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.

Adam Smith, climate, COP and natural capital | David Pitt-Watson | The Radical Old Idea

Watch our Radical Old Idea interview on Adam Smith with David Pitt-Watson, responsible investing pioneer and Cambridge Judge Business School. As COP27 came to a close, our researcher Sam Wheldon-Bayes spoke to David about Smith, the climate crisis, COP and natural capital.

In the interview, filmed at Adam Smith's Panmure House, where the Enlightenment scholar once lived, David discusses what Smith would have thought about climate, COP and natural capital, applying these lessons to some of the big questions facing modern policymakers. The discussion draws on the Wealth of Nations in the 21st Century essay series, which he contributed to.

As David argues, some of Smith's modern devotees dramatically misunderstand his beliefs. In the face of a collective challenge such as climate change, it is unlikely Smith would have proposed a free-market, low-regulation approach, but rather advocated effective regulation.

Click here to watch now.

The ingredients for climate-related capital requirements

This article was authored by Martina Menegat.

Climate-differentiated capital requirements for financial institutions have been proposed as a method for ‘crowding in’ green investment by making it either cheaper to finance climate-friendly activity, or more expensive to finance harmful activity. The debate has been polarised between these two options: a ‘green-supporting’ factor or a ‘brown-penalising’ factor. Yet, things are not always simply green or brown, and the range of policy options is far more varied than this binary choice.

Capital requirements are cushions of capital that banks are required to hold in order to absorb losses, expressed as a percentage of deposits – with a reserve ratio of 20%, banks would need to keep 20% of all their deposits on hand to guard against losses. Adjusting the right amount of capital requirements is a delicate exercise. With a capital ratio fixed at 100%, banks would simply be piggy-banks, able to take in deposits but barred from lending money and investing in the economy. With undercapitalized banks, the risk is insolvency, which triggers expensive recovery interventions. Currently, under the Basel framework, banks  hold a minimum capital ratio of 8% based on their risk-weighted exposures.

The main argument for introducing climate-differentiation capital requirements is that climate change poses relevant, uncosted, risks for the financial system.

Central banks are increasingly committed to identifying, measuring, and assessing climate-related financial risks (CRFRs). The Governor of the Bank of England, Andrew Bailey, believes that stress tests and scenario analysis are the best tools to evaluate CRFRs. Yet, so far they have been incapable to help banks in adjusting their exposures to climate risks.

The main obstacle to accurate pricing of CRFRs is their ‘radical uncertainty’: even if we are pretty sure that a combination of CRFRs will materialise in the next future, there are no advanced methods for calculation. CRFRs are also endogenous to the financial system: the misalignment between the global financial system and Paris climate targets exacerbates the same risks that central banks are trying to measure.

According to Greenpeace UK and WWF UK, UK financial institutions have exposure to high-emitting companies for 1.8 times the country’s domestically produced emissions. Advocates of short-term action argue that patchy data are better than nothing. Hard rules on banks are thought to correct the ‘feedback loop’ between finance and climate, in turn reducing systemic climate risks.

Regulators are showing increasing interest in this topic. While the European Banking Authority is expected to publish its advice to the European Commission on the integration of sustainability in capital requirements by 2023, in the Canadian parliament there is already a proposed law to adjust capital requirements to climate risks generated by exposures to high-emitters.

However, proposals to change banks’ capital requirements have been harshly opposed by the financial industry and so regulators prefer to be cautious. The Bank of England has already examined the possibility to introduce a brown penalising factor, but identified a series of obstacles. Most notably, heightening capital requirements for profitable companies that are conducting brown businesses could destabilise the financial system. Conversely, easing requirements for green companies (the so-called green supporting factor) without accurately calculating their risk profile could create a green bubble.

Climate-related capital requirements need not be reduced to green-supporting or brown-penalising factors. The energy put into the debate is much wider. Academics and civil society organisations have formulated three proposals that are of particular interest.

First, economists have suggested combining a green-supporting and a brown-penalising factors. The simultaneous adoption of such factors will have positive effects on reducing global warming, and thus diminish physical risks for financial institutions. Yet, the same research found that, for example, combining a brown-penalising factor with green fiscal policies will be more apt in addressing financial stability concerns.

