In the latest issue of The Ethical Corporation magazine we look at what it will take to raise the trillions of dollars in finance needed to address the climate and nature emergencies

In stark contrast to COP27 in Sharm el-Sheik, heads of state stayed away from the COP15 biodiversity talks in Montreal in December, leaving it to ministers to try to reach agreement on a new Global Biodiversity Framework.

The same lack of high-level engagement cannot be said for business leaders. Although nowhere near the numbers who flocked to Egypt in November, 700 top executives from companies and financial institutions are thought to have travelled to Montreal to participate in events on the sidelines of the talks. 

One of the biggest “asks” by the private sector was that target 15 of the draft framework, calling for countries to require companies to report on their dependencies and impacts on nature, be made mandatory. A methodology that will allow them to do so, being developed by the Taskforce on Nature-related Financial Disclosures (TNFD), will be finalised next year.

As we report in the latest issue of The Ethical Corporation magazine, the requirement for businesses to account for both their dependencies and impacts on nature is regarded as a key pre-requisite to unlocking the hundreds of billions in dollars that will need to come from the private sector if the world is to meet its climate and biodiversity goals. 

While policymakers and the private sector are only just waking up to the importance of nature to the climate agenda, finance for both is still perilously below where it needs to be, as Mike Scott reports in his introduction to the issue.  One year after the Glasgow Financial Alliance for Net Zero (GFANZ) was born at COP26 in Glasgow, promising to accelerate the global transition to a green economy, GFANZ seems to be falling apart at the seams.

Under attack from Republican politicians in the U.S., GFANZ dropped its requirement for signatories to comply with the UN’s Race to Zero standard and divest from fossil fuels. But that wasn’t enough to prevent Vanguard, the world’s second biggest asset manager, from quitting GFANZ earlier this month.

One of the biggest announcements at COP27 was a Just Energy Transition Partnership (JET-P) to mobilise $20 billion in public and private sector finance to help Indonesia to transition from coal, following last year’s $8.5 billion JET-P deal for South Africa. But as Angeli Mehta reports, such projects barely scratch the surface of what will be required. She looks at what it will take to scale up.

(Credit: Tolga Akmen/Reuters)

Mehta also reports on the growth of the First Movers Coalition, a global initiative to harness the purchasing power of companies to decarbonise seven “hard to abate” industrial sectors. Since its launch at COP26 last year, the U.S.-backed coalition has grown from 34 to 67 companies, in sectors accounting for 30% of global emissions, and is already leading to purchasing commitments.

With governments delaying so long to take action to cut CO2 emissions, almost all the pathways to climate safety now also depend on two highly speculative bets: a massive roll-out of carbon capture and storage projects, and industrial-scale carbon removals, according to the UNFCCC. Matthew Green looks at how 35 companies in the oil and gas sector are looking to unlock much greater finance for both by developing a methodology that will allow them to sell carbon credits.

Meanwhile, Mike Scott reports on how the energy crisis has boosted the business case for investing in another under-financed source of CO2 emissions: the built environment.

Mark Hillsdon looks at how impact investment has come of age as priate investors seek to help meet sustainable development goals.

And Peyton Fleming lays out the challenges for ESG investors in the U.S., where the sector’s historic surge has triggered a greater level of scrutiny and demands for transparency from regulators, which is much needed, but also a politically driven backlash in Republican states.

In September, GFANZ’s leaders wrote to its 550 member firms, urging them to join the 30 last year that signed a commitment to eliminate commodity-driven deforestation from their portfolios. Yet by COP27, the number of signatories had only risen to 35. Mark Hillsdon looks at why deforestation risk continues to be a blind spot for the finance sector.

Sarah LaBrecque, meanwhile, reports on efforts to dramatically scale up the amount of finance going to protecting ocean and coastal ecosystems, known as the blue economy, which are critical to addressing both the biodiversity and climate emergencies. 

We also have commentary from Cornelia Andersson, group head of sustainable finance and investment at the London Stock Exchange Group, who argues that capital will only be reallocated to the green economy on the scale needed to achieve net zero if all regulators mandate disclosure of sustainability data.   

Meredith Sumpter, chief executive of the Council for Inclusive Capitalism, introduces a new framework to help companies identify whether their sustainability initiatives are helping people as well as the planet.

With the need for a just transition one of the strongest themes both at COP27 and COP15, it is an appropriate note to close this issue on financing the climate and nature transition, and our coverage of the most important issues for sustainable business this year.
We’re looking forward to seeing you all again in 2023.

Main picture credit: Gerardo Garcia/REUTERS



CDP  climate change  deforestation  biodiversity  GFANZ  TCFD  TNFD 

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