TNFD launch beta version of Framework
The global economy depends on nature to the tune of $44 trillion annually, but nature-related risks and opportunities have traditionally been overlooked in financial decision-making. However, this area of focus is developing at pace, riding in the slipstream of climate and making up for lost time.
Yesterday saw the Taskforce on Nature-Related Financial Disclosures launch its beta Framework. The full framework will launch in September 2023, with comments on the beta version open until 1 June 2023. The framework is designed to help organizations report and act on evolving nature-related risks and opportunities, and promote more sustainable business practices.
The beta framework includes a full and final draft of the framework, recommended draft disclosures, updates to the LEAP process, additional guidance for four sectors and four biomes, and cross-sector guidance on risk management, scenario analysis, target setting, and stakeholder engagement.
Framework categories & recommended disclosures
Biodiversity
The use of natural resources, the impacts of land use and infrastructure development, and the risks and opportunities associated with biodiversity conservation and restoration. Recommended disclosures include information on the company’s use of biodiversity, the potential impacts of its activities on biodiversity, and any measures it is taking to mitigate these impacts.
Land use
Recommended disclosures include information on the company’s land use practices, its impacts on land use change, and its efforts to manage these impacts, including the use of agricultural land, forestry, and other natural resources.
Water
Recommended disclosures include information on the company’s water use, its impact on water quality and availability, and its efforts to manage and reduce these impacts.
Greenhouse gas emissions
Recommended disclosures include information on the company’s greenhouse gas emissions, its efforts to reduce these emissions, and any risks and opportunities associated with the transition to a low-carbon economy.
Other disclosures
In addition to the four main categories, the Framework also includes a set of general disclosures such as the company’s governance structure and policies related to nature, as well as its engagement with stakeholders and efforts to integrate nature-related considerations into its decision-making processes.
Toolkit
The TNFD Framework is accompanied by a toolkit which provides guidance to companies and financial institutions on how to use the Framework to assess and report their nature-related dependencies and impacts.
- Guidance Document on how to use the Framework, including instructions on how to conduct a nature-related risk assessment and how to prepare a nature-related financial disclosure
- Technical Supplement on specific issues related to the Framework, such as how to measure and report on biodiversity impacts and dependencies
- Case Studies on how companies and financial institutions have used the Framework to assess and report on their nature-related dependencies and impacts
- Data and Metrics to measure and report on their nature-related dependencies and impacts.
- Implementation Support for companies and financial institutions that are using the Framework, including training and capacity building, technical assistance, and stakeholder engagement.
The release of the TNFD’s full and final beta framework is an important milestone towards developing a standardized approach to nature-related financial disclosures. To provide feedback on the draft framework, visit the TNFD website. By integrating nature-related considerations into decision-making processes, organizations can better understand the risks and opportunities associated with nature, and work towards a more sustainable future for all.
To learn more about how to integrate nature finance into your organisation, get in touch at info@globalethicalfinance.org
No more delays: What the new IPCC AR6 synthesis report means for the finance industry
"Finance, technology and international cooperation are critical enablers for accelerated climate action. If climate goals are to be achieved, both adaptation and mitigation financing would need to increase many-fold. There is sufficient global capital to close the global investment gaps but there are barriers to redirect capital to climate action."
IPCC AR6 Synthesis Report
To those of us involved in environmental action every day, the release of each IPCC report can seem somewhat anti-climactic. The report represents an impressively detailed description of the horrifying impacts of climate change, and a sobering assessment of the progress made so far by humanity to address it.
In some ways, the release of publications like the IPCC AR6 Synthesis Report tells us only what we already know: there is a serious problem which we are running out of time to solve. However, the sermon is intended not only for choir, but the congregation too.
Sadiq Khan, the Labour Mayor of London, and Chris Skidmore, a Conservative UK MP launched a cross-party initiative to tackle climate inaction this week. As they state in an excellent article in support of it, climate denialism has given way to ‘climate delayism’.
Thanks to the excellent work of the IPCC, laying out in meticulous detail the science of climate change, denial of climate change is no longer an intellectually credible position. Those who once denied now claim to accept the science, but raise all sorts of bad-faith arguments to obstruct, delay and minimise action to address the problem.
Reading the AR6 Synthesis Report makes clear that delay is just as bad as denial. We can still limit temperature rises to 1.5C, but only with swift, significant action. Doing that, as the final section of the report makes clear, relies on the finance industry.
Achieving the goals of the Paris Agreement will require massive shifts in the patterns financial flows, which require effective regulation, incentives, public-private partnerships and bold action from the finance industry.
