Allocate new multilateral finance to developing countries, says COP26 President Alok Sharma

We need to allocate new multilateral finance to developing countries, says COP26 President Alok Sharma. On 11 July, COP26 President Alok Sharma told an audience in Venice that "climate change is the greatest challenge that we face", and "to keep that 1.5 degree limit within reach, we must halve global emissions by 2030, and these efforts depend on finance. Without it, the task ahead is near impossible."

One of the UK government's key aims for COP26 is to "get finance flowing to climate action, both public finance and private finance", with a particular focus on emerging markets and developing countries, "where the need is greatest".

Sharma claimed it was "essential that developed countries deliver the $100billion a year that they have promised to developing countries", a sum that promises to be a major sticking point in the upcoming negotiations. Agreed at Copenhagen, the failure to deliver on this promise has seriously damaged trust from developing countries in industralised countries' committment to global climate action.

One solution to this is a $650bn allocation of Special Drawing Rights (SDRs), a multi-currency lending facility, being prepared by the IMF. The G7 has argued that they want to "channel almost a sixth of the newly allocated SDRs to support healthy, green and resilient recoveries from Covid-19 in the poorest and most vulnerable countries", said Sharma, calling for a more ambitious level of SDR recycling than during the aftermath of the Global Financial Crisis.

The Reading West MP urged Multilateral Development Banks (MDBs) to take action, suggesting that "every MDB should set a date by which they will align with the Paris Agreement, as the World Bank and the EBRD have done." We will be working with the Islamic Development Bank on our Path to COP26 campaign.

"Every MDB should meet their climate finance targets, increasing them where possible, and develop plans to mobilise more private finance", said Sharma. This will be key to overcoming the significant barriers that still exist to investment in emerging markets, which can seem too risky to attract large-scale institutional capital, despite the enormous investment opportunities.

The COP26 President urged MDBs and private financial firms to "increase their collaboration, and scale-up blended finance initiatives and technical assistance, and to improve the conditions for investment within countries, and build pipelines of high-quality, bankable projects". One initiative in this vein has been the IsDB's Transform Fund, which Hayat Sindi, Scientific Adviser to then President of IsDB, spoke about during our SDG financing panel at Ethical Finance 2021.


UK must make its Green Finance ambition work for the whole planet

The UK government has committed to establishing the UK as a global green finance hub, and to propagating consistently high standards around green finance globally. This is a very encouraging move ahead of COP26. At GEFI, we believe very strongly that international cooperation and, in particular, engaging with the global south will be key to developing credible plans for a global net zero economy.

As our co-founder and director Omar Shaikh said:

We welcome the ambition to make the UK a leader in green finance. But Net Zero is a global game and we must use the UK’s financial services position as a global leader to take the opportunity of COP26 to make the green transition fair for every citizen of our shared planet.

Our recent flagship Ethical Finance summit saw a full day devoted to a series of global showcases, bringing in perspectives on sustainable finance from regions including South Asia, West Africa and South East Asia; see our EFx platform to watch all of these and more.

The development and implementation of TCFD and TNFD frameworks must play a crucial role in government and regulatory strategies to ensure climate and biodiversity risks are not only recognised but are measured and reported on by financial institutions. Such developments will drive green finance globally as capital is diverted towards mitigation and adaptation investments.

The emergence of global frameworks provides best practice standards, consistency and transparency the finance sector has been seeking and, in so doing, reduces the threat of greenwashing. You can watch the new TNFD Co-chair Elizabeth Mrema and Mikkel Larsen of DBS Bank, one of the key institutions developing TNFD explain the new nature-focused framework at Ethical Finance 2021.

Ultimately, the financial sector must play a pivotal role in delivering a Net Zero economy, but it cannot do so without international collaboration.

COP26 represents the perfect opportunity for the finance sector to work with governments on a global stage. As the curtain gets set to rise in less than 17 weeks, the UK government must lead from the front to inspire others to commit to a Net Zero and nature positive economy that guarantees both the survival and prosperity of the whole planet. The need to raise awareness and inspire practical action has driven GEFI to convene a powerful group of financial services institutions and stakeholders through our Path to COP26 campaign.

Alongside programmes driving Finance for Nature, and integrating faith perspectives with the SDGs, the campaign aims to unlock the power of ordinary people’s pensions to deliver a better future for everyone, and position both Scotland and the UK at the heart of a global Green Finance that works for the whole planet, ensuring that people (and not simply profit) are allowed to prosper.


Partnership agreed enabling bankers to become a ‘force for positive change’

Partnership agreed enabling bankers to become a ‘force for positive change’

The UK’s largest professional body for bankers has agreed a partnership to promote ethical investment across the globe.

