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
Five EIT Climate-KIC innovators featured in Global Cleantech 100

Five EIT Climate-KIC supported innovative ventures included in the...

Five EIT Climate-KIC innovators featured in Global Cleantech 100
In The News
The journey to zero-emissions transport – part three

The transport sector already accounts for a quarter of...

The journey to zero-emissions transport – part three
In The News
The journey to zero-emissions transport – part two

The transport sector already accounts for a quarter of...

The journey to zero-emissions transport – part two
In The News
The journey to zero-emissions transport – part one

The transport sector already accounts for a quarter of...

The journey to zero-emissions transport – part one
In The News
Malaysia and Estonia win Climathon Global Awards at ChangeNOW summit

The city of Penang, Malaysia, and a team of...

Malaysia and Estonia win Climathon Global Awards at ChangeNOW summit
Opinion
Redesigning venture capital (part III): A hypothesis
Dominic Hofstetter Transformation Capital, EIT Climate-KIC
Redesigning venture capital (part III): A hypothesis
Opinion
The Long Time
Beatrice Pembroke & Ella Saltmarshe Co-founders, The Long Time Project
The Long Time
In our community
Mariana Mazzucato on big-picture, high-ambition innovation missions
Mariana Mazzucato on big-picture, high-ambition innovation missions
In The News
Circular Cars Initiative launched at WEF Davos

The Circular Cars Initiative (CCI), supported by EIT Climate-KIC,...

Circular Cars Initiative launched at WEF Davos
In The News
EIT Climate-KIC CEO selected as a top expert to advise the European Commission

Yesterday, the European Commission announced EIT Climate-KIC CEO Kirsten...

EIT Climate-KIC CEO selected as a top expert to advise the European Commission
In our community
Net zero requires just, inclusive and radical transformations
Net zero requires just, inclusive and radical transformations
In Detail
New report: Is Germany ready for the future?

E3G´s new report “Is Germany ready for the future? The case for action in a climate-changed world.”, supported by EIT Climate-KIC, finds that Germany...

New report: Is Germany ready for the future?
Opinion
Redesigning venture capital (part II): A blueprint
Dominic Hofstetter Transformation Capital, EIT Climate-KIC
Redesigning venture capital (part II): A blueprint
In The News
EIT Climate-KIC’s work in Slovenia

Last November, the Slovenian parliament passed a motion to...

EIT Climate-KIC’s work in Slovenia
In The News
Slovenia adopts EIT Climate-KIC Circular, Regenerative Economies Deep Demonstr...

The Slovenian parliament passed a motion to adopt an...

Slovenia adopts EIT Climate-KIC Circular, Regenerative Economies Deep Demonstration
In our community
Cities in a 1.5 degree world: What is there to learn from Leuven’s May...
Cities in a 1.5 degree world: What is there to learn from Leuven’s Mayor Ridouani?
In our community
Slovenia adopts EIT Climate-KIC circular economy proposal: Q&A with Kirs...
Slovenia adopts EIT Climate-KIC circular economy proposal: Q&A with Kirsten Dunlop
Innovation Spotlight
Elemental Water Makers’ solar desalination an asset as climate change ...

EIT Climate-KIC supported Elemental Water Makers is a water desalination scale-up that’s transforming water systems by enabling...

Elemental Water Makers’ solar desalination an asset as climate change threatens clean water
Innovation Spotlight
Zolar’s household solar kit is democratising the energy sector

Energy production and consumption are the largest sources of greenhouse gas emissions in the European Union, accounting for 80 per cent...

Zolar’s household solar kit is democratising the energy sector
In our community
Interview with policy and governance innovation experts at Madrid and Basque...
Interview with policy and governance innovation experts at Madrid and Basque Country Universities
In The News
COP25: Madrid city side event

With the carbon costs of travel in mind, key...

COP25: Madrid city side event
In our community
Interview about Futures Literacy with Riel Miller, Head of Foresight at UNES...
Interview about Futures Literacy with Riel Miller, Head of Foresight at UNESCO
In The News
COP25: Climate leader insights

With the carbon costs of travel in mind, key...

COP25: Climate leader insights
In The News
OpenSurface land-use tracking platform launches at COP25

Pioneering AI, satellite and ground-sourced data technology drives more...

OpenSurface land-use tracking platform launches at COP25
In The News
COP25: Towards the systemic transformation

With the carbon costs of travel in mind, key...

COP25: Towards the systemic transformation
In The News
Helsinki launches Climate Watch to track city’s emission reductions

The City of Helsinki recently launched the ‘Climate Watch’,...

Helsinki launches Climate Watch to track city’s emission reductions
Opinion
Moments matter*
Michelle Zucker Director, Community Activation, EIT Climate-KIC
Moments matter*
In The News
Naked Energy secures €6.17 million in funding

Naked Energy, an EIT Climate-KIC supported solar energy startup...

Naked Energy secures €6.17 million in funding
In The News
First European cluster accelerator programme launched in Frankfurt

How to take clusters to the next level and...

First European cluster accelerator programme launched in Frankfurt
Innovation Spotlight
Ioncell’s fiber innovation could help drive the circular economy transitio...

The textile, garment and fashion industries generate tonnes of pollution each year and recycle very little, which...

Ioncell’s fiber innovation could help drive the circular economy transition