Topic: Finance

OCBC is Southeast Asia's first bank to rule out funding new coal power plants | Eco Business

Singapore’s OCBC Bank is the first banking giant in Southeast Asia to rule out financing new coal-fired power plants.

In an interview with Bloomberg on Wednesday, the bank’s chief executive Samuel Tsien said the company would no longer fund new coal-fired power plants in any country.

Investors set out policy priorities to limit systemic climate risks | IGCC

The policies investors have outlined today are critical first steps to managing the substantial risks of climate change. They will also unlock multi-billion dollar investments in economic revitalisation and zero carbon modernisation.” 

Download the Media Release or the policy document Policies for a Resilient Net Zero Emissions Economy.

A New Horizon - speech by Mark Carney, Governor Bank of England

“Once climate change becomes a clear and present danger to financial stability it could already be too late to stabilise the atmosphere at two degrees.

The paradox is that risks will ultimately be minimised if the transition to a low-carbon economy begins early and follows a predictable path. But for markets to anticipate and smooth the transition to a 2-degree world, they need the right information, proper risk management, and coherent, credible public policy frameworks.”

Role of disclosure in addressing climate data deficiency | Geoff Summerhayes, Sustainable Insurance Forum

On the 22nd February 2019, Geoff Summerhayes gave this speech in London at the Sustainable Insurance Forum.

“The weight of money, through consumer demand, investor decisions and regulatory responses, is pushing the transition to a low carbon economy relentlessly forward. This shift has consequences for us all, but to make good decisions, governments, regulators, businesses and investors need access to timely, reliable and sufficiently granular information.”

What is the role of central banks in managing climate change? | London Institute of Banking and Finance

Dr Paul Fisher, well known to many at Climate Alliance has written a very interesting article for the London Institute of Banking and Finance. He asks the question whether central banks should play a role in managing the risks presented by climate change.

How Climate Finance Flows Around The World | Carbon Brief

This diagram shows the average yearly amount of climate finance given by each OECD country on average in 2015 and 2016, and where that money went.

Donor countries are listed down the left-hand side of the diagram. The right-hand side shows the amounts which flowed to recipient countries or regions.

PRA ‘expects’ banks and insurers to report climate risks | Gibson Media

"Insurers and banks are to be expected to manage and report their climate-related risks, according to a draft supervisory statement from the UK’s Prudential Regulation Authority (PRA).

The consultation paper, which was described as “a major step for a regulator of a global financial centre”, says the risks from climate change are far-reaching and foreseeable and require a strategic approach." Read More

Sudden tightening of financial conditions poses a risk for financial stability | De Nederlandsche Bank

The budding economic crises in a number of emerging countries, like Turkey and Argentina, illustrate that a sudden tightening of financial conditions constitutes one of the major risks to financial stability.

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Financial conditions in the developed countries have remained accommodative to date, but a turnaround is possible in these countries, too. The trigger for such a turnaround may be a quicker than anticipated tightening of monetary policy in the United States, but it may also be further escalating trade tensions, or a hard Brexit. These developments are discussed in our Autumn 2018 Financial Stability Report (FSR), published today.

Accommodative financial conditions are fuelling vulnerabilities

Ten years after the crisis, financial conditions in most developed countries are accommodative. Prolonged accommodative financial conditions fuel financial stability risks, however, as they lessen the incentive to pay off debts and stimulate risk-seeking behaviour on the financial markets. If financial conditions were to tighten suddenly, debtors will be severely hit by rising financing costs and financial markets may experience sharp corrections, which may in turn translate into heavy losses in the investment portfolios of financial institutions.

Risks are already surfacing in a number of emerging countries

Particularly in emerging countries with large financial and macroeconomic imbalances, financial conditions have been tightening over the past few months. This has painfully revealed the vulnerabilities that have been building up over time, such as high corporate debts denominated in foreign currencies. All emerging countries may be faced with ongoing capital outflows if investor confidence deteriorates and investors at the same time do not differentiate between vulnerable and less vulnerable countries. In due course, a budding economic crisis in emerging countries may also hit the Dutch financial sector through direct exposures and negative confidence effects.