The three-year agreement will see the Chartered Banker Institute and the Scotland-based Global Ethical Finance Initiative (GEFI) work towards positive change in the sector.

They will use the COP26 summit in Glasgow in November as the catalyst to encourage financial institutions to finance the transformation needed in the economy.

The strategic alliance will support bankers to play a leading role in achieving net zero and honouring commitments made at previous COP summits to limit harmful emissions.

The deal will pay particular heed to the ‘Carney Test’ – set by former Bank of England governor Mark Carney – which implores financial institutions to take climate change into account when taking any financial decision.

GEFI, which is based in Edinburgh, said the Covid crisis also presented the financial sector with the opportunity to make changes that would bring long-lasting benefits to the environment.

Recently, the Scottish Government announced it would be a partner for GEFI’s ‘Path to COP26’ campaign in order to show Scotland was playing a key role in the global shift towards environmentally responsible and sustainable finance.

The organisation is holding a series of events in the run-up to COP26.

In a joint statement, Simon Thompson CEO, Chartered Banker Institute, and Dame Susan Rice, chair of the global steering group, Global Ethical Finance Institute, said:

“Global leaders have a stark choice about the legacy they want to leave our planet.

“Financing this transition will require the deployment of global capital on an unprecedented scale and a transformational shift in the banks and the bankers of the future.

“This important partnership is aimed at supporting bankers to be a force for positive change across the world.

“Merely talking about the scale of the problem climate change presents will not be enough – the banking sector needs to act too.

“Rebuilding the global economy after Covid-19 and delivering on the climate change challenge presents a unique opportunity. 

“That’s an opportunity for bankers across the world to be a force for positive change.”

Read more in The Banker: https://www.thebanker.com/Comment-Profiles/Viewpoint/Bankers-must-pass-the-Carney-test

The Chartered Banker Institute (CBI) and the Global Ethical Finance Initiative (GEFI) have announced a three-year strategic partnership to support bankers to be a force for positive change.

The UN’s 26th climate conference, COP26, taking place in Glasgow this November, presents global leaders with stark choices about the legacy we want to leave for our planet. The scale of change to achieve net-zero carbon emissions is bigger than any transition the global economy has ever seen; to meet the climate targets set in Paris in 2015 will mean an 11% reduction in carbon intensity every year from now to 2050. 

Financing this transition requires the deployment of global capital on an unprecedented scale, and a transformational shift in the banks and the bankers of the future. The Bank of England, under its former governor Mark Carney (now a UN special envoy for climate action and finance, and the UK prime minister’s finance adviser for COP26), set the objective in 2020 of ensuring that “every professional financial decision will need to take climate change into account”. In order to pass the ‘Carney test’, as it has been dubbed, we have identified the need for every finance professional to have the skills and knowledge to accurately assess climate-related risk and opportunities.

The UN Principles for Responsible Banking align banks and their lending decisions with the needs of our planet and its people. This work is well advanced in more than 200 banks worldwide; our two organisations have been helping bankers understand how to implement the principles and supporting the expansion into developing economies, for example, by supporting a group of Islamic banks who want to make this commitment. 

The CBI, the world’s oldest banking institute, launched a green finance education charter at the end of June 2020. It is now supporting its 30,000 members across the world — and its network of affiliated organisations, such as the Asian Institute of Chartered Bankers and Finsia in Australia and New Zealand — to get the skills they need to pass the ‘Carney test’. GEFI has grown in scale and reach over the past decade, as more and more bankers from different disciplines have sought out the expertise they need for the herculean task ahead. It has launched a ‘Path to COP26’ campaign that brings together 40 financial institutions, managing more than £2tn in assets, who are committed to make finance work in support of COP26 and on the road to net-zero. In line with our efforts, we are pleased to see UK banks such as NatWest, a sponsor of COP26, strengthening its climate policies.

But we all need to do more. Knowing how to measure the size of the climate problem and the risks that banks face is not enough. The explosion in fintech and the recovery from the global financial crisis has demonstrated the powerful forces of innovation and adaptation that reside within banks. Leaders in banking must make it clear that they want to see that power mobilised and channelled in this direction. We should expect our banks and individual bankers to be at the forefront of developing solutions and enabling a transition to a greener, fairer and more sustainable future. However, the impact and timing of decisions in the short, medium and long term must also consider how change can provide a socially just transition for customers, communities and society through responsible lending and inclusive, customer-centric services.

Rebuilding the global economy after Covid-19 and delivering on the climate challenge presents a unique opportunity. Now is the time for bankers to be a force for positive change. 