Second, other experts argue in favour of a climate systemic risk buffer. A buffer is an additional cushion of a bank’s capital that can be introduced to address exposure to systemic risks. Supervisors can apply a climate buffer on all banks that are particularly vulnerable to CRFR or on all assets that face high risk to be stranded.

Third, a coalition of NGO and CSO organisations has proposed to introduce a one-to-one capital or a 1250% risk weight rule on banks. In this case, banks would be required to hold an amount of capital at least equal to their exposures every time they finance new fossil fuel projects – which are at higher risks of becoming stranded assets in the light of national transition plans.

No single policy is a silver bullet. If introduced, climate-differentiated capital requirements will produce a small contribution to reducing the pace of global warming. It is also unlikely that a slight increase in capital requirements for high-emitter companies will disturb massively the financial system.

Opponents of climate-differentiation capital requirements are right in a sense: they are not the perfect instrument to deal with climate change. However, the perfect instrument simply does not exist. Instead, we have a toolkit of regulatory instruments at our disposal. We need creativity and debate to face the climate crisis.

COP27: finance day preview

COP27 is upon us. The first day saw UN Secretary General Antonio Guterres warn the world that "we are fighting for our lives and we are losing... we are on a way to climate hell", setting out the stakes of these talks, in addition to raising the pressing loss and damage issue.

Finance day is taking place tomorrow, on Wednesday 9th November. As accredited observers, GEFI have been working with our partners to curate events in the Blue Zone featuring our co-founder Omar Shaikh, who is out in Sharm El-Sheikh. As most of our audience will be tuning in online, we have given times in GMT. Local time (EET) is GMT+02.

Here is a selection events and programmes highlighting the best of finance at COP27.

We recently launched our Path to COP28 campaign. Join the campaign to get an early start on next year's key summit, and deliver finance for climate action. Find out more now.


"Channel your inner 3-year-old" | The Radical Old Idea with Dr Katherine Trebeck, on the Economics of Arrival

Why is it necessary to "channel your inner 3-year-old" to reshape the economy?

At our Radical Old Idea event, Dr. Katherine Trebeck explained the basics of her recent book the Economics of Arrival to Kaisie Rayner. For Dr Trebeck, economics should be focused not on growing indefinitely, but instead on point of "arrival": a destination that, once reached, allows us to "make ourselves at home". To get here we must channel that inner 3-year-old, to constantly ask "why?".

Why do we need more growth?

Why do we need to work 40-hour-weeks?

Why can someone work a full-time job and still be in poverty?

This focuses the mind on the point of arrival. The lack of an endpoint leaves our economies directionless, focusing too much "helping people and planet cope", remedying social aches and pains without treating their root causes.

As she explained, growth up to a point is good, providing us with the means to live a decent life. In particular, growing the incomes of the poorest in society delivers results. However, beyond a certain point, it ceases to increase happiness (in development economics, this is often known as the 'Easterlin paradox'). Just like eating ice-cream, the first few mouthfuls are incredible, but after a while, each extra spoon provides less joy than the previous one.

Building on the food metaphor, she pointed out that growth should be a means to an end. Growth for growth's sake is akin to walking into a restaurant and shouting "more!". It's far more important to know what it is that you want more of, such as looking after citizens, providing food, health services, and a decent material standard of living.

Some examples of economies that have arrived, or have the potential to arrive, include Japan and Costa Rica. Japan has a high standard of living, and relatively low inequality without extensive redistrubution. However, without a clear endpoint, the country suffers from high worker stress, when in fact it could "take its foot off the pedal" and lead a better life by slowing down.

Another exaple is that of Costa Rica, which is a middle income country that has thrived in terms of health, social and nature outcomes, because it has focused on outcomes rather than economic growth for its own sake.

The event concluded with a lively audience discussion which looked at how to practically ditch GDP, whether the focus on predistribution over redistribution was viable, the role of elites and more.

