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Sustainable Finance Community Update

Working towards a sustainable future


An IFoA Sustainability Board initiative. Follow us on LinkedIn and Twitter for further updates and insights, and subscribe to the newsletter here.
 
5th November 2021
Pictured above: Glasgow, hosting city of COP26 as pictured by Craig McKay on Unsplash. This week's newsletter continues with coverage of COP26, which is front and centre of all sustainability discourse this week as global delegates to descend on the city to share speeches, pledges and commitments with the world. Protests have blocked Glasgow's Clyde Arc (pictured above, locally known as 'Squinty Bridge') which is nearby to the home of COP26, The Scottish Event Campus (SEC).
In the spotlight
Climate-related risk: what are actuaries doing?
 
 
Actuaries are among those leading the thinking on climate-related risk. On 4 November the IFoA published the findings of its recent information gathering exercise on climate-related risk, looking at the involvement of actuaries, as well as the extent and impact of their influence, in climate-related risk. Go to the IFoA website to find out more, or go straight to the full report.
 
In the news
COP26: Glasgow's UN climate conference opens with key speeches
 
World leaders gathered in Glasgow on Monday for the opening of the critical 12-day United Nations Conference on Climate Change (COP26) and delivered speeches from the global stage. Leaders, including those from major greenhouse gas emitting countries like the US, Canada, Spain, India, and more, spoke on Days 1 and 2 of the summit, including remarks on emissions reductions and funding for UN climate financing initiatives.
 
UK Prime Minister Boris Johnson kicked off the conference’s opening ceremony where he spoke on the importance of reducing global emissions. Likening the crisis to a “doomsday device”, Johnson delivered remarks on listening to science and the impact of a temperature increase on the global food supply and extreme weather. The PM told leaders and delegates that the "anger and the impatience of the world" would be uncontainable "unless we make this COP26 in Glasgow the moment that we get real about climate change".
 
After the opening address, climate activists from vulnerable parts of the world, including one from the Amazon, spoke about the threat climate change poses to them. Prince Charles, UN Secretary General Antonio Guterres and Sir David Attenborough also spoke.
 
Read the article here (BBC).
 
COP26: India PM Narendra Modi pledges net zero by 2070
 
India, the world's fourth biggest emitter of carbon dioxide after China, the US and the EU, has promised to cut its emissions to net zero by 2070. This is quite a significant step for the country, which is still getting more than 50% of electricity from coal. Whilst the key goal of the COP26 summit for countries was to commit to reach this target by 2050, therefore disappointing some activists and experts, there has been some warm welcoming for the goal.

Mr. Modi made the pledge as one of five commitments from his country, which include a promise for India to get 50% of its energy from renewable resources by 2030, and by the same year to reduce total projected carbon emissions by 1bn tonnes. The prime minister appears to have sought out the middle ground for his pledges - both being serious about climate change but without compromising India's economic potential.
 
Read the article here (BBC). See the opinion section for further analysis of this commitment .
Global leaders to sign pledge to halt deforestation
 
In what is being billed as one of the first significant steps of this year’s COP26 summit, leaders from countries that are home to more than 85% of the world’s forests put their names to a declaration designed to end the legal and illegal destruction of woodland. Climate experts said the pledges marked a change in the seriousness with which deforestation — a main source of carbon emissions — is treated on the international stage and in the private sector.

However, as with all international agreements, the devil is in the details. The declaration does not outline specifics such as how progress will be assessed and what might happen if nations fail to implement it. Matt Williams, climate and land program lead of the Energy and Climate Intelligence Unit said that details about how the pledge will work in practice may emerge in the coming days following the “negotiations and dialogue” that have taken place “behind the scenes for the past few months”. In an attempt to set standards for sustainable supply chains, 28 governments also signed up to a new forests, agriculture and commodity trade “road map of action”.
 
 
Read the article here (FT - paywall).
 
UK to enshrine mandatory climate disclosures for largest companies in law
 
The UK will become the first G20 country to enshrine in law mandatory TCFD-aligned requirements for Britain's largest companies and financial institutions to report on climate-related risks and opportunities. This will include many of the UK's largest trades companies, banks and insurers, as well as private companies with over 500 employees and £500m in turnover.
 
The new requirements will help investors and businesses to better understand the financial impacts of their exposure to climate change, and price climate-related risks more accurately, while supporting the greening of the UK economy and ensure they are well placed to harness opportunities from the UK's transition to net zero. The UK government has been delivering on green finance ambitions through a package of measures, including the recent Sovereign Green Bond issuances and a commitment to set out an indicative sectoral transition pathway to 2050 to align the financial system with the UK's net zero commitment.
 
