Digital library on sustainable finance
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This report present actions under way at the European level and in selected Member States to align the rules governing the financial system with environmental sustainability. The authors stress thereby five policy priorities: capital reallocation, enhancing frameworks for risk management, clarify core responsibilities of financial institutions, improve reporting and disclosure and the need of a strategic reset, seeking to link previously unconnected initiatives.
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Building a Sustainable Financial System in the European Union - EN
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This study aims to examine how institutional investors across the world are beginning to consider the Sustainable Development Goals within investment decisions, in addition to their future plans related to the SDGs. A survey was sent to about 500 institutional investors globally of which 52 responded. The report highlights the belief that the SDG's will serve to enhance returns, mitigate risk, strengthen reputation and help achieve investment objectives of the different institutions.
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This issue is the second in a two-part COP21 special and focuses on the major outcomes of COP21 for institutional investors. It also looks at leading current investment responses to climate change from asset owners.
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ESG Magazine: Can investors lead the fight against climate change? - EN
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The Guide’s objective is to provide the reader with a clear understanding of the field of impact investment, and with the practically applicable knowledge and tools necessary for the development and implementation of an impact investment program.
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Abstract: True ESG integration means ESG factors are systematically fed into the valuation models and investment decisions of analysts and PMs. However, most ESG approaches fail to do this. As a result, sustainable investing is much less an application success than a marketing success. Our Value Driver Adjustment (VDA) approach is different: it ties into traditional valuation approaches by linking ESG issues to value drivers via their impact on business models and competitive positions. For equities, the initial results find that the average target price impact of ESG factors is 5% overall, and 10% conditional on non-zero adjustments; dispersion is wide as target price changes ranged from -23% to 71%. The investment team has experienced a pay-off in terms of more in-depth analysis of companies, a clearer view on risk and better informed decisions.
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The Equator Principles (EPs) are a voluntary code of conduct and a risk management framework for determining, assessing and managing environmental and social risks in projects, such as energy or infrastructure projects. This report combines a literature analysis, interviews with project financiers and stakeholders and an analysis of EP signatories' reports to determine how these actors are implementing the EPs. The report finds that the EPs do not create significant changes in project financing institutions and therefore enforcement mechanisms should be implemented.
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The Equator Principles - Do they make banks more sustainable? - EN
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The COP 21 Paris Agreement emphasizes the necessity of transitioning towards a low-carbon economy with a shift towards more renewable energies. The report outlines the danger associated with a late and sudden shift, where the adaptation occurs abruptly, whereas an early start in implementing the pledges could ensure a soft landing. The risks would mainly be associated with the macro impact of a sudden change in energy use, revaluation of carbon-intensive assets and a rise in the incidence of natural catastrophes. To ensure financial stability, this report suggests to enhance disclosure of the carbon intensity of non-financial firms, making stress-testing of related exposures of financial firms possible.
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Too late, too sudden: Transition to a low-carbon economy and systemic risk - EN
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This article outlines potential implications of climate change for the management of financial risks. It identifies insurance as a mechanism to reduce the economic disruption of disaster events. In addition, it outlines policy approaches to aid the penetration of disaster insurance coverage and the capacity of insurance markets to absorb disaster risks. Recommendations for improving the financial management of disaster risks are also identified.
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Financial Instruments for Managing Disaster Risks related to Climate Change - EN
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The momentum established by the COP 21 Paris Agreement presents revenue risks and opportunities, as capital investment shifts from high to low carbon energy infrastructure and solutions. Financial intermediaries will and are already exposed to these trends, and abrupt changes could influence the overall financial stability. In order to reduce uncertainty over the energy transition and become masters of their own destiny, this reports summarizes the issues at hand and sets out some thoughts about a potential response.
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With an estimated value of approximately USD 50 trillion, real estate assets consume about 40% of the world's energy and contribute to up to 30% of the annual GHG emissions. Practitioners note that the effective integration of ESG measures is hindered by excessively large amounts of available information or uncertainty about relevant actions. This report suggests a framework setting out measures and actions needed to support the integration of ESG and climate risks into the business of investment and management, overcoming the barriers. Aiming thereby to transform aspirational measures into default practices for all stakeholders in the property sector by suggesting tailor-made step-by-step frameworks for individual target audiences (e.g. asset owners, bond and debt investors).
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This report builds on the previous CS study "Conservation Finance - Moving beyond donor funding toward an investor-driven approach". Since then the field has developed rapidly. The objective of this report is to identify financial product structures that have the potential to establish finance in mainstream investment markets, reaching an estimated medium-term potential of USD 200-400bn. However, there are four central challenges currently inhibiting the conservation finance market's growth: little commercial support for early-stage projects, substantial search and transaction costs for identification and implementation of conservation projects, high perceived risk, and the lack of the scalability and replicability of current projects. The authors propose three shifts that would allow to address these challenges.
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Conservation Finance From Niche to Mainstream: The Building of an Institutional Asset Class - EN
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For this report about 750 experts researched 29 separate global risks. The one with the greatest potential impact was found to be failure of climate change mitigation and adaptation. It's the first time since the report was published in 2006, that an environmental risk has topped the ranking. The report highlights the importance of the interconnections among the risks, suggesting that a small number of key risks wield great influence. An example is climate change exacerbating water crises, resulting in conflicts and forced migration. The report concludes that knowledge about risks (likelihood and potential impact) and their interconnections is fundamental for leaders, helping them to prioritize areas for action.