What will the UK Government's 'nature positive' response to Dasgupta mean for finance?

The UK government recently committed to a 'nature positive' response to Prof. Sir Partha Dasgupta's review of the Economics of Biodiversity. At Ethical Finance 2021 last week, Prof. Dasgupta called for a 'World Bank of Biodiversity', arguing that despite the complexity of nature and biodiversity, there are ways of reducing the issues to fairly simple economic principles. The biosphere should be treated as a global public good, argued Prof. Dasgupta at the annual Ethical Finance Summit, explaining that treating it as such would justify paying penalties for its desctruction.

In the UK Government's response to Prof. Dasgupta's review, it committed toi a number of actions ahead of the crucial COP26 climate summit in November. These include:

  • Committing up to £3 million additional support to the development of the Taskforce on Nature-related Financial Disclosures framework – a market-led initiative which will support business in assessing emerging nature-related risks and opportunities
  • Working with the Office for National Statistics to improve the way nature is incorporated into our national accounts
  • Further improving Government guidance for embedding environmental considerations into policy-making processes
  • Incorporating biodiversity into the UK Government Green Financing Framework
  • Joining the OECD Paris Collaborative on green budgeting, an initiative to encourage governments to incorporate climate and environmental considerations into their financial and fiscal decisions

These are all no doubt positive developments - necessary steps on the way to creating global frameworks that protect biodiversity and the biosphere. However, given the scale of the challenges we face, are they enough? The Living Planet Report 2020 reports stark statistics regarding biodiversity, including:

  • An average 68% decrease in population sizes of mammals, birds, amphibians, reptiles and fish between 1970 and 2016
  • A 94% decline for the tropical subregions of the Americas over the same period
  • 75% of the Earth’s ice-free land surface has already been significantly altered, most of the oceans are polluted
  • More than 85% of the area of wetlands has been lost
  • Until 1970, humanity’s Ecological Footprint was smaller than the Earth’s rate of regeneration. To feed and fuel our 21st century lifestyles, we are overusing the Earth’s biocapacity by at least 56%
  • Per person, our global stock of natural capital has declined by nearly 40% since the early 1990s, while produced capital has doubled and human capital has increased by 13%

Put simply, nature is in crisis, and as this crisis depens, it will affect our economies more and more. As the Dasgupta review pointed out nature suffers from a 'Tragedy of the Commons' effect - while the benefits for its destruction are privatised, the costs are public - a classic 'Principal-Agent problem', in the economists' parlance. To address this, we desparately need global cooperation between governments, finance, business and civil society on protecting biodiversity, and we need it now. THe steps the UK Government has committed to are a crucial step on the road to protecting nature with a 'World Bank for Biodiversity', but without committments to go further - to not just report and disclose impacts, but actively work to prevent them - there is a risk that this could be too little, too late.

The finance sector needs an urgent, credible plan to make TNFD reporting mandatory, as reporting in line with TCFD is likely to become soon. While TCFD's progress from idea to (in some territories) law has been admirably fast relative to the usual pace of public policy, it has still been too slow relative to the climate crisis. To respond to the crisis of nature and biodiversity that we are seeing, TNFD must be even faster.

At COP26, we will be exploring these issues as part of our Finance for Nature programme in our Path to COP26 campaign, with a dedicated focus on nature discussions in the unique setting of Loch Lomond. Click to learn more.


Greenwashing - what it is, and how to avoid it

What is greenwashing, and why does it happen? With Earth Day 2021 coming up, we take a look at a phenomenon which threatens the credibility of green businesses across the spectrum. For those inside the sustainable finance movement, the term is familiar. It is a common enough phenomenon that it has even made its way into the dictionary, with Cambridge Dictionary defining it as “mak[ing] people believe that your company is doing more to protect the environment than it really is”. In finance, this could mean a “green” investment fund which invests in unrepentant fossil fuel companies.

It is not hard to see how this could harm the credibility of both individual businesses and the green business movement more generally. If there are persistent gaps between how companies present themselves and their products and what they are actually doing, this will harm trust, putting customers off green products and causing genuine damage to the environment in the process. To mitigate this risk to both the environment and businesses operating in good faith, there have been numerous attempts to standardise what it means for a financial product to be considered “sustainable”, most notably the EU Sustainable Finance Taxonomy.

The rise of legal standards around sustainable finance implies three distinct types of greenwashing – scientific, legal, and perception. Legal greenwashing refers to falling short of legal standards, scientific to being assessed to fall short of some standard – for example, being consistent with limited global temperature rises to 1.5C – and perception to falling short of public expectations of what a product should mean.