 
Read the article here (UK Government).
Danish lobby boasts 40% of new $130bn Nordic/UK PF green pledge
 
Nordic and UK pension funds have committed to invest $130bn (€112bn) in clean energy and the green transition by 2030, in a collective pledge announced at an event in Glasgow during COP26, with the Danish pensions lobby pointing out that 40% of this was down to its members.

The Climate Investment Coalition (CIC) – a scheme formed two years ago to foster private funding for clean energy and climate investments – announced that a range of pension funds, including Iceland’s Almenni Pension Fund, Denmark’s ATP and the Environment Agency Pension Fund in the UK, had collectively made the commitment and also promised to report annually on the progress of their climate investments.
Peter Damgaard Jensen, CIC co-chair, said: “These ambitious pension funds are taking critical steps to ensure pensions take advantage of the enormous opportunities of the green transition, help spur immediate solutions to lower carbon emissions, while protecting our savings against the ravages of climate change.”
 
Read the article here (IPE).
 
What are we reading
Climate Scenario Analysis: Current Practice and Disclosure Trends

New research from Alliance Manchester Business School aims to shed light on the practical processes and approaches used in UK companies already conducting climate scenario analysis in order to help those companies at an earlier stage of their journey. It highlights the practical steps taken by the teams interviewed, as well as the observed challenges and best practice.

Scenario analysis has a long history in helping companies prepare for complex and uncertain futures. Scenarios provide hypothetical constructs of possible future states that are used to challenge prevailing assumptions and to analyse business model resilience. Climate scenario analysis helps companies to identify and prepare for the impacts that climate change will have on their business models by guiding a structured exploration of different possible futures to identify the most relevant risks and opportunities. The research highlights that, at present, deployment of climate scenario analysis is being driven by disclosure requirements and investor expectations.
 
 
Read the article here (FRC).
 
Tune in
Watch live: Full coverage of the COP26 summit

Sky News is hosting live rolling coverage of the panels, talks and discussions at COP26, as well as guest interviews as part of its 'Climate Live' broadcast. Watch live from Sky News here.
 
There is a handy summarized breakdown of what is expected each day here , and a tracker of what has been agreed so far here.
 
 
Opinion
Cop26: welcome to Glasgow - the world is watching
 
Cop26, a conference which has been delayed by a year, led thousands of participants who had come to the UK from all four corners of the globe to face queues and icy weather due to rain and no shelter. Perhaps a chance to focus the mind at the highest stakes COP to date.
The delegates' speeches, all highlighting and demanding urgency, included:
  • Mia Amor Mottley, PM of Barbados accused countries of making promises based on technology that doesn’t yet exist.
  • The UN secretary general, António Guterres, urged G20 countries, who are responsible for 80% of emissions, to return to Cop every year with new commitments, rather than every five years as before. He also spoke about the importance of reaching the $100bn a year target promised in Paris in 2015.
  • Sonam Phuntsho Wangdi, from the Kingdom of Bhutan, who is chair of the least developed countries group at UN climate change negotiations, which represents the world’s poorest 48 nations, said “words alone are not enough. We cannot leave Glasgow without strong commitments that will ensure the survival of the billion people living in the least developed countries.”
 
Read the piece here (The Guardian).
 
India’s 2070 Climate Target Is a Far Bigger Deal Than It Sounds
 
India's Prime Minister Narendra Modi this week announced a 2070 net zero target which is 20 years too late. In line with China emitting the majority of global emissions during the 2000s and 2010s, India's emissions will account for the bulk of emissions increases in the 2020s and 2030s. In fact, 65% of additional greenhouse gases emitted between 2013 and 2040 will come from India as per the International Energy Agency's 2015 World Energy Outlook.
 
At  the 2015 Paris conference, India's two major energy targets pointed to increasing renewables deployment and rapid emissions growth. Coal output would double to 1.5bn metric tons by 2020. Installations of wind, solar and other renewable generations would quadruple to hit 175 gigawatts by 2022. Whilst the 175 gigawatts of renewable power has not been met, India is not far off its target, which was originally labelled 'incredible' by a Brookings Institution report in 2016. Power is the biggest slice of India's emissions, but manufacturing, transport and agriculture are also key to reducing emissions in India.
 
Read the article here (Bloomberg).
 
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