The report also notes that the finance industry itself is at risk from the physical and transitional risks associated with climate change. To address these, the report calls for a coordinated global response that includes climate-related financial disclosures, stress tests, and scenario analysis.
As an industry, finance must not allow our delayers to get the best of us. There will always be better data tomorrow. There will always be a clearer regulatory picture next week. There will always be more lucrative subsidies in a month’s time. We must focus on what is important: immediate action.
Future generations will not judge us for choosing a marginally less efficient course of action: they will judge us for knowing what needs doing yet still delaying.
GEFI and UKIFC host Unlocking Islamic Finance Power Roundtable
Unlocking Islamic Finance Power Roundtable hosted at Simmons and Simmons
Following the Path to COP28 Sustainable Finance Summit, a select group of Islamic finance and sustainable finance practitioners gathered to discuss the alignment of Islamic finance with sustainability and the SDGs.
Regional and international financial institutions shared their experience on navigating both the conventional SDG financial market and the Islamic finance market to expedite the incorporation of the UN SDGs into Shariah products. Participants emphasized how Islamic finance is rooted in an ethical approach, but development in terms of ESG has been highly uneven.
However, the Islamic finance sector needs to act decisively on sustainability. At COP28 all eyes will be on the finance sector in the GCC, so being seen to be doing nothing is not an option, and sustainability is vital to capturing a younger generation of consumers.
Several institutions pointed to the value of “soft law” frameworks such as UN PRI and UN PRB in providing a clear action plan on sustainability. This means both to offering individual sustainability products and, perhaps more importantly, incorporating sustainability into general operations. The latter requires training at every level of an organisation, starting at the top.
There is a need to understand what consumers want, which the recent UKIFC study into Islamic banking customers and the SDGs does. Once this is established, consumers can be educated about what Islamic finance can do, and how it can do it: this can be a challenge for an acronym-heavy industry usually modest about its achievements.
This modesty is a key limitation to the global expansion of Islamic finance, hampering international awareness of the opportunities associated with it, the differentials to conventional banking (e.g. how late payment fees are handled more ethically in Islamic finance), and the pricing and commercial positioning advantages (e.g. sukuk’s resilience to price shocks in emerging markets).
COP28 presents a key moment to catalyse action in sustainable Islamic finance, drive awareness and uptake of the UN PRB and PRI, and contribute towards climate action.
Learn more about the UKIFC’s new Islamic finance and the SDGs: Retail banking customer perspectives report.
Unlocking Islamic Finance Power Roundtable hosted at Simmons and Simmons
Following the Path to COP28 Sustainable Finance Summit, a select group of Islamic finance and sustainable finance practitioners gathered to discuss the alignment of Islamic finance with sustainability and the SDGs.
Regional and international financial institutions shared their experience on navigating both the conventional SDG financial market and the Islamic finance market to expedite the incorporation of the UN SDGs into Shariah products. Participants emphasized how Islamic finance is rooted in an ethical approach, but development in terms of ESG has been highly uneven.
However, the Islamic finance sector needs to act decisively on sustainability. At COP28 all eyes will be on the finance sector in the GCC, so being seen to be doing nothing is not an option, and sustainability is vital to capturing a younger generation of consumers.
Several institutions pointed to the value of “soft law” frameworks such as UN PRI and UN PRB in providing a clear action plan on sustainability. This means both to offering individual sustainability products and, perhaps more importantly, incorporating sustainability into general operations. The latter requires training at every level of an organisation, starting at the top.
There is a need to understand what consumers want, which the recent UKIFC study into Islamic banking customers and the SDGs does. Once this is established, consumers can be educated about what Islamic finance can do, and how it can do it: this can be a challenge for an acronym-heavy industry usually modest about its achievements.
This modesty is a key limitation to the global expansion of Islamic finance, hampering international awareness of the opportunities associated with it, the differentials to conventional banking (e.g. how late payment fees are handled more ethically in Islamic finance), and the pricing and commercial positioning advantages (e.g. sukuk’s resilience to price shocks in emerging markets).
COP28 presents a key moment to catalyse action in sustainable Islamic finance, drive awareness and uptake of the UN PRB and PRI, and contribute towards climate action.
Learn more about the UKIFC’s new Islamic finance and the SDGs: Retail banking customer perspectives report.
GEFI host UN Principles for Responsible Banking Power Roundtable in Dubai
UN Principles for Responsible Banking Power Roundtable hosted at EY
At a private Power Roundtable designed to foster a collaborative – rather than competitive – atmosphere, UN Principles for Responsible Banking (PRB) signatories shared their experiences with financial institutions considering becoming signatories. The event featured 5 UAE-based banks, 4 global banks and 3 banks based in the UK and Australia.