Find the Economics of Arrival at https://policy.bristoluniversitypress.co.uk/the-economics-of-arrival


GEFI launch Path to COP28 campaign

Leading financial institutions came together in Dubai this week for the launch of our ‘Path to COP28’ campaign to finance a greener global economy. The campaign features a number of partners, including the Dubai International Financial Centre (DIFC), which hosted the event. The COP28 summit in Dubai will be key to the  success of Glasgow’s COP26

The launch explored the role of the finance sector in the transition to a low-carbon and climate-resilient economy in the run-up to the global climate change summit in Dubai in November 2023. It saw the presentation of a new report into green sukuk, an Islamic finance product analogous to bonds, our new SDG Insight Series, and the Tayyib framework, designed to integrate impact with Islamic finance. Find out how to join the campaign.

While COP27 in Sharm El-Sheikh is just a month away, COP28 will see many financial institutions make major progress reports on and updates to the commitments they made at COP26 last year. At the Glasgow summit, many signed up to the GFANZ agreement led by former Bank of England Governor Mark Carney and made individual net zero commitments.

Our campaign is designed to encourage banks, asset management firms and other financial companies to demonstrate their commitment to the climate agenda, building upon the success of its  Path to COP26 campaign. It will consist of a series of activities and events, including a report on the challenge public sector pensions face in achieving net zero.

According to the United Nations Environment Programme Finance Initiative, the climate transition will require additional investment of at least $60 trillion from now until 2050 – around $2 trillion every year – meaning private sector commitments are vital to tackling the climate crisis.

And bold climate action could deliver at least US$26 trillion in economic benefits through to 2030, compared with business-as-usual, a report from the Global Commission on the Economy and Climate found.

David Pitt-Watson, Visiting Fellow at Cambridge Judge Business School and former President of United Nations Environment Programme Finance Initiative (UNEP FI) said that “As part of the Glasgow Financial Alliance for Net Zero (GFANZ), the finance industry set big aspirations. At COP26 in Glasgow, $130 trillion of invested assets signed up to the GFANZ, enough to fund the transition. COP28 in Dubai is where we find out how far these financial institutions have been able to deliver.”

He added that “finance, indeed our entire economic system, depends on climate stability. From COP21 in Paris in 2015, investors have urged policy makers not to delay in taking tough action. Together with global political leaders, the finance industry must play its part in creating and funding sustainable commerce. If it can, the future can be bright. If not, the alternative is catastrophic for us all.”

Graham Burnside, Senior Advisor to the Global Ethical Finance Initiative explained that “our Path to COP28 campaign seeks to encourage and support financial institutions in transitioning from commitment to actual implementation, measurement and reporting”, going on to point out that “finance can be a force for positive change” and asking for “organisations from across the globe to sign up to our Path to COP28 campaign to help us assist the financial sector to commit to practical efforts to tackle climate change.”

Arif Amiri, Chief Executive Officer of Path to COP28 host partner DIFC Authority said “DIFC and GEFI are delighted that the financial services sector is the first industry to launch a programme that aligns with the UAE government’s COP28 agenda.”

He added that “DIFC is perfectly placed to be host financial centre for the Path to COP28 programme given the progress we have already made and will continue to make on climate related matters with our clients. We are looking forward to working with GEFI and senior members of the local, regional, and international finance community to embrace this initiative and truly make a difference.”

On the Path to COP28: how we got here, and what to expect for finance

Our Path to COP28 campaign is building momentum for climate action from finance at COP28, and we will launch the campaign on 24 October in Dubai.

While COP27 in Sharm El-Sheikh is just a month away, COP28, taking place in Dubai in 2023, will see many financial institutions make major progress reports on and updates to their COP26 commitments. Our campaign builds upon the success of the prior Path to COP26 campaign to coordinate the finance sector ahead of this crucial summit.

In this blog, we take a look at what COP is, the role of finance, some of the key milestones along the path to Glasgow, and what to expect in Sharm El-Sheikh and Dubai.

What is COP?

COP stands for Conference of the Parties to the United Nations Committee on Climate Change. COPs are where the world comes together to agree on climate action, on how to mitigate climate change and adapt to it. As Manuel Pulgar Vidal, the COP20 President from Peru told us at our 2021 summit, this is no mean feat, as COP is “a multilateral process, with almost 200 countries: so everybody counts”.

