Observatory of Climate Action – Implication of the Finance sector

Report 2018

Finance for Tomorrow partnered with the Climate Chance Observatory of non-State climate action for the publication in November 2018 of a unique of its kind Report on climate action in the financial sector. This stocktake will serve as the starting point for the discussion entitled “Aligning capital flows: Are we on track?” gathering financial professionals and observers that will open the Climate Finance Day.
Financing the struggle against climate change and shifting the orientation of financial flows is a challenge both enormous and complex. Not only that, the defining feature of this challenge is its urgency. Financial actors have the capacity to redirect capital toward an economic model aligned with the 2015 Paris Agreement. For this reason, responsibility for the successful transition toward a low-carbon economy rests heavily on these players, and the transparency of their efforts is a key issue. Such is the focus of the first review conducted by Climate Chance, whom Finance for Tomorrow, the Paris green and sustainable finance initiative, is proud to have partnered with. Providing an account of the financial community’s climate-positive efforts, while essential, is no easy matter. What this initial review does is make it possible to assess progress going forward.
The second question this report attempts to address is to what degree the actions of finance are consistent with climate issues. Are we on the right course? Is there sufficient momentum? The study has the merit of not only considering ‘green’ finance, but also gauging the persistence of ‘brown’ finance that increases the difficulty of achieving international climate goals. While NGOs remain the primary sources of information in this area, the work recently undertaken by regulators should also improve our understanding and management of the risks associated with climate change.
The present review must be renewed, deepened and focused in successive iterations, year after year, to assess the progress achieved and measure the task remaining. It also seeks to identify the drivers of change. Market forces are one powerful impetus, as can be seen in the rise of green bonds, low-carbon investment funds and, more recently, the emergence of green loans. Regulation is also crucial. Likewise, the main schools of economic research must incorporate climate as a key variable. And lastly, the time has come to make expertise in climate issues a required component of professional competence. This is what Finance for Tomorrow seeks to promote at the level of the Paris Financial Centre. These efforts have earned Paris a place at the forefront of green finance as a financial centre that offers the world the expertise and innovation needed to allow green and sustainable finance to grow and increase on a new scale.

Discover the Report here