At the event, current signatories highlighted the benefits from a comprehensive framework that aligns with science-based targets, offers engagement with credible third-party alliances, and promotes top-down engagement and education for board members and decision makers through UN-sponsored working groups.
Experience shows that this framework has helped financial institutions in setting credible climate transitions plans and in engaging their clients on this journey, where they would have otherwise struggled with setting their own measurement tools and statistics. The costs of PRB implementation were discussed to be manageable for smaller banks – as they are for largest institutions – as smaller banks are more agile in this context.
Regional challenges and views were also considered, such as the dependance of the region’s GDP on oil and gas. PRB signatories shared their approach to facing these challenges within their own jurisdiction. A solution was hiring non-banking expert teams of scientists, engineers, and academics to offer robust decisions aligned with the Paris Agreement targets.
Other key decisions included selecting projects to finance, reinvesting proceeds from oil and gas projects into ESG-focused projects instead to offset their carbon footprints and creating innovation centers for start-ups and companies to provide investable ESG solutions. Some of the key lessons learned from signatories regarding the incorporation of the Principles were that it has to be from the top down.
A key engagement and education tool offered is the PRB Academy, which focuses on sharing knowledge and skills to professionals as they develop ESG consideration in risk and asset management. The Academy is also extending its global curriculum to make it regionally relevant and to cover nature and biodiversity finance alongside its climate finance curriculum. Emphasis was also made on the significance of public scrutiny, and COP28 will be that for the region; therefore, it is essential that institutions align their operations accordingly.
Learn more about the Path to COP28 campaign, and how it is driving action from finance at this year’s summit at pathtocop28.com.
UN Principles for Responsible Banking Power Roundtable hosted at EY
At a private Power Roundtable designed to foster a collaborative – rather than competitive – atmosphere, UN Principles for Responsible Banking (PRB) signatories shared their experiences with financial institutions considering becoming signatories. The event featured 5 UAE-based banks, 4 global banks and 3 banks based in the UK and Australia.
At the event, current signatories highlighted the benefits from a comprehensive framework that aligns with science-based targets, offers engagement with credible third-party alliances, and promotes top-down engagement and education for board members and decision makers through UN-sponsored working groups.
Experience shows that this framework has helped financial institutions in setting credible climate transitions plans and in engaging their clients on this journey, where they would have otherwise struggled with setting their own measurement tools and statistics. The costs of PRB implementation were discussed to be manageable for smaller banks – as they are for largest institutions – as smaller banks are more agile in this context.
Regional challenges and views were also considered, such as the dependance of the region’s GDP on oil and gas. PRB signatories shared their approach to facing these challenges within their own jurisdiction. A solution was hiring non-banking expert teams of scientists, engineers, and academics to offer robust decisions aligned with the Paris Agreement targets.
Other key decisions included selecting projects to finance, reinvesting proceeds from oil and gas projects into ESG-focused projects instead to offset their carbon footprints and creating innovation centers for start-ups and companies to provide investable ESG solutions. Some of the key lessons learned from signatories regarding the incorporation of the Principles were that it has to be from the top down.
A key engagement and education tool offered is the PRB Academy, which focuses on sharing knowledge and skills to professionals as they develop ESG consideration in risk and asset management. The Academy is also extending its global curriculum to make it regionally relevant and to cover nature and biodiversity finance alongside its climate finance curriculum. Emphasis was also made on the significance of public scrutiny, and COP28 will be that for the region; therefore, it is essential that institutions align their operations accordingly.
Learn more about the Path to COP28 campaign, and how it is driving action from finance at this year’s summit at pathtocop28.com.
GEFI host Sustainable Finance Summit Series in Dubai
Sustainable Finance Summit Series hosted at DIFC
Our Path to COP28 Sustainable Finance Summit series began with words of welcome from Dame Heather McGregor, Omar Shaikh, and Christian Kunz of hosts DIFC.
Simon Thompson of The Chartered Banker Institute then presented a keynote address on how the industry can drive success at the Dubai summit, highlighting the Principles for Responsible Banking Academy.
Next, a panel featuring Sebastian Frederiks from ING, Nadia Boumeziout from Zurich Insurance, and Dr Maria Carvalho from NatWest Group moderated by Dame Heather McGregor, discussed the practical implementation of sustainable finance principles into strategic decision-making.