This suggests that there can be both deliberate and accidental greenwashing. As more customers across the financial system demand sustainable products, the incentives to label products as green have increased, and consequently fund managers may consciously or subconsciously respond to this incentive. Fund managers might also sincerely believe in a product which turns out to fall short of legal, scientific or perception standards for what that product should be.

For example, many in the finance industry, such as Lothian Pension Fund’s David Hickey, strongly believe in the power of equity engagement on “brown” stock. The public – as shown in this video from pension campaign group Make My Money Matter – may have limited understanding of the details of how pensions operate and expect even those funds not explicitly engagement in ethically-aware investing to avoid some types of businesses.

With the complex spectrum of greenwashing in mind, it is difficult to put a number on the exact scale of the problem, in finance and beyond. As regulation around sustainable finance improves, and consumers demand more integration of ESG concerns, we will no doubt see some fall short.

How do we solve a problem like greenwashing? Sadly, it seems unlikely that the problem will just go away of its own accord. As sustainability becomes an ever more important part of economic life, greenwashing will continue to be an issue, but one that can be mitigated as regulators, consumers and the financial industry improve their understandings of sustainable finance. In future, assessing whether a financial product’s green credentials are grounded in reality will be as important as assessing whether its financial claims stand to muster.

One innovative solution, touted by Kaisie Rayner, Climate Change Lead at Royal London, at our Ethical Finance 2020 panel on greenwashing, is to flip the situation on its head. With food, Kaisie pointed out, we do not highlight the vegetable content, but rather the sugar and fat. Likewise, instead of labelling some products as “green”, perhaps we should instead be putting health warnings on those that are not.

What can we do to prevent greenwashing?

Be open, honest and transparent about financial products

Financial institutions should disclose the details of their products, and not try to optimistically claim unearned green credentials. Consumers should be able to easily find out the principles and strategies of ethical finance products.

Call out bad practices

Where greenwashing is taking place – intentionally or not – we should call it out.

Strengthen regulation and standardise terminology

Historically, the ethical finance sector has run largely on trust. Firms have been responsible for labelling products as “green”, “ethical” or “ESG”, and consumers have been responsible for assessing whether these labels match their expectations. A standardised set of terms for ethical finance should improve transparency.

Move towards “health warnings”

It should become standard practice to highlight the aspects of a financial product that consumers might not want to be associated with.


Why Nature Needs To Be On The Finance Agenda This Earth Day

With Earth Day 2021 right around the corner on Thursday 22nd April, we at Global Ethical Finance Initiative (GEFI) are taking the opportunity to look ahead to November 2021, when Glasgow will host COP26, the UN climate change summit. This is the most important climate summit since the landmark COP21 summit in Paris in 2015, when heads of state committed to restricting global temperature rise this century to 'well below' 2°C above pre-industrial levels and to pursue efforts to limit it to 1.5°C, in the Paris Agreement. COP26 is a crucial opportunity for nations to come together to review their commitments and strengthen ambition for the decade ahead.

Scotland is already leading by example with the Climate Change Bill making a commitment to becoming a net-zero society by 2045 – five years before the rest of the UK. The Scottish Government has also responded to the global climate emergency by adopting an ambitious new target to reduce emissions by 75 per cent by 2030. The Scottish National Investment Bank, which will be operational in the second half of 2020, will support the transition to net zero through a range of debt and equity products.

The financial opportunities and risks of transitioning to a low carbon, resilient global economy have catapulted climate change to the top of the agenda for investors, lenders and insurers across the globe. As well as setting ambitious targets to minimise their own greenhouse gas emissions many financial institutions are driving reductions in the climate impact of their financing activity by decarbonising their portfolios and increasing investments in solutions to climate change. With Earth Day coming up, it is timely to reflect on the key role nature plays in regulating climate as well as helping us to adapt to and mitigate against climate change. By conserving nature and restoring ecosystems we reduce climate vulnerability and increase resilience.

The sustainable management and use of nature can help tackle wider socio-environmental challenges such as water security, water pollution, food security, human health and disaster risk management. However, with ecosystems declining in size and condition by 47 per cent globally, and species populations facing extinction, the wake-up call on nature loss arrived at this year’s World Economic Forum where, for the first time, the Global Risks Report ranked biodiversity loss as one of the top-five global risks in terms of likelihood and impact in the next 10 years.

Around $44 trillion of economic value generation – over half the world’s total GDP – depends on nature and its services and sustainable use of our environment in Scotland accounts for 11 per cent of our total economic output – worth £17.2 billion a year – and one in seven full-time jobs. The global coffee market had retail sales of $83 billion in 2017 but 60 per cent of coffee varieties are at risk of extinction from a combination of climate change, disease and deforestation.

