If 2020 taught us little else, it taught us that life and the global economy are vulnerable to the forces of nature. Proof is the COVID-19 pandemic which reduced life expectancy in the U.S. by one full year in just a year’s time. And it clearly damaged and set back so many sectors of our economy. Imagine the impacts of global upheavals of nature should we not be sustainable and climate change impacts farflung economic sectors.

At a recent conference, Mark Carney, UN Special Envoy for Climate Action & Finance and a former Governor of both the Bank of Canada and the Bank of England, says finance can play a pivotal role in addressing the climate crisis, focusing on three points:

First, Mr. Carney argues that now is the time to lay the groundwork for a more sustainable financial system to address climate issues while also preparing for sustainable growth.

A new organization, The Network of Central Banks and Supervisors for Greening the Financial System has grown to over 70 central banks, with the US Fed having announced its intention to join. This would enable 80 – 85% of global GHG emissions to occur in areas with regulators in this organization. This enables a consistent approach to investment and strategies.

The signatories to the United Nations Framework Convention on Climate Change (UNFCCC) asks each nation for concrete commitments to follow the terms of the Paris Agreement, like reducing GHG emissions and assisting poorer countries to grow sustainably. Mr. Carney sees this as a cycle. These commitments provides the opportunity for certainty and planning of projects and financing, which better enables success in such initiatives, which leads to meeting climate goals.

Second, is how can market forces be used to make headway in solving the climate crisis. As has been said, a forest has no market value until the trees are chopped down. What can change to encourage (financially) forests from not being chopped down, for instance? Mr. Carney believes that strengthening the carbon offset market can be such a vehicle.

The third factor revolves around risk. The financial sector needs to quantify risk and put their money behind opportunities of excellent projects and avoid funding those that add risk in terms of climate. Quantification of risk and reward, of course, cannot occur without open, public determination of and reporting of climate change risks.
If these issues can be resolved, then Mr. Carney is optimistic that the market will drive climate solution in a successful and beneficial way.

And finally, we are seeing in the US major moves and discussions led by major financial sector leaders (i.e., BlackRock) that climate change is the pre-eminent issue of our times with great human and business implications.

CCES has the experts to help your firm find its footing with Climate Change and sustainability and begin to assess technical risk. Contact us today at 914-584-6720 or at karell@CCESworld.com.