COP25: Measurement and attribution of climate contribution to financiers

With the carbon costs of travel in mind, key EIT Climate-KIC COP25 session summaries are available online for those who cannot attend—and for review for those present. These summaries aim to extract important debates, dialogues, and learnings from each session.

Last week, EIT Climate-KIC’s CEO Kirsten Dunlop moderated a session during the “Measurement and Attribution of Climate Contribution to Financiers” event, which asserted: To shift from incremental improvements to transformational climate action, financiers should be incentivised to conduct green investments. This requires the measurement and attribution of their scope three climate contribution, a complex task that raises several new and challenging issues.

The event was introduced by Massamba Thioye, Manager of Regulatory Development Unit, UNFCCC.

The session, “Measurement of Financiers’ Contribution to the Climate Goals,” featured a panel consisting of: Nancy Saich, Climate Change Expert/Senior Adviser, EIB, Mike Knight, Senior Adviser, Carbon Tracker, Simon Messenger, Director, 2 Degrees Investing Initiative, Simon Connell, Head of Sustainability Strategy, Standard Chartered Bank and Dennis Pamlin, Senior Advisor, RISE Research Institute of Sweden.

When we talk about financial systems what do we mean?

Saich said, for a long time, public banks have played a dominant role in financial systems, but we’re now seeing gradual involvement of a wider range of players. With the EU’s involvement, we’re noticing a bigger focus on capital markets and investor choices. Commercial banks are forming groups to address the climate change issue, and we’re starting to see that central banks and regulators are now driven by financial risk and the reasoning that any financial system, if it’s going to be viable, needs to be sustainable. Therefore, there are tools that need to be put in place to support this new mindset.

Pamlin said so far we have been focusing on financial players engaged in transformative change. But, for a long time, people have been coming to the COP to discuss challenges instead of solutions, and innovation ecosystems have not been included in the conference. Now that they’re part of the conversation, many stakeholders could be engaged.

“Finance is a relatively low carbon activity with big carbon consequences,” said Knight. He continued, saying we need to think of investing at an international scale and not just a regional one to address climate change.

Can we map out the disconnects of financial systems and the challenges of transformation?

“Finance is a service sector and a wrapper around the real economy. People within finance can be passive or play an interventionist role and, given the fact the world is on track for three degrees, that looks necessary,” said Connell. “We need finance to look further forward in time to talk about the risks we’re not pricing in. Being aligned with the Paris Agreement and de-risking a portfolio are two different things.”

Pamlin said sectors are now rethinking their purpose; they’re asking how they can measure their real impact in society. Questions like: “How many people do we feed?” and “How many children are we educating?”

“We will see clusters of new stakeholders soon,” he concluded.

Saich said financial systems are addressing the disconnect from transformative action, but very peripherally. The EU is leading the way here and is careful to avoid greenwashing by transparently working to define what “green” means. It’s also encompassed environmental objectives in addition to climate.

She cautioned: If we’re undermining the end game with something else we’re doing, then that effort is wasted. Paying attention to this necessarily involves questioning where the money is going, which challenges the status quo of financial systems.

Knowing that financial systems aren’t currently aligned with the Paris Agreement goals, how can we intervene?

Messenger said we must start measuring climate impact. However, if you asked everyone to fully align their portfolio with the Paris Agreement targets, it would not be feasible. That’s why policy plays an important role here. He concluded: Financiers, policymakers and the public need to work in sync to make these big transformations happen.

Saich said all finance has to be compatible with the Paris Agreement goals, whether it’s climate finance or not.

“There are economic sectors we don’t need and need to be shut down, which is where the conversation around social impacts comes in,” she said. “And then there are sectors we need – food and construction materials – and we need to be focusing there. We need to ask: “Is it green?” We need transformation in those sectors.”

She continued: “We’re putting so much pressure on the green part of the market. If we required more impact reporting from other sectors, that would be more fair.”

Pamlin said current financial systems don’t foster long-term and agile solutions: “Real transformation is a threat and we need new financial systems to move forward.”

Our growth-focused economic system is wired to discount the future in favour of the present. Where do we see signals of discontinuity and alternative systems coming through?

“The EU technical leadership group leaps to mind, with experts from every possible background working to drive the climate agenda,” said Saich. “The fact you have NGOs, public banks, banks, certifiers working together is fantastic.”

She asked: “How can we drive finance towards not doing things?” For example, the most low-carbon solution is to avoid driving a vehicle at all, and to design a city for walking. But the financial sector is not designed to support that.

“Also, can we please stop thinking we can do valuable climate action with offsetting? It’s a good idea, but it’s not the solution,” she concluded.

Knight said: “I get a sense of enchantment that finance will solve the problem. But the finance community will need political backup for that to happen, and the endorsement of what we talked about today, to move towards the financial systems we want.

Dunlop concluded the session by asserting we need the right boundary conditions, operating standards, practicing assumptions and more to shift financial systems. The last element is shifting from trying to pick winners to investing in many actors working together towards a common goal.

 
Location
Spain
Related Goal
Goal 10: Mainstream climate in financial markets
Articles you may be interested in
In The News
Embracing a new approach to climate change in Moldova

Moldova is one of Europe’s most modest contributors to...

