Every Friday, Policy Shift will share a selection of recent articles and publication focused on public policy and innovation. This week's theme deals with sustainable finance and more broadly the financing of the energy and ecological transition.
By Veblen Institute, given that the ECB mirrors investment choices made by financial markets (even though financial markets seem misaligned with a mitigation path limiting the global warming to 1,5°), this analysis suggests a way to integrate carbon emissions as a criterion in its own right, shaping central banks’ investment decisions and the collateral framework used for refinancing purposes.
By the Institute for Climate Economics, the paper proposes a framework that specifies three dimensions of action: a comprehensive scope of action (institutions should seek to directly/indirectly support low-GHG climate resilient development across all business areas); a long-term time horizon to guide impact (that does not lead to carbon lock-in or mal-adaptation); and an ambitious scale of contribution (through activities that do not harm other environmental objectives and foster transformative outcomes).
By the association “Finance for Tomorrow”, the report presents available tools and solutions in order to provide the keys to developing a common understanding of climate risk in financial markets. It develops a methodologies map that provides an overview of existing tools to measure and assess climate risk, as well as regulatory actions to tackle this issue of financial stability.
By the IFRS, this analysis provides guidance on (i) how to make materiality judgements when considering climate-change risks, (ii) which financial reporting considerations with regard to climate when applying IFRS standards, and (iii) how to disclose climate-related risks in the financial statements. This analysis echoes a report published by the French Ministry of Economy and Finance on climate and ESG-related corporate information in June 2019 (check out the Agefi magazine’s article and the report).
By the asset management company Meeschaert, this study assesses the impact of rare earths along the supply chain and the degree of exposure of financial institutions to operational, reputational, environmental and regulatory risks entailed by these metals. These metals are extracted under very specific conditions and produced in a limited number of countries, in small quantities and their use makes them poorly substitutable and difficult to recycle. Contrary to what their name may suggest, these elements are not uncommon: their criticality is mainly linked to China's current quasi-monopoly for their extraction and transformation.