The Analysis Comment


Reporting the facts on climate-change finance


A new global industry survey finds that firms are seeking alignment on climate-risk analysis, measurement, and disclosure approaches


Axel Weber Chairman, Institute of International Finance and UBS Group


With a growing focus on sustainable finance, and particularly the need for a robust toolkit for climate risk management and disclosure, the Institute of International Finance (IIF) and the European Banking Federation last month published the findings of a joint survey of members. The survey of 70 financial firms around


the world, with total assets of nearly $40tn, finds that the streamlining of measurement and disclosure frameworks, and increased international collaboration, are key to strengthening the climate-related risk analysis and reporting toolkit. It demonstrates the important industry


efforts underway to develop methodologies to better understand, measure and disclose financial risks from climate change. We will work with and support our members as they continue these efforts and looks forward to increasing engagement with regulatory policymakers as they begin to develop climate-risk supervisory frameworks.


Hesitant Among firms that are not yet disclosing data on financed emissions, more than 50% said they are hesitant to do so given the lack of standardised accounting frameworks and data challenges. Encouragingly, 70% of all respondents


organisation’s overall risk- management framework


into


expressed an interest in the creation of a collaborative, open-source framework to enhance these climate finance tracking and reporting frameworks. “The EBF is committed to support and contribute to the


protection of the environment and will work closely with our members to develop tangible sector-wide initiatives,” said Jean Pierre Mustier, president of the European Banking Federation and group chief executive officer of Unicredit SpA. “Banks need to do more than ‘business as usual’ because now is the time to act and make


February 2020


identifying and assessing climate-related risks and opportunities. However, only 17% of respondents have fully integrated this process


process for their


Over 45% of our survey participants stated that their risk management framework includes an explicit


an impact. We need to reduce our direct environmental impact by further cutting greenhouse gas emissions and moving towards renewable energy sources. “We need to work to make an even bigger


difference through our indirect emissions, by partnering with customers in the shift to a low carbon economy. Building a sustainable future is an important challenge that we must all address together.”


Key findings Other key findings include: l Supply and demand of sustainable instruments is on the rise – more than half of respondents already issue their own sustainable instruments and 89% of respondents expect demand for sustainable investments to grow in 2020. l Better processes are needed for risk management – over 45% of our survey participants stated that their risk management framework includes an explicit process for identifying and assessing climate-related risks and opportunities. However, only 17% of respondents have fully integrated this process into their organisation’s overall risk- management framework. l Most financial firms do, at least partially, already follow the Task Force on Climate- related Financial Disclosures


(TCFD)


recommendations – overall, 60% of institutions are already implementing TCFD


recommendations to some degree, with another 30% stating they are planning to do so in the future. l But adoption of TCFD recommendations varies widely across geographies – only 37% of emerging-market respondents reported disclosing information aligned with TCFD recommendations, compared with more than 80% of respondents in developed Europe. CCR


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