Finance at COP

But what does all this mean for the financial industry? The early COPs like Kyoto were focused mainly on getting governments to agree on the basics of climate science, and what the targets for carbon emissions reduction should be in order to prevent or minimise.

Since then, attention has shifted increasingly towards action, looking at how we actually achieve the targets that the political process produces. One core component of this is finance. Most agree that addressing climate change requires significant transformation of our economies, particularly around the energy sector. Creating new industries and reshaping existing ones requires investment; while governments can provide some of the funding, the sheer scale of the challenge means that private finance must play a significant role. Since COP21, finance has been playing an increasingly important role at the summit.

The history of COP


The first summit, COP1, took place in Berlin in 1995. The foundation for the summit, and for the UN’s climate work, came from the Earth Summit in Rio in 1992. Presiding over the summit was Angela Merkel, Germany’s Environment Minister at the time.


A landmark early achievement of the COP process was the signing of the Kyoto Protocol at COP3 in 1997. The agreement set the groundwork for climate diplomacy, and was refined at subsequent COPs. However, key emitters such as the US withdrew from the treaty, and it took until 2005 to come into force.


COP6 at the Hague in the Netherlands saw a crucial issue come to the fore: paying for climate mitigation and adaptation in developing countries. Lack of agreement over this central question led to the collapse of the talks.


In 2009, COP15 in Copenhagen saw massive protests and was generally regarded as a failure. Many criticised the summit for not producing an ambitious, legally binding agreement in line with scientific recommendations. Others felt this was never a likely outcome given political considerations.


A solution to the “who pays for climate action?” question was agreed at COP16 in Mexico: the $100bn Green Climate Fund for developing countries. More than 10 years on, this has still yet to be delivered: the failure to do so has harmed trust in the process. There has been disagreement over how much public and private finance should contribute, and the recipients of funding.


In 2015 in Paris, COP21 saw the signing of the Paris Agreement, and the first real participation of private finance. The agreement represented a consensus that addressing climate change requires significant economic transition, particularly in the energy sector.

As finance is key to economic transition, the agreement included international mechanisms to promote climate-friendly finance, carbon trading, technology transfer and adaptation to climate change impacts. It also set the stage for the Taskforce on Climate-related Financial Disclosures, or TCFD, which has made its way into law in several countries in the years since, and significantly boosted climate bonds.

A notable contribution from private finance was a major petition to governments to commit to climate action: prior to that it was “assumed that capital markets opposed such regulation”, according to David Pitt-Watson, Chair of UNEP FI during the summit.


COP26 in Glasgow, saw the most significant progress since Paris, with the signing of the Glasgow Climate Pact. It still received a mixed reception from climate advocates, many of whom felt the agreement did not go far enough on securing binding targets, such as the last-minute amendment to “phase down”, rather than “phase out” coal. Arguably the most significant commitment was that made by all nations to come back before COP27 with enhanced emission-cutting pledges.

Nonetheless, the summit did see greater recognition than ever, from all across society, of the perils of climate change. One aspect of this was more involvement from financial institutions. The Glasgow Finance Alliance for Net Zero, or GFANZ, was launched, aiming to unite many existing initiatives, while individual financial institutions from around the world made net zero commitments of their own.

The future of COP


At COP27, in Sharm El-Sheikh, success is likely to be judged on four core areas: Mitigation, Adaption, Climate Finance and Loss and Damage. A key focus across the summit is likely to be issues for developing countries – as the COP process is driven by the host country’s diplomatic service, key themes often reflect that country’s priorities. On the finance side, we expect to see updates on potentially strengthening GFANZ, progress reports from financial institutions and a focus on nature and the need for nature-based solutions to climate change.


COP28 in Dubai will see the results of the first major stocktaking on the Paris Agreement. The process began at COP26, and will conclude in Dubai. This process is likely to be mirrored in the private finance side, as financial institutions provide results on their COP26 commitments, and update them.