Nature and biodiversity loss therefore represent a significant financial risk. Insufficient accounting for the risks posed by nature loss have unintended consequences, such as short or long-term risk mispricing, inadequate capital buffers, and in extreme cases the potential for stranded assets.
In boardrooms nature loss continues to be largely a hidden risk. This needs to change, and quickly.

GEFI is working with the United Nations Development Programme and Scottish Government on a programme of collaboration that aims to raise awareness and position nature at the forefront of the COVID-19 economic recovery and for the long-term well-being of people and the planet. Within the programme, which forms part of our wider Path to COP26 campaign, we are actively looking to develop a financial instrument that accelerates nature-friendly investments at scale as well as draw upon our extensive global network to support other initiatives such as the Scottish Environment Protection Agency and Scottish Wildlife Trust’s challenge to unlock £1 billion of new investment for nature conservation in Scotland. We are also looking to explore the feasibility of a global framework for financial institutions measure and disclose nature-based risk.

With Covid-19 exposing the fragility of health security and financial systems there is a pressing need to build social, environmental and economic resilience. At GEFI, as we approach COP26, we are committed to working with our partners ensure nature joins climate at the top of the finance agenda to underpin a green and sustainable recovery, positioning Scotland as a leading global centre for ethical finance this Earth Day and beyond.

*A version of this blog post was published in The Herald on the 8th August 2020; it has been updated for 2021 .

Chris Tait
Executive Manager
Global Ethical Finance Initiative


Scottish Government announce campaign partnership for the Path to COP26

The Scottish Government has announced it will be a campaign partner for the ‘Path to COP26’ campaign to demonstrate to the world that Scotland is playing a leading role in the shift towards more environmentally responsible and sustainable finance.

With a global footprint and Scottish roots, the Global Ethical Finance Initiative (GEFI) is leading the campaign which has united major financial services institutions representing over £2 trillion in assets to help build more resilient economies which support the transition to a greener, net-zero planet.

The finance sector needs to act together to achieve decisive action at COP26, the most important climate summit since Paris, and the campaign will deliver a series of over 30 events and projects leading up to COP26 in Glasgow in November.

This includes Ethical Finance 2021, a flagship global summit to be convened virtually from Scotland in June, with confirmed speakers including a former COP President, head of the UN Environment Programme and CEOs and financial services leaders from four continents.

Held in conjunction with the Scottish Government and the United Nations Development Programme (UNDP), the summit will explore the long-term future of ethical finance, looking at the climate finance challenge, financing the UN’s Sustainable Development Goals (SDGs) and leadership in finance for the challenges ahead.

NatWest Group is the host partner, and the global event is supported by Chartered Banker and the Chartered Institute for Securities & Investment. Confirmed speakers include Manuel Pulgar-Vidal, Climate and Energy Global Practice Leader at WWF, COP20 President and a former Peruvian environment minister, Inger Andersen, executive director of the UN Environment Programme and David Pitt-Watson who co-chaired the finance discussions at the Paris climate summit.

The announcement comes after the Scottish Government yesterday unveiled its global capital investment plan, which aims to build a pipeline of ESG-ready (environmental, social and governance) projects that deliver for people and places in Scotland.

Ivan McKee, Minister for Trade, Innovation and Public Finance, said:

“The Scottish Government is delighted to further strengthen its relationship with the Global Ethical Finance Initiative.

“By providing support for a series of events on the road to COP26 showcasing Scotland’s investment opportunities, GEFI will help signal to the world that Scotland is leading the global movement towards investment which is socially and environmentally responsible.

“Scotland is already in a strong position in attracting ethical investment and GEFI, along with Scotland's outstanding financial sector, is paving the way in this developing field of green finance.

“Our global capital investment plan reemphasises our commitment to Net Zero and a wellbeing economy, and we will continue to work with partners and investors who share our values as a nation, making Scotland the destination of choice for ESG investment.”

Omar Shaikh, co-founder of GEFI, said:

“We welcome the Scottish Government’s support for the Path to COP26 campaign. The flagship summit at the heart of this, Ethical Finance 2021, will be a crucial milestone for the finance industry ahead of COP26.

“We’ll be convening leading professionals from across finance, from banking, to asset management, to asset owners, so that we drive further action ahead of the UN summit in Glasgow in November.

“It’s time to move from talk to action.

“We have been working with Scottish Government, the UN and global financial institutions to position Scotland as a leader in ethical, sustainable finance to attract the global capital needed to support a successful and fair transition.”


