companies’ long-term prospects … But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.”
Financial firms produce very few greenhouse-gas emissions directly, aside from those associated with keeping the lights on and the computers whirring. But the picture changes dramatically when you add “financed emissions”, those associated with a firm’s lending and investing activities. Figures from the few banks and asset managers that disclose them suggest that financed emissions are 100 to 1,000 times bigger than operational ones.
Christine Lagarde is expected to make the European Central Bank a pioneer in fighting climate change by slashing its purchases of bonds issued by fossil fuel companies and other heavy carbon emitters, according to a Financial Times poll of economists.
On 8 December 2020, the Monetary Authority of Singapore (MAS) issued Guidelines on Environmental Risk Management (the Guidelines) tailored to financial institutions (FIs) in three sectors: asset management, banking and insurance. The Guidelines are intended to drive the transition to an environmentally sustainable economy by enhancing the integration of environmental risk considerations in FIs’ financing and investment decisions and promoting new opportunities for green financing.
The Federal Reserve has made a move that cements its nod to the risk that climate change could pose to the financial system.
In a statement released Tuesday, the central bank said it has formally joined a global peer group that is addressing climate’s impact on finance. The Network of Central Banks and Supervisors for Greening the Financial System, as it’s called, was formed in 2017 and now has 83 members from around the world. The U.S. already had been an informal participant for more than a year.
Economists, environmentalists and advisers to President-elect Joe Biden warn that global warming could spur that next catastrophe. The climate finance proponents among them argue that major lenders should be required to undergo climate-related stress testing before it’s too late.
There is growing hope that the financial sector can contribute to decarbonizing the economy and help prevent dangerous levels of anthropogenic climate change. But aligning financial portfolios with the Paris Agreement, or lowering a portfolio’s carbon footprint alone, won’t be enough to actually contribute to real world emissions reductions. After all, where do emissions go when they are no longer in your portfolio?