Our Path to COP28 campaign will drive action from finance at COP28, and launches on 24 October in Dubai.

Scottish Taskforce for Green and Sustainable Financial Services: Meeting 3

The meeting took place at the NatWest Group Business School in Edinburgh on the margins of GEFI’s Ethical Finance Global 2022 summit. The meeting commenced with opening remarks from Taskforce Chair, David Pitt-Watson, followed by an introduction of new Scottish Taskforce members; Aegon Asset Management and Franklin Templeton.

With no formal presentations on the agenda, the Secretariat provided an update on the progress being made on each of the 4 workstreams as agreed at the previous meeting.


1. Education, Training, Qualifications and Research (ETQR)

ETQR continues to enable and offer the possibility of being an area of strength for Scotland. An ETQR working group has been established and following a series of meetings and a workshop, there is now a more concrete plan on next steps to be taken to build upon Scotland’s position relative to its growing workforce. The working group will continue to engage with Scottish Financial Enterprise to ensure that efforts are complementary. Finally, it was noted that GEFI has produced and published a short brochure on ETQR opportunities in Scotland, with an overview of the top programs and qualifications that are active in Scotland.

2. Investigating and Developing the Domestic Market

There continues to be a gap between investors and investible projects. With a recognised need for an open discussion between what the finance industry and project originators in Scotland. A working group will therefore be established to bring relevant stakeholders together to:

  • Explore the process for identifying and pre-qualifying prospective investable projects in Scotland
  • Understand green and sustainability-linked investment mandates/initiatives for Scotland (and elsewhere)
  • Identify gap is between green investible projects and investors and create solutions on how to close it

3. Mapping and Positioning

There is a general sense that Scotland has a lot to offer in promoting green and sustainable finance and Taskforce efforts will focus on:

  • Engaging with Financial Centres for Sustainability and monitoring rankings on the Z/Yen’s Global Green Finance Index
  • Developing a consistent narrative to position Scotland’s green and sustainable finance offering
  • Mapping Scotland’s responsible investment landscape
  • Engaging with GFANZ to explore Scotland’s role in supporting implementation the role of finance in the NZ transition.

4. Product Innovation: Natural Capital

 A working group is to be established to explore opportunities for Scotland to create tangible evidence-based data and projects to further the goal of Scotland being a global leader in carbon offsets (aligned with UK Voluntary Carbon Markets Forum).

"Forgive me father, for I have measure" | Leadership and Purpose | Ethical Finance Global 2022

"Forgive me father, for I have measured"

An eclectic conversation between Simon Thompson of The Chartered Banker Institute, Sarah Birrell Ivory of University of Edinburgh Business School and Will Goodhart of CFA UK saw us close out a wonderful day of debate and discussion at Ethical Finance Global 2022.

With no moderator to keep the peace, a freewheeling and entertaining conversation between the trio asked how to translate the day's good intentions into action.

They pondered whether the ceaseless call for better data is a sin against real activity, how professional education and professional values can produce socially and environmentally aware employees, the need for leaders to listen, and everything in between.

Watch now at https://youtu.be/D5u4gvpFOVY.

Geopolitical Risk and Ethical Finance | Ethical Finance Global 2022

What does the war in Ukraine mean for energy policy? Where does China fit in on sustainable finance efforts?

In an excellent first panel from Ethical Finance Global 2022, with Dame Susan Rice FSCB, Agi Veres, UNDP, Stephen Hibbert, ING and Leon Kamhi, Federated Hermes engaged in a wide-ranging discussion.

They discussed China's progress on sustainability and sustainable finance, and its vital role in delivering green infrastructure at the scale needed for the world's net zero transition.

Another topic was the energy crisis, and the tensions inherent in balancing environmental and social sustainability, the differing rates of inflation in society and whether the rise in prices brought about by the war in Ukraine justify rolling back commitments made on fossil fuel financing; according to ING, they do not.

Finally, participants discussed the need for companies to protect their lowest paid workers from the crisis, and the role that younger eployees, who are more purpose-oriented, have had on transforming their places of work.

Watch now at https://www.youtube.com/watch?v=9ru4QUM3F8k.