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Actualización de Mercado: Serie de Finanzas Sostenibles – Inversores Institucionales

De cara a la COP26, Financial Centres for Sustainability (FC4S) presenta el segundo reporte de la “Actualización de Mercado: Serie de finanzas sostenibles”. Estos documentos tienen como objetivo proveer una revisión de los principales desarrollos de mercado, así como ejemplos de guías y regulaciones (nacionales e internacionales) que contribuyan a la movilización de las finanzas verdes y sustentables.

Esta segunda edición describe cómo los inversores institucionales están activamente contribuyendo al enverdecimiento de los mercados financieros. Los inversores institucionales tienen incentivos para enfrentar y mitigar riesgos climáticos, especialmente las administradoras de fondos de ahorro para el retiro y otros inversores a largo plazo que no pueden diversificar con facilidad para evitar riesgos globales como el cambio climático, y, por lo tanto, tienen una motivación intrínseca para abordarlos.

Aspectos destacados:

  • Los inversores institucionales están adoptando marcos para elaborar reportes ASG y alentando a sus empresas participadas a adoptar estrategias de mitigación climática.
  • Los inversores institucionales han comenzado a evaluar sistemáticamente la exposición de sus carteras a riesgos ASG porque la evidencia demuestra que dichos riesgos son relevantes para el rendimiento financiero
  • Los titulares de activos están demandando mejor divulgación de riesgos ambientales y climáticos y, en general, que sus ahorros sean administrados teniendo en cuenta criterios de sostenibilidad.
  • Los inversores están impulsando el diálogo con empresas ya sea mediante la participación corporativa directa o el uso de los derechos de los accionistas; algunos están dejando de lado las inversiones altas en emisiones de carbono y eligen inversiones con altas puntuaciones ASG.
  • Las autoridades financieras han intervenido brindando protocolos, directrices de supervisión y consultas sobre la adopción de factores ASG, y aclarando que dichos factores están dentro del deber fiduciario.

Sustainable Finance Market Update – Institutional Investors

Financial Centres for Sustainability (FC4S) is launching the second report of the Road to COP26 Sustainable Finance Market Update Series. These decks aim to provide a review of the main market developments to mobilize green and sustainable finance and bring examples of supporting national and international guidance and regulations.

 

The second edition is about Institutional Investors and how these are actively contributing to the greening of financial markets.  Institutional investors have the incentives to address and mitigate long-term climate-related risks, particularly pension funds and other long-term-focused investors who cannot easily diversify out of global risks such as climate change and thus have an inherent incentive to address them.

Highlights:

  • Institutional investors are increasingly adopting ESG reporting frameworks and encouraging their investee companies to actively consider climate mitigation strategies.
  • Institutional investors have started to systematically assess their material ESG risks portfolio exposure because evidence shows that such risks can be material to financial performance.
  • Asset owners are increasingly demanding for better disclosure of environmental and climate related risks and that their savings be managed taking into consideration sustainability factors.
  • Investors are increasingly fostering dialogue with companies through both direct corporate engagement and the use of shareholder rights; some are moving out of high-carbon investments to low ESG score investments.
  • Financial authorities are stepping in providing protocols, supervisory guidance and consultations on the adoption of ESG factors and clarifying that these factors are consistent with fiduciary duty.

Sustainable Finance Market Update Series

Recognizing that issues related to sustainability are underpinning better risk management practices in financial institutions, the Financial Centres for Sustainability (FC4S) Network is launching the Sustainable Finance Market Update Series. In the run-up to COP26, 1st – 12th November the aim of the Series is to provide a review of the main market developments to mobilize green and sustainable finance and bring examples of supporting national and international guidance and regulations. 

The first edition consists of a review of the existing Market Infrastructure supporting sustainable finance activities, including the frameworks and market trends in disclosure and reporting, ESG service providers, challenges and opportunities of data quality and relevant taxonomies. It also provides an overview of 20 tools that quantify and measure different aspects of companies’ ESG impact. 