Ethical Finance Round Table | Festive Fireside on Reasons to be Cheerful in 2021

After a year that will live long in the memory for all the wrong reasons, the final Ethical Finance Round  Table of the year discussed reasons to be optimistic about what the future holds, in an event focused on Scotland. The session looked at the newly formed Scottish National Investment Bank and how it aims to tackle inequality, drive innovation and be at the center of Scotland’s transition to NetZero. It also discussed how we have a unique opportunity to determine the future and reignite a fair economy for Scotland. Dame Susan Rice, Chair of the Scottish Fiscal Commission was joined by Willie Watt, Chair of the newly-formed Scottish National Investment Bank (SNIB), and Andrew Wilson of Charlotte Street Partners and the Sustainable Growth Commission.

But, Och! I backward cast my e'e.
On prospects drear!
An' forward, tho' I canna see,
I guess an' fear!

To a Mouse, on Turning Her Up in Her Nest With the Plough, November, 1785 - Robert Burns

After our very own Graham Burnside welcomed attendees in typically Scottish fashion, quoting Burns, moderator Dame Susan Rice explained that she was looking forward to hearing about the ‘what’ and ‘how’ from the speakers. How can a mission led financial institution support business and celebrate outcomes that are both fair and inclusive? What are the opportunities that can reignite the Scottish economy, such as COP26 and the COVID rebuild?

Willie Watt introduced us to SNIB, which opened for business less than four weeks ago. Funded by the Scottish government with £2bn over the next ten years, the bank has three missions:

1) Address inequality in Scotland

2) Invest in innovation

3) Assist in Scotland’s transition to NetZero

The Bank will look for both financial and impact returns from its investments and hopes to be fully self-sustaining in five years. Willie Watt stressed that maximising profit and purpose is no longer an either or – good governance and sustainable business are the path to profit and purpose. While accepting that the Sustainable Development Goals are a good guide to business and asset owners, Willie felt they are too complex to create a successful investment strategy and so the three missions will instead be the focus.

Andrew Wilson, Founding Partner of Charlotte Street Partners and Chair of Scotland’s Sustainable Growth Commission, stated that there has never been a better time to take risks and make big policy changes. While the most powerful force has traditionally been what we did yesterday, the COVID crisis has left us with no choice but to enter an era of reform, accelerating many of the challenges we face, including inequality and deglobalisation.

Andrew argued that we can no longer afford to look to the future with fear. We must instead determine what the future will be with the opportunity afforded to us. One risk is that lending stops at haste post COVID and we do not support the emergence on the other side. While debt is at record levels, the cost of servicing that debt has fallen by half and is historically cheap. The tyranny of short-termism is one of our greatest risks and we must be more honest with society - stop “promising jam tomorrow”, promise hard work for a generation to get this country and others to a point of civilisation that they deserve.

For Andrew, while deglobalisation is a growing – and worrisome – trend, it offers an opportunity to smaller countries to collaborate. For example, Scotland, New Zealand, and Iceland are tied by their pursuit of a wellbeing economy. Another opportunity Scotland has in abundance lies in its natural economy. If the right collaboration took place, Scotland’s natural economy would be within the top three globally.

Andrew also spoke about the need for proper engagement with the developing world. It is not only right but also in the interest of developed counties to help out developing countries. The problems they face will not stay in the developing world. The second big risk Andrew identified was populism, which is driving deglobalisation and selling a myth of the past as an easy solution to the future. He was clear that this is not the solution, the solution is thinking long term and investing.

Dame Susan finished the session, explaining that history shows us that after a major crisis, there will be a shift in values and in how we live. We can use this moment to lead change and that is a reason for hope and festive cheer. Opportunity always exists and we must allow ourselves to test and experiment as we go forward. When she looks at Scotland, Dame Susan feels enormous pride of the efforts made to date. The Scottish Parliament voted unanimously for the world’s most aggressive Net Zero timeline. There is something special about Scotland that makes people come together and make things happen.


The Path To COP26 | One Year To Go Event

Speakers at the ‘One Year To Go’ event for GEFI’s Path to COP26 campaign discussed how the finance sector can practically support action on climate change ahead of the COP26 summit next year in Glasgow. The session offered perspectives from banking, asset management and COP insiders, with Gail Hurley of GEFI joined by Cambridge University Visiting Fellow David Pitt Watson, Ingrid Homes of Federated Hermes, Isabel Fernandez of ING, and discussion moderator Hamish Patrick of Shepherd + Wedderburn. Click on the links to watch videos from the event, including all the presentations, the Q&A, and individual presentations from David, Isabel and Ingrid.