Rising real estate prices demand attention

Real estate markets in the Netherlands are running at full steam, especially in prime locations. House price rises are driven by the insufficient supply of homes, low interest rates and vigorous economic growth. Easing of the borrowing capacity relative to the borrower’s income is undesirable as this would only serve to fuel overheating in the market. In order to ease the pressure on house prices, the housing supply must be increased, particularly in the middle segment of the rental market. The price increases on the commercial real estate market are being driven mainly by the search for yield among investors. As a result, this market is more sensitive to a turnaround in sentiment. As vulnerabilities often build up in times of economic boom, financial institutions must pay extra attention to monitoring and managing the risks associated with commercial real estate in the period ahead.

Further efforts by insurers remain necessary

This issue of DNB's FSR also discusses the vulnerabilities in the Dutch insurance sector. Although insurers are making progress in developing a future-proof insurance sector, further efforts of insurers, supervisors, and policymakers remain necessary, including successful implementation of the recovery and resolution framework.

Disruptive energy transition stress test

DNB developed a targeted stress test in order to quantify the possible effects of a disruptive energy transition on the Dutch financial sector. The stress test revealed that a disruptive energy transition may induce severe losses for Dutch financial institutions. Governments can prevent unnecessary costs by implementing timely and effective climate policies, while financial institutions should include energy transition risks in their risk management process.

UNEP Financial Initiative Publications

UNEP FI’s work includes a strong focus on policy – by fomenting country-level dialogues between finance practitioners, supervisors, regulators and policy-makers, and, at the international level, by promoting financial sector involvement in processes such as the global climate negotiations. Useful publications from the Finance Initiative can be found here.

Press release: First Status Report | TCFD

"The more companies know about the risks they face, the faster and more effectively they can address them — and the more they report that information, the better equipped investors will be to make smart decisions. It is encouraging to see the Task Force's group of supporters continue to grow. It will make the global economy more resilient and drive more capital to projects that are helping to reduce emissions and protect people from harm," said Michael R. Bloomberg.

Financing a resilient and sustainable economy | RIAA, IGCC, PRI, UNEP SI and UNEP FI

Joint Statement calls on the finance sector to support the development of Sustainable Finance Roadmaps for Australia and New Zealand

The Responsible Investment Association Australasia (RIAA) has today joined with the Investor Group on Climate Change, the Principles for Responsible Investment (PRI), the UN Environment’s Principles for Sustainable Insurance, and the UN Environment Programme Finance Initiative (UNEP FI) – collectively representing over 300 institutions with $10 trillion in assets – to sign a joint statement that commits to starting the development of Sustainable Finance Roadmaps for Australia and New Zealand.  

We are now encouraging RIAA members and the wider finance sector in Australia and New Zealand to join with us in support of this commitment to develop Sustainable Finance Roadmaps by signing the Joint Statement in support of a Sustainable Financial System, released at the UNEP FI Conference on Financing a Resilient and Sustainable Economy in Sydney today. 

Get in touch to express your interest in supporting the Joint Statement here

The organisations that have convened this statement commit to convene finance, government, civil society and consumer bodies to kick-start the process to develop Sustainable Finance Roadmaps for Australia and New Zealand.

We will now open this statement up to other organisations to sign on to show their support of this commitment to develop Sustainable Finance Roadmaps and to participate in the process. 

A Sustainable Finance Roadmap is a set of recommendations across policy, regulation and finance practices that helps the finance sector contribute systematically to a more resilient and sustainable economy.  From the European Union to China, a growing number of regions and countries globally have developed Sustainable Finance Roadmaps to help achieve national, regional and global sustainable development goals.

You can read the RIAA’s briefing paper on Sustainable Finance Roadmaps produced for the conference here.

The Sustainable Finance Roadmaps build on RIAA’s work to date identifying key priorities for shaping more sustainable finance markets in Australasia, as outlined in our paper: Driving Long-term Investment and Delivering Responsible Financial Markets. 

What investors need to know about technology and climate change: the race of our lives | Jeremy Grantham

Jeremy Grantham talks about the challenges we face from climate change. His deep insight is an eye opener!