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More Walls, More Warming, Less Water: A World at Risk in 2016 - EN
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This report by the Credit Suisse Research Institute explores several aspects of the connection between sound governance and improved business performance. Amongst others the experts identify specific company types and sectors, in which governance can serve as a particularly robust investment strategy instrument. The report concludes that a governance-oriented investment strategy works best in distinct sectors and periods of time.
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This UBS report looked at middle-class consumption in 215 cities around the world and compared it to the level of climate-change risk in those cities. The report highlights the economic risks (i.e covering uninsured losses, shifts in consumption patterns) resulting from the interconnection between socio-economic structures and high exposure to climate change of cities.
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After the 2015 Paris Agreement, this paper takes stick of the wide-ranging implications for fiscal, financial and macroeconomic policies coming to grips with climate change. Thereby issues such as the carbon price, climate finance, disclosure of carbon footprints, or the implications on the financial stability are discussed.
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After Paris: Fiscal, Macroeconomic, and Financial Implications of Climate Change - EN
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Section 4.2.5 (Action area 5 – Economic and financial system) was adapted to include two goals (goal 5.4 and 5.5) specifically related to sustainability and finance.
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Sustainable Development Strategy 2016-2019 - DE
Sustainable Development Strategy 2016-2019 - FR
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Abstract: The search for a relation between environmental, social, and governance (ESG) criteria and corporate financial performance (CFP) can be traced back to the beginning of the 1970s. This study extracts all provided primary and secondary data of previous academic review studies. Through doing this, the study combines the findings of about 2200 individual studies. Hence, this study is by far the most exhaustive overview of academic research on this topic and allows for generalizable statements. The results show that the business case for ESG investing is empirically very well founded. Roughly 90% of studies find a nonnegative ESG–CFP relation. More importantly, the large majority of studies reports positive findings. We highlight that the positive ESG impact on CFP appears stable over time. Promising results are obtained when differentiating for portfolio and nonportfolio studies, regions, and young asset classes for ESG investing such as emerging markets, corporate bonds, and green real estate.
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ESG and financial performance: aggregated evidence from more than 2000 empirical studies - EN
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Institutional Investors get increasingly active on climate change issues. The Montreal Pledge and the Portfolio Decarbonization Coalition are two examples. This report reviews strategies and metrics for investors seeking to reduce GHG emissions and aid transition towards a low-carbon economy through investment decisions.
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Climate Strategies and Metrics Exploring Options for Institutional Investors - EN
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This issue is dedicated to the theme of fossil fuels, 'unburnable carbon' and 'stranded assets'. Read about how the financial industry is reacting to the risks of climate change and fossil fuel linked investments.
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This guidance document by the European banking Authority (EBA) lays out sound remuneration policies to all staff and specific requirements for the variable remuneration of staff whose professional activities have a material impact on the institutions’ risk profile. Articles 74 and 75 of Directive 2013/36/EU (CRD) mandate the EBA to develop guidelines on both remuneration policies for all staff as part of institutions’ internal governance arrangements and remuneration policies for identified staff.
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Novethic has published its 8th survey on responsible investment practices among European asset owners, with the support of Degroof Petercam in 13 countries. The results show that climate is a priority for 53% of the 181 institutions surveyed, together holding € 7,367 bn in assets; very few, however, have decided to exclude fossil fuels from their investments so far.
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In light of the momentum around discussions on climate risks and its impacts on assets (i.e. carbon bubble or stranded assets), this report analyzes the short-term risks stemming from how investors react to climate-related information. Thereby the study indicates the vulnerability and resiliency of different portfolio types to climate-change related risks. This allows investors to start reflecting on how to offset potential losses and invest in assets less likely to be affected by climate risks.
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Unhedgeable risk How climate change sentiment impacts investment - EN
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This report complements the global, annually published aggregate report on microfinance investment vehicles (MIVs) that Symbiotics has been producing since 2007, and shows disaggregated data for the Swiss subset of global MIVs. It follows a first report on this subset published by Symbiotics in collaboration with the Swiss Development Agency (SDC) in December 2011.
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This guide helps connect the themes of carbon footprint analysis with investment objectives, such as, minimising risk and meeting climate targets. With a growing number of Carbon footprint services available, different investors may require additional insights into the various methodologies. The ‘Carbon Compass’ reviews each methodology and answers the most commonly-asked questions simply and practically.
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The Natural Capital Declaration aims to develop evidence to evaluate natural capital dependencies and impacts as material risk for financial institutions. The first part of this study provides arguments for a business case for banks and asset managers to incorporate natural capital factors in their lending and investment decision-making processes. The second part provides an overviews of 36 financial institutions' existing capabilities to manage natural capital risk. The report concludes that there is a discrepancy between the acknowledgment of the importance of the natural capital risks, and the effective implementation in the investment and lending processes.
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Towards including natural resource risks in cost of capital State of play and the way forward - EN
