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Implementing a Sustainable Finance Strategy

Updated: Apr 25, 2023

July 11, 2021.

image of a burnt forest where trees are smoldering as evening falls
Implementing a Sustainable Finance Strategy

Over the last month, many of us will have been watching, or experiencing first-hand, the extreme heatwave across the west coast of America and Canada. The weather event has caused major disruption and sadly, many people have lost their lives.

Since 2015 the World Weather Attribution (WWA) initiative has been conducting real-time attribution analysis of extreme weather events as they happen around the world. This week the WWA published research that whilst an event such as the Pacific Northwest 2021 heatwave is still rare or extremely rare in today’s climate, it would be virtually impossible without human-caused climate change.

The WWA results provide a strong warning: our rapidly warming climate is bringing us into uncharted territory that has significant consequences for health, well-being, and livelihoods.

So, what is the financial services industry doing to help promote a transition to a lower-carbon economy?

In 2017, the Task Force on Climate-Related Financial Disclosures (TCFD) published a set of recommendations with four Core Elements: Governance, Strategy, Risk Management, Metrics and Targets.

The TCFD notes that “The risk climate change poses to businesses and financial markets is real and already present. It is more important than ever that businesses lead in understanding and responding to these risks—and seizing the opportunities—to build a stronger, more resilient, and sustainable global economy.” Source: Task Force on Climate-Related Financial Disclosures.

For those who have not yet read the TCFD recommendations, I would suggest that you take the time to understand the principles and proposed roadmap, as well as the key areas of consideration.

In the UK, the FCA has published a sustainable finance strategy outlining their approach through the three themes of Transparency, Trust and Tools. The Chancellor’s remit letter to the FCA in March 2021 stated that the FCA should consider the Government’s commitment to achieving a net-zero economy by 2050.

The FCA is consulting on proposals to introduce climate-related disclosure requirements, aligned with the TCFD’s recommendations, for asset managers, life insurers, and FCA-regulated pension providers. The FCA is also gathering views on select Environmental, Social and Governance (ESG) topics in capital markets, including green and sustainable debt markets. Feedback is invited on the proposals until 10th September 2021.

For those of us who work in the Financial Services Industry, we all have an important part to play. Sharing knowledge is important as ESG initiatives develop. Collaboration across organisations, regions and industries will improve our ability to collectively meet our ESG objectives.

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