Embracing a new approach to climate change in Moldova
In The News
Krakow: transforming the city towards climate neutrality

Poland’s former capital and one of its oldest cities,...

Krakow: transforming the city towards climate neutrality
In The News
Is Europe doing enough to tackle climate change?

On 23 April, EIT Climate-KIC CEO Kirsten Dunlop spoke...

Is Europe doing enough to tackle climate change?
In The News
EU Commission publishes sustainable finance taxonomy

The European Commission has published its EU-wide classification system for...

EU Commission publishes sustainable finance taxonomy
In The News
New European Bauhaus: what kind of future do you want to live in?

On 22 and 23 April, the first conference dedicated...

New European Bauhaus: what kind of future do you want to live in?
In The News
Estonian innovation to help stabilise grid as renewables increase

EIT Climate-KIC supported Estonian start-up Sympower has raised €5.2...

Estonian innovation to help stabilise grid as renewables increase
In The News
Five EIT Climate-KIC community members in Forbes 30 under 30 list

Twelve entrepreneurs from across the EIT community have been...

Five EIT Climate-KIC community members in Forbes 30 under 30 list
In The News
These eleven organisations are building a greener Europe

Google, in partnership with EIT Climate-KIC, launched the €10...

These eleven organisations are building a greener Europe
In The News
New equity crowdfunding programme unearths cleantech start-ups

Found by us, funded by you, a new start-up...

New equity crowdfunding programme unearths cleantech start-ups
In The News
From start-up to 100-person industry player in 18 months: air up is launching ...

It’s a beverage revolution: Healthy hydration while fooling your...

From start-up to 100-person industry player in 18 months: air up is launching in new markets
In The News
#TurnItAround: an event for all climate solutions seekers, suppliers and enabl...

As part of the fifth SDG Global festival of...

#TurnItAround: an event for all climate solutions seekers, suppliers and enablers
In The News
New EIT initiative to boost innovation in higher education

The European Institute of Innovation and Technology (EIT) is...

New EIT initiative to boost innovation in higher education
In The News
Just transition within reach for Polish coal city Rybnik

“We are preparing plans for the next decade. Mentality is...

Just transition within reach for Polish coal city Rybnik
In The News
Inclusive guide helps communities build urban resilience

The new Urban Action Kit, launched by the International...

Inclusive guide helps communities build urban resilience
In The News
Climate app among DigiEduHack 2020 global finalists

The DigiEduHack, supported by EIT Climate-KIC as well as...

Climate app among DigiEduHack 2020 global finalists
In The News
GreeMko receives Climate Reality Project Award in Spain 

GreeMko (for Green Management Technology), a Spanish start-up that...

GreeMko receives Climate Reality Project Award in Spain 
In The News
What’s the future of trade in a climate crisis?

EIT Climate-KIC Chief Executive Officer Kirsten Dunlop addressed the...

What’s the future of trade in a climate crisis?
In The News
Wanted: Green business ideas to fix climate change

Starting today, the seventh edition of the global green...

Wanted: Green business ideas to fix climate change
In The News
Why sustainable water management needs a systemic solution

Ensuring that fresh water is available, in a sustainable...

Why sustainable water management needs a systemic solution
In The News
Integrating nature with technology to strengthen climate adaptation

The European Commission released the new EU Climate Adaptation...

Integrating nature with technology to strengthen climate adaptation
In The News
EIT Climate-KIC is a key player in helping Europe adapt to climate change

EIT Climate-KIC welcomes the new EU strategy on adaptation...

EIT Climate-KIC is a key player in helping Europe adapt to climate change
In The News
Edinburgh: building climate resilient infrastructure and communities

A labyrinth of cobblestone streets, dimly lit and presided...

Edinburgh: building climate resilient infrastructure and communities
In The News
Residents of Kessel-Lo, Belgium, are invited to shape the future of their neig...

EIT Climate-KIC is working with the city of Leuven...

Residents of Kessel-Lo, Belgium, are invited to shape the future of their neighbourhood
In The News
Improved urban parks increase communities’ climate resilience

Start Park, a project led by citizens from Florence,...

Improved urban parks increase communities’ climate resilience
In The News
New accelerator programme geared towards systemic change secures key partners

Following its Open Call, the New Accelerator programme has...

New accelerator programme geared towards systemic change secures key partners
In The News
New videogame builds climate awareness among players

Change Game, a videogame financed by EIT Climate-KIC and...

New videogame builds climate awareness among players
In The News
Organic and homemade food brought to the dining rooms of large corporations

Carlota Mateos and Juan Vila, co-founders of PlenEat have...

Organic and homemade food brought to the dining rooms of large corporations
In The News
Climeworks added to Microsoft’s climate portfolio

EIT Climate-KIC supported Climeworks, a carbon capture technology, is...

Climeworks added to Microsoft’s climate portfolio
In The News
Circular Slovenia named in 100 Climate Policy Breakthroughs

The peer-to-peer learning platform for governments, Apolitical, included EIT...

Circular Slovenia named in 100 Climate Policy Breakthroughs
In The News
New tool uses satellite imagery to accelerate sustainable agriculture

Supported by EIT Climate-KIC and developed by its partner...

New tool uses satellite imagery to accelerate sustainable agriculture