Gail Hurley introduced the Path to COP26 campaign, which seeks to ensure that the finance sector plays a leading role in the most important COP since Paris. Over 40 organisations have joined the campaign, representing £2.7 trillion of assets; click here to find out how to get involved

Gail highlighted a recent UN publication, which gave a damning report on the financial sector’s efforts so far to get funding to where it is needed. It has come up short in dealing with both climate change and development in the world’s poorest countries, despite positive signs across the sector.

David Pitt-Watson, investor, Cambridge Judge Business School Visiting Fellow and former UNEP FI chair during COP21 shared his practical experience of COP, and stressed that climate matters for finance. Finance needs to move money from where it is, to where it needs to be, but at present there is not enough green finance and far too much brown finance is still taking place.

COP is important because finance cannot solve the issue of climate alone, but needs support from policymakers, and it is important that discussions for ambitious climate agreements take place before the conference itself. The finance sector will likely be looked at with some cynicism and suspicion, in part because£100 billion was promised to the developing world as part of the Copenhagen Accord agreed at COP19, but evidence of its influence is hard to find.

David stressed that there is genuine progress in the finance sector, particularly on reporting, but more needs to be done. One area he felt that we can improve at COP is stewardship. Divestment diminishes the power we hold by maintaining equity;by using the votes equity holders have to appoint Directors, we can vote for those that align their organisations with the Paris Agreement. The onus is on the finance industry to demonstrate that we are doing the right thing: delegates will not be interested in virtue signalling.

Isabel Fernandez , Member of the Management Board and Global Head of Wholesale Banking at ING spoke about how the banks sees the pandemic as a chance to ‘hit the reset button’ and on issues including biodiversity loss, climate change and inequality.

While there are many commitments out there, it is action that counts and Isabel argued that ING have taken the lead when it comes to aligning lending portfolios with Paris.  They have done this by creating an approach called Terra, which uses scenario analysis to determine the impact of different sectors on the climate. Assessing the gap between the technology required to meet the Paris Agreement targets and those used currently by clients, Terra shows how far each sector is along the path towards Paris. This allows ING to finance the technology and innovation clients need to move their business closer to achieving the goals set,steering key sectors towards a low carbon future.

The second progress report on Terra has been released, showing that across the nine sectors which are contributing the highest emissions, most are on track to align with Paris. They have found that many clients are actively looking to develop sustainably so have bought in readily to this approach and the advice which ING have given. Terra is all open source to increase its reach and open collaboration across the banking sector. Isabel explained that ING believe that it is not where clients are today, but where they are heading which is most important.

Ingrid Holmes, Director – Policy at Federated Hermes opened by sharing some of the issues that they are dealing with. For instance, what needs to be done to commit to net zero, when they should be trying to achieve that goal, and also when they should be committing to becoming a Paris aligned firm.

There are six key things Federated Hermes expect every company to be thinking about:

  • Disclose in line with the TCFD
  • Sufficient governance and capacity to move forward with climate management
  • Embrace the complexity of the issues
  • Look beyond operations and strategy into supply chains
  • Use public policy influence positively to engage with government with new market rules
  • Commitment to science-based targets, with interim targets also established

Federated Hermes feel some activities are unjustifiable, such as thermal coal, and will be withdrawing capital from them. Controversial investments, such as those burning fossil fuels but in the process of transition, will require a business case to ensure the transition comes to pass or divestment will occur.

The session closed with a Q&A moderated by Hamish Patrick of Shepherd + Wedderburn, who asked the speakers how the trends and push towards climate finance that we are seeing is helping the developing world. David answered that this is a very difficult position where, with justification, the global south is looking at the north to fix the problem they have profited from. Promises of funding have not materialised and we need to get funds flowing to global south sustainable development projects. Isabel spoke about some of the feedback she has had from the global south, that the developed world has had 50 years of pollution to get to its present state, but nonetheless she has seen their determination and enthusiasm to develop sustainably. It then becomes ING’s role to help wherever they can.

Regarding the products needed for a transition, Ingrid spoke about the desire to see more thematic products with an explicit Paris alignment to them, adding that while there are an increasing number of products out there, we need to stop greenwashing. David argued that we do not need more complex products: the finance sector’s job is to manage the money of the millions of people who have invested money, often through their pensions, and to move it to where it needs to be. We have a set of financial institutions that are ‘Institutionally fossilist’ – institutions that have grown to up to be able to finance the old economy. Now we need to get the new systems that will finance the new economy.