Eline Skeurink then delivered a presentation on Principles for Responsible Investment and their role in supporting signatories in the Middle East and globally in their responsible investment activity, before Sultan Choudhury OBE from Islamic Finance Council UK (UKIFC) presented the findings of the UKIFC Global Islamic Finance Retail Banking Survey (click here to download the report).
The second and final panel saw Charles Haresnape from Gatehouse Bank plc, Mohieddine (Dino) Kronfol from Franklin Templeton, and Christian Gueckel from SEDCO Capital | سدكو كابيتال join Mustafa Adil from LSEG (London Stock Exchange Group)/Refinitiv, an LSEG business. The panel built on Sultan’s presentation, discussing how to unlock Islamic finance at COP28.
Learn more about the Path to COP28 campaign, and how it is driving action from finance at this year’s summit at pathtocop28.com, or visit our event page to find out more about the second in the series.
Sustainable Finance Summit Series hosted at DIFC
Our Path to COP28 Sustainable Finance Summit series began with words of welcome from Dame Heather McGregor, Omar Shaikh, and Christian Kunz of hosts DIFC.
Simon Thompson of The Chartered Banker Institute then presented a keynote address on how the industry can drive success at the Dubai summit, highlighting the Principles for Responsible Banking Academy.
Next, a panel featuring Sebastian Frederiks from ING, Nadia Boumeziout from Zurich Insurance, and Dr Maria Carvalho from NatWest Group moderated by Dame Heather McGregor, discussed the practical implementation of sustainable finance principles into strategic decision-making.
Eline Skeurink then delivered a presentation on Principles for Responsible Investment and their role in supporting signatories in the Middle East and globally in their responsible investment activity, before Sultan Choudhury OBE from Islamic Finance Council UK (UKIFC) presented the findings of the UKIFC Global Islamic Finance Retail Banking Survey (click here to download the report).
The second and final panel saw Charles Haresnape from Gatehouse Bank plc, Mohieddine (Dino) Kronfol from Franklin Templeton, and Christian Gueckel from SEDCO Capital | سدكو كابيتال join Mustafa Adil from LSEG (London Stock Exchange Group)/Refinitiv, an LSEG business. The panel built on Sultan’s presentation, discussing how to unlock Islamic finance at COP28.
Learn more about the Path to COP28 campaign, and how it is driving action from finance at this year’s summit at pathtocop28.com, or visit our event page to find out more about the second in the series.
Lord Mayor of the City of London visits Edinburgh to meet with Nicola Sturgeon
After a series of meetings between senior Scottish Government and City of London officials, including First Minister Nicola Sturgeon and Lord Mayor Nick Lyons, GEFI convened financiers and policymakers at Phoenix Group’s Edinburgh offices last week on 24th January.
The panel featured Amanda Young, abrdn, Richard Rollison, Scottish Government, Chris Hayward, The City of London, David Pitt-Watson, Cambridge Judge Business School and Dame Susan Rice, GEFI & The Financial Services Culture Board, and came together to discuss the nature of collaboration between Scotland and London on finance, and the role that Scotland’s sustainable finance community can play.
The discussion emphasised that Scotland has power in the investment space, in particular in regards to sustainability and ethical investment where it is leading the way with a community of sustainable finance practitioners.
This is in part down to the size of the industry: people know each other in a way that is difficult in a city as large as London. Another factor is the disproportionate number of SMEs in the Scottish economy.
Scotland’s strengths are in long-term investing, and in values-led approaches such as sustainable investing, which means it complements the City of London’s global reach. Panellists emphasised that there is not a competition between London and Scotland: we all bring different things to the equation and many people in Scotland have deep ties to London.
Overall, the scale of problems like climate change can feel huge, but focusing on tangible actions in a specific place can be a fantastic start.
Watch Chris Hayward and Richard Rollison outline their view on Scotland-London collaboration.
Festive Fireside | Wrapping Up 2022 & Unwrapping 2023
Our final event of 2022 saw us wrap up the year just gone and look ahead of 2023 with Amanda Young of abrdn, Thom Kenrick of NatWest Group, Dr Sarah Ivory of the University of Edinburgh, David Pitt-Watson of Cambridge Judge Business School and GEFI's own Graham Burnside.
The discussion opened by considering the impact of energy crisis on the continued adoption of renewable technologies, and the role that the newfound important of energy independence will play in future energy policy.
As the sector has matured, there are growing concerns about whether ESG departments are overstretched. As most of the panellists emphasised, experienced sustainable finance professionals are in high demand within their organisations, which can lead to burnout: Amanda Young suggested a need to "Make Sustainable InvestingFun Again".
