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War to climate change : the world of finance needs to participate

by

Hubert Roy

September 26, 2018 11:30

Photo : Freepik

In a report published yesterday, theOECD, theunited nations Environment and the world Bank confronting the world of finance. They crave its players to lay down the basis in their practices to lead the war to climate change.

The report, Financing Climate Future ; Rethinking Infrastructure reveals that only 9 of the 180 signatory countries have submitted their targets for reducing greenhouse gas emissions as they have promised 3 years ago, at COP 21, the conference that gave birth to the Paris Agreement on climate change.

Dependency budget for fossil energy

However, during this time, governments continue to devote over $ 500 million per year to subsidize the oil, coal and gas, noted by the three organizations. Worse still, several of these countries have not put an end to their dependence on the budget in respect of revenue from fossil fuels, they add.

“This inertia may cause us to lose the war against climate change,” says Angel Gurria, secretary-general of the OECD. It deeply regrets the situation and calls on the governments of the world to deliver on the promises made in Paris three years ago.

Six pillars, including finance

To put the train on the rails, the OECD, the united nations Environment and the World Bank identifies six pillars. One of them is to create systemic changes in the financial world to support the transition to more capital-committed to the environment.

Initiatives have been put in place, stipulating the three agencies. The interest is also growing to invest in sustainable infrastructure, they say. Despite this, investors still lack knowledge, but also of conviction, to invest in projects with low emissions of carbon dioxide.

A number of barriers embedded in the same financial rules current prevents to allocate long-term funding to investment projects with low environmental footprint, complain they. They suggest that companies and investors and promote risk management practices that incorporate the danger posed by climate change.

It is important, therefore, according to them, that climate considerations are integrated in the regulation of the financial system to support stability. More importantly, governments must put at the disposal of banks and insurers of the scenarios analysis of climate change risks. For the three organizations, such scenarios might also become strategic tools for establishing their policies.

Examples exist :

• In France, article 173 of the energy act has introduced measures which require the fund managers and pension funds to disclose the risk that climate change poses.

• In South Africa, the law on the pension request for this type of investors to consider how environmental factors may have an impact on their long-term performance.

• In Brazil, the central Bank has issued guidelines to promote social and environmental responsibility of financial institutions.

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