Climate change: Ethical finance can help deliver a 'Marshall Plan for the planet' - Omar Shaikh

This article originally appeared in The Scotsman at https://www.scotsman.com/news/opinion/columnists/climate-change-ethical-finance-can-help-deliver-marshall-plan-planet-omar-shaikh-3001747

Faced with the biggest pandemic in a century grinding the global economy to a halt, or our ecosystem being on the cusp of the irreversible extinction of species caused by climate change and our insatiable demand for natural resources, or indeed the rupturing of deep structural barriers causing gender and race discrimination highlighted by the Black Lives Matter campaign, people are no longer willing to accept the status quo.

The gap between the rich and the poor has never been bigger and – despite all our advancements – the UN has called for the urgent implementation of the Sustainable Development Goals (SDGs) so that no one is left behind.

We sit at a key juncture and there is an unrivalled opportunity to rewire the system – for those nations, markets and companies which can demonstrate vision, leadership and courage.

And we have no time to lose: this must be the decade of action.

Change the world

Five years have passed since the countries of the world came together to set the SDGs – a blueprint to achieve zero hunger, quality education, decent work and climate action, among other targets by 2030.

Despite the challenges we all face, at the Global Ethical Finance Initiative (GEFI) we believe that when we come together to share insights and commit to action, we genuinely can change the world.

The plans that governments and institutions produce must be more about renewal than just recovery, building a responsible, inclusive, sustainable and green future. We must encourage bravery and allow our leaders to be courageous, because we will only achieve as much as their vision and courage allows us to.

At the heart of this is reframing capitalism – and the blood supply for this is ethical finance.

Last week, from our base in Scotland, we convened – virtually – over 1,500 professionals from 86 countries to shape a better finance system. Some of the world’s largest banks and asset managers attended the Ethical Finance 2020 summit, representing over $20 trillion of assets.

Ethical finance is a fairer system of financial management that combines profit with better outcomes for people and the planet.

There is a reason why we are based in Scotland and why the summit is convened from Scotland. In rethinking capitalism, Scotland, as a global citizen and with its heritage going back to Adam Smith, can play a unique role in this. The financial services and academic talent, progressive thinking and inherent culture provide an enabling ecosystem for solutions that can once again shape the world.

Financing a green recovery

A recent report from the Ethical Finance Hub found that Scotland’s £9.5 billion UK-domiciled responsible investment already represents 11 per cent of the UK responsible investment market, compared to the country’s seven per cent share of the total market.

There is an unrivalled opportunity for Scotland’s £800 billion financial services industry to tap into, service and grow the market.

We need to consider where climate finance can help fund the green recovery and create jobs through facilitating foreign direct investment (FDI).

There is therefore a prerogative for those in charge to demonstrate ambition and moral leadership. The Scottish Government has already demonstrated a willingness to think beyond GDP, with Nicola Sturgeon rightly talking about the fundamental need for health and well-being. Ministers now need to take the next steps to progress this agenda and organise and commit to realising the financial innovation that is required.

Finance firms too must continue to take action. It is encouraging that Aviva this month set a new 2050 net-zero carbon emissions target for its own auto-enrolment default pension funds.

Steve Waygood, chief responsible investment officer with Aviva Investors, told our summit that “we need a vision for a Marshall Plan for the planet”, echoing the words of Prince Charles last month. Steve highlighted the COP26 climate change summit being held in Glasgow next year as arguably the most important conference that the UK has hosted.

Make My Money Matter

Preparatory work over the next six-to-nine months will reveal the world’s ambition to tackle climate change and determine whether the summit in Glasgow is considered a success.

With the fifth anniversary of the Paris climate agreement coming this December, governments including the UK Government should soon be setting out their commitments and ambition to tackle the emergency.

Our ‘Path to COP26’ campaign has now become the largest financial services sector movement in the run-up to COP26 with over 40 firms registered. The initiative is designed to encourage banks, asset management firms and other financial companies to demonstrate their commitment to the climate agenda by sign-posting existing initiatives and standards for them to sign up to.

For Scotland, there are great opportunities for asset owners to invest in the clean energy sector and deliver greener pensions. Investments in wind power and green hydrogen present considerable, unique opportunities to Scotland that can attract energy-intensive businesses and allow Scotland to become a leading net green energy exporter.

All this needs to be financed and our pensions are an important source. As part of our ‘green your pension’ campaign, we know that only 13 per cent of Scots who have a pension actively chose their own investment portfolio.

We have partnered with the Make My Money Matter campaign led by Richard Curtis, encouraging the public to shift their pensions away from harmful assets and in line with their values.

There is an opportunity in the months ahead to make a positive difference.

For the sake of all people and the planet, we must seize it.