 

Highlights

 

  • An array of disclosure standards and frameworks are available targeting different stakeholders. Several initiatives are in place to drive convergence and alignment of these standards as well as to reduce reporting costs and risks of greenwashing. 
  • The data and analytics industry has grown fast in the sustainability domain. Even so, there are still issues related to quality of data, comparability and harmonization, which need to be addressed to ensure data reliability, consistency and comparability.
  • There is a growing number of ESG service providers including the ESG and risk rating providers, climate index providers and external reviewers. They are all currently perfecting the quality of their services relying on digital technologies, since the industry has recognized their role in speeding up and guaranteeing decision- making. 
  • Market infrastructure supporting sustainable finance is growing fast. Financial actors and authorities are recognizing the importance of disclosure and reporting and generating ESG quality data. Along with this increase, different standards, frameworks, tools and ESG service providers are appearing in the market.

 

Read the following reports of the series

 

Institutional Investors

Banking

Capital Markets

Actualización De Mercado: Serie De Finanzas Sostenibles

Entendiendo que los asuntos relacionados con sustentabilidad están apuntalando mejores prácticas de manejo de riesgos en instituciones financieras y apoyando la movilización de recursos, Financial Centres for Sustainability (FC4S) lanza la “Actualización de mercado: serie de finanzas sostenibles”, una revisión de los principales desarrollos de mercado para movilizar las finanzas verdes y sostenibles, que provee ejemplos de desarrollos regulatorios nacionales e internacionales para el fomento de las finanzas sostenibles.

La primera edición consiste en una revisión de la infrastructura de mercado existente para apoyar a las finanzas sostenibles. Incluye información sobre los marcos de divulgación y reporte, los proveedores de servicios ASG, los desafíos y oportunidades de la calidad de los datos, y las nuevas taxonomías. A su vez, brinda información sistematizada sobre más de 25 herramientas para cuantificar y medir distintos aspectos del impacto ASG de las empresas.

Destacados

  • El mercado financiero ya dispone de estándares y marcos de divulgación orientados a diferentes actores. Existen diversas iniciativas orientadas a impulsar la convergencia y el alineamiento de dichos estándares y reducir los costos de elaboración de múltiples informes y los riesgos de greenwashing.
  • La industria de datos creció rápidamente en el ámbito de la sostenibilidad. Sin embargo, aún existen problemas con la calidad, comparabilidad y armonización de los datos, que deben ser solucionados para asegurar su confiabilidad, uniformidad y comparabilidad.
  • La cantidad de proveedores de servicios ASG está creciendo, incluyendo calificadoras de riesgo, proveedores de índices climáticos y ambientales y auditorías y certificaciones externas. Su cantidad va en aumento y la calidad de sus servicios se está perfeccionando gracias a las tecnologías digitales, ya que la industria ha reconocido el papel que desempeñan estos actores en acelerar y garantizar la toma de decisiones de inversión.
  • La infraestructura de mercado que apoya a las finanzas sustentables está creciendo rápidamente. Las autoridades reconocen la importancia de la divulgación y el reportepara generar datos ASG de calidad.

Shifting Gears II

Data needs to be better and more widely available to make climate and sustainable finance truly transformative on a global scale

The relatively poor quality of data and its limited availability are the major challenges facing the world’s financial centres as they embrace climate-friendly investment and sustainability practices.

Despite the challenges, including the huge impact of the COVID-19 pandemic, global financial centres have made significant progress in developing sustainable finance ecosystems. They have doubled or in some cases even tripled capital outflows toward low-carbon transition and the achievement of the Sustainable Development Goals (SDGs).

The FC4S Shifting Gear II report which is based on its third Annual Assessment Program, developed in partnership with PwC, an FC4S partner and co-funded by EIT Climate-KIC, was launched during the annual Abu Dhabi Sustainable Finance Forum 2021, hosted by Abu Dhabi Global Market (ADGM). 

The report which 24 of its 30 members in 2020 (80%) responded to, shows that between 2018 and 2020, the financial centres have made significant progress, regardless of their size or maturity level.  Financial centres across all continents are mobilizing their resources, connectivity, expertise, and capital to align with the objectives of a sustainable financial system. They are working with other institutions and private actors to build high-level approaches and initiatives to make significant progress at a national level.