With all this, there is a risk of watering down boundaries, a risk highlighted by the number of funds around the world downgraded in response to more stringent regulations, though interestingly not to any great extent in Scotland's fund management community.
Some on the panel argued that there is a need to ensure the E, S and G are considered together, possibly by emphasising the actual problems that finance seeks to solve, rather than the broad categories into which those problems fall. For example, rather than using environment, specify climate change, or biodiversity.
Finally, the panel suggested their 1 thing to focus on for the coming year:
Amanda Young: Make Sustainable Investing Fun Again
Thom Kenrick: steer the economy through the cost of living crisis
Dr Sarah Ivory: focus on professional skills in finance
David Pitt-Watson: every company must consider how they contribute to climate change in generating profit
Finance Day at COP15
Today is Finance Day at COP15, the nature summit taking place in Montréal.
The core goal of COP15 is "30x30", the mission to protect at least 30% of the world's land and sea by 2030, but midway into the summit fears are growing of a lack of binding commitments. Read WWF's explainer for the summit.
Over half of global GDP depends on nature, making clear the need to finance its protection and restoration. Click below for some of the key finance-focused events taking place later today:
- The main sessions and key side events from UN CBD, the summit organisers
- Finance-focused side events from Nature Positive, WWF, Global Canopy, the Science-Based Targets Network, UNDP and the Finance for Biodiversity Pledge
To learn more about nature financing, click the links below for a selection of videos and reports on nature finance:
- Watch the finance section of the Nature for Life Hub from UNDP, including GEFI's contribution
- Watch all of GEFI's nature-focused content on our EFx platform
- Read Investing in the Planet’s Safety Net: Biodiversity Finance Stories from the Field from UNDP
- Read A Market Review of Nature-Based Solutions from Finance Earth
- Read The why and how of biodiversity integration by financial institutions from the Finance for Biodiversity Pledge
- Read When finance talks nature from WWF
- Read Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy from the World Economic Forum
Wrapping up 2022 and unwrapping 2023 | Ethical Finance Round Table
Our final event of 2022 will be our traditional year-end Ethical Finance Round Table. This returns as an in-person event on Tuesday, 13 December at 10:30-12:00pm at RBS Accelerator, 36 Saint Andrew Square, Edinburgh.
Our speakers will reflect on 2022 and look ahead to 2023. They will dissect the impact Ukraine, COP27 and the cost of living crisis have had on finance, before turning their thoughts to the coming year, including COP28 in Dubai, with time for networking after the formal proceedings.
The speakers will be:
- David Pitt-Watson, Visiting Fellow, Cambridge Judge Business School
- Amanda Young, Chief Sustainability Officer, abrdn
- Thom Kenrick, Head of Social Strategy and Impact, NatWest Group
- Dr Sarah Ivory, Senior Lecturer in Climate Change and Business Strategy, University of Edinburgh Business
Click here to sign up now.
John Kay joined us today to discuss the difference between risk and uncertainty, what this means for finance and how societies can collectively deal with the unknown by ensuring systems build in resilience.
As John explained to series host Kaisie Rayner FRSA, risk can be estimated, while uncertainty is truly unknowable, a distinction forged in the wake of the Great Depression.
Over the last half century, finance and economics have gradually merged these two concepts. The economist Milton Friedman explicitly stated, in his quest to model society as a collection of perfectly informed utility maximiser.
This reflects a general bias towards quantifying phenomena among policymakers, a fear of the unknown and the unknowable. Models should be treated not as quantitative answers to these intractable problem, but rather tools to be used to organise thinking.
Sir John Kay argued that this is reflected in the paradox of the perfect map; if a map were to represent reality perfectly, it would be a 1:1 copy of it, and therefore no map at all.
What a map or model should do is simplify information in a way that retains what is useful while cutting out other information. London’s Tube map is a great way of navigating the city by train, but much less helpful on foot.
By treating models as gospel, rather than helpful simplifications, we risk ignoring that which has been left out. Resilience and robustness – which are key to dealing with uncertainty – will be viewed as inefficiency.
An example of this is the global financial crisis, where sophisticated risk modelling and the unrelenting pursuit of profit sidelined experienced professional judgement. Another is that of privatisation of public services, where resilience and robustness can be cut to make profit, with the state ready to step in if the unexpected does happen.
Purchase Radical Uncertainty: https://lnkd.in/epTk7ujb or https://lnkd.in/gHD4h5P3
Find out more about our Radical Old Idea series https://lnkd.in/eKYu2uny
Watch the full webinar on our YouTube page.