"Very few investors realise how rapidly the environment is being wounded, not just by climate change but also by overuse and by chemical waste.  We may have created a world that is simply hostile to most living creatures including us.

Contrastingly, very few realise how favourably and dramatically fast the relevant science is progressing and the cost of necessary technologies declining.  These opposite forces will determine whether we can even retain a world with as stable a global society as we have today, a modest definition of success.  The results will certainly transform the entire world of energy, resources and food in a few decades with unprecedented financial consequences."

Mr. Grantham co-founded GMO in 1977 and is a member of GMO’s Asset Allocation team, serving as the firm’s chief investment strategist. He is a member of the GMO Board of Directors and has also served on the investment boards of several non-profit organizations. Prior to GMO’s founding, Mr. Grantham was co-founder of Batterymarch Financial Management in 1969 where he recommended commercial indexing in 1971, one of several claims to being first. He began his investment career as an economist with Royal Dutch Shell. Mr. Grantham earned his undergraduate degree from the University of Sheffield (U.K.) and an M.B.A. from Harvard Business School. He is a member of the Academy of Arts and Sciences, holds a CBE from the UK and is a recipient of the Carnegie Medal for Philanthropy.

View the presentation slides from this lecture here.

HLEG Recommendations and the bilateral trade agreement - what are the implications?

Last week, the EU announced that it is going to immediately proceed with new regulations that will impact a broad range of financial services. The new regulations will be based on the recommendations made recently by the High Level Expert Group on Sustainable Finance.

The Australian Government and the EU jointly announced last week they are going to fast track a bilateral trade agreement. This will open up new opportunities to the Australian financial services industry – but also potentially make them subject to EU regulations. See below for more on these two important announcements.

EU Announces Plans to Implement HLEG Recommendations

24 May 2018.

Vice-President of the EU Commission Valdis Dombrovskis

Vice-President of the EU Commission Valdis Dombrovskis

Valdis Dombrovskis, Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union said: "We should put our money into projects that are compatible with our decarbonisation objectives and the fight against climate change. This is important for the environment and the economy, but also for financial stability. Between 2007 and 2016, economic losses from extreme weather disasters rose by 86%. The proposals presented today show that the European Union is committed to ensuring that our investments go in the right direction. They are about harnessing the vast power of capital markets in the fight against climate change and promoting sustainability."

The proposed Regulation will introduce consistency and clarity on how institutional investors, such as asset managers, insurance companies, pension funds, or investment advisors should integrate environmental, social and governance (ESG) factors in their investment decision-making process. Exact requirements will be further specified through Delegated Acts, which will be adopted by the Commission at a later stage.

But the council has added a warning that it wants to make sure the deal doesn’t compromise its high standards of social and environmental protection, or hurt small and medium sized business. Read More

EU-Australia Free Trade Negotiations Start - Sydney Morning Herald

22 May 2018

EU Trade Commissioner Cecilia Malmstrom. Photo: AP

EU Trade Commissioner Cecilia Malmstrom. Photo: AP

European officials will land in Australia next month to begin negotiations on a free trade deal, after the EU’s governing council gave its long-awaited official authorisation on Tuesday  to begin negotiations for trade deal with Australia.

“The council also approved negotiation of a similar deal with New Zealand. They expect the agreement to increase EU exports to New Zealand and Australia by about a third in the long term, through removing customs duties and other barriers. EU Trade Commissioner Cecilia Malmstrom said the deal would “safeguard high standards in key areas such as sustainable development”. Read more

 

Executive Perspective: Determining What is "Green" | Thomson Reuters

“If you want to set rules and regulations, that’s why you need definitions, and that’s why green taxonomy is an important part of the European policy agenda.”

Dr. Paul Fisher, Senior Associate at the Cambridge Institute for Sustainability Leadership, discusses the determination of what “green” is . He unpacks the importance of identifying green definitions to better set rules and regulations, and create metrics to measure green investments and products at the  2018 Climate Bonds Initiative’s Annual Conference, in conversation with Sherah Beckley, Editor of Thomson Reuters Sustainability.