As Financial Centres strive to deliver capital to support the low-carbon transition and the achievement of the Sustainable Development Goals, financial centres also reported several key challenges. These include:

  • Thirst for data: Data quality and availability is the primary challenge faced by two-thirds of financial centres. Leading centres face issues on comparability and market sizing, while private actors struggle to identify which capital flows can be considered green and sustainable.
  • Going beyond climate: Climate Change continues to be a major focus for any private and public institution, and it remains a point of entry into sustainable activities. Social and biodiversity themes are emerging.
  • Public authorities are key for take-off: Public authorities can play an important role in encouraging the implementation of Paris alignment commitments, and the SDGs, addressing shared challenges and promoting the use and harmonization of assessment tools and methods.
  • Policy and regulations remain a critical driver: Four out of five financial centres consider that new policy initiatives can act as a “positive enabler” or even be a “major driver” of sustainable finance.
  • Increasing international collaboration: Nearly half of centres have identified “building connectivity” in their top 3 priorities, the continuous expansion of the FC4S network illustrates such a trend.
  • Professional development and education: Skill shortage may prevent public and private institutions alike from going beyond commitments and scaling up sustainable financial activities, but centres are reporting a growing number of sustainable finance programmes and training available to students and workers.

 

For more information, please contact:

Florencia Baldi, Head of FC4S & SIF Knowledge Hub 

Email: florencia.baldi@undp.org 

Climate and Environmental Risks and Opportunities in Mexico’s Financial System

This study represents a first in-depth diagnosis on the readiness of financial institutions to address environmental and climate risks. It evaluates the evolving governance architecture adopted so far by financial institutions in Mexico to integrate environmental and social risks into their mainstream management risk strategies, also looking at the tools and capabilities used to address these risks. This diagnosis is expected to raise awareness at the senior level on the underpinning risks they face and the opportunities from climate and environmental impacts, in the context of international discussions about the fiduciary duty of financial organizations.

The report is structured in three main chapters, covering governance, strategy and risk management practices. For each of these, it looks at drivers and challenges, and makes recommendations to better align financial flows to the development of an environmental and socially responsible agenda, and a low-carbon economy.

Implications of the Covid-19 Pandemic for Global Sustainable Finance

In the context of the COVID-19 pandemic, this paper was developed to support thinking on how to respond to the pandemic from a sustainable finance perspective. Specifically, it has two objectives:

  • The first is to set out what we know about the ways in which the many different components of our sustainable financial system – market actors, policymakers, regulators, and international institutions – are thinking, planning and reacting to the pandemic, with a focus on implications for sustainable finance markets. As such, it is a work in progress, and will be updated and refined over time as new information and new ideas come to our attention.
  • The second objective is to set out a framework for assessing what levers may exist to strengthen the role of the financial system in supporting a low-carbon recovery, and the prospective roles for different communities of actors.

This paper is not intended to be comprehensive across the wide range of sustainability-related implications of the pandemic and is focused on developments within the financial system. For instance, it does not attempt to forecast how macroeconomic trends may impact the trajectory of the low-carbon transition. Rather, this paper is a preparatory effort to inspire thinking by different communities of actors on response strategies over the coming months and help identify where collaboration will be required.

Nudging the Financial System: A Network Analysis Approach

This paper is a first attempt to improve the understanding of the sustainable finance ecosystem, its partnerships, actors and emerging network characteristics related to the implementation of the 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals (SDGs).

Network analyses of these diverse arrays of sustainable finance partnerships are deemed relevant for the alignment and cascading of sustainable finance into the wider financial system. The current sustainable finance network is composed of 115 different “partnerships”,

5,181 constituent members and more than 10,000 connections. Based on network analytics, this paper shows that 74.6% of the network is connected to only one partnership and only 13.3% of the network constituents are connected to three or more other partnerships. This means that a small number of constituents have a high number of connections to the different partnerships and a high number of constituents have a low number of connections.

The analysis also shows that the network is rather small, as the length of the path from any two different network participants is 3.67 on average, any constituent in the network is at less than four degrees of separation from anyone else. This just highlights the role that international organizations with a broad geographic presence such as UNDP or multilateral development banks can play to convene and connect, facilitate and scale up the reach and impact of the current sustainable finance network.

Swiss Sustainable Finance – E-Learning

Capacity building in sustainable finance is one of the key drivers to advance investments in more sustainable products. Therefore, in 2018, the SSF education workgroup, in collaboration with the Edmond de Rothschild Group, created an online education tool on sustainable investments tailored specifically to the needs of finance professionals. As of April 2020, the e-learning tool is available to the broad public.

The e-learning consists of four online modules, which each take approximately two hours to complete. Integrated case studies as well as sustainability profiling of clients offer an interactive learning experience of practical value. The e-learning is available in English, German and French.