Financing a Low-Carbon Economy: French Presidential Report on Climate Finance
Date: December 10, from 3pm to 5pm
Location: French Pavilion
Organizers: I4CE & French Presidential Commission on Innovative Climate Finance
Discussion of the 10 recommendations of the Canfin-Grandjean Report to the President of the French Republic on how to mobilize public and private funding for climate action and how to advance this agenda in key forums (G7, G20, IMF, OECD) and with actors such as development finance institutions and central banks. The presentation of the 10 recommendations will be followed by a round table on progress made and next steps for 2016.
The full report of the Commission can be found on the I4CE website here: https://www.i4ce.org/download/9620/
Introduction: Presentation of findings of report
Mr Pascal Canfin, Co-President, French Presidential Commission on Innovative Climate Finance
Round table: In 2015 the roadmap has been drawn – in 2016 will we stay the course?
Moderator: Ian Cochran, I4CE
- Mr Mark Campanale, Founder & Executive Director, Carbon Track Initiative
- Mr Hervé Guez, Directeur de la recherche, Mirova
- Mr Nick Robins, Co-Director, UNEP Inquiry
- Mr Ubaldo Elizondo, Principal, Environment and Climate Change, CAF
Ms Gabriela Ramos, OECD Chief of Staff and Sherpa to the G20
On Thursday 10 December, I4CE and the Canfin-Grandjean Commission convened a side-event in the French Pavilion at COP21 to discuss progress made in 2015 on the implementation of the roadmap outlined by the Presidential Commission – and the next steps in 2016. This well-attended side event demonstrated how regulators, public financial institutions and private financial actors have made progress and launched a process of acculturating the broader financial community to the risks and opportunities presented by climate change.
Pascal Canfin, co-president of the French Presidential Commission on Innovative Climate Finance, briefly presented the report submitted to President Hollande the 18th of June 2015. He outlined and foreshadowed much of the progress made in France – as well as within the G7, the G20, the OECD and in other fora – that was discussed in more detail by the panel.
A round table discussion moderated by Ian Cochran (Program Director, I4CE) followed this presentation of the report, focusing on three questions:
- What progress was made in 2015 to achieving this roadmap?
- What challenges post-COP21?
- What concrete progress can be expected in 2016 and what are the key milestones?
First, Mr Mark Campanale, Founder & Executive Director, Carbon Tracker Initiative, presented the risk-based narrative that his institution has pushed forward, playing an important role in framing the climate challenge in a way understandable for the financial sector. Their work focuses on the incoherence found within the financial sector regarding the importance for both near- and medium-term risks related to both the physical impacts and to the stranding of assets due to climate policies, as well as broader transformation to a low-carbon economy. Particular attention was given to institutional investors such as pension funds that must balance short-term payment considerations with long-term issues such as the impact of their actions to create a world in which their beneficiaries will want to retire. Within their recent analysis, they estimate that close to two trillion dollars of invested capital would be stranded in a world coherent with the 2°C objective. He concluded by discussing a recent initiative launched in collaboration with stock exchanges worldwide to develop the necessary means of incorporating climate-related disclosure.
Mr Hervé Guez, Director of Research, Mirova – a sustainable asset manager in France – presented the recent evolutions within the regulatory context in France. The recent Energy Transition for Green Growth legislation, passed in France at the end of 2015, has implemented a number of new climate-related disclosure and reporting requirements for financial institutions. These requirements are seen as a first step by French regulators to push financial sector actors to better understand their exposure to climate-related risks, in addition to an overall improvement of risk assessment and integration in financial decision making. While the final implementing decree is still in development, the reporting and disclosure requirements will push different types of financial institutions to quantify the climate-related impact of their portfolios. For credit institutions, the incorporation of the resulting exposure to associated risks into stress testing exercises will need to be explored in 2016. In the coming years, this process aims to develop a culture within financial institutions to identify these risks and take concrete actions to manage them.
Mr Nick Robins, Co-Director of the United Nation’s Environment Project on the Design of a Sustainable Financial System, presented a brief overview of the two-year program showing that multiple initiatives have been implemented at different levels to improve the financial system and make it more sustainable. He described the challenges coming ahead as well as the opportunities for the financial system based on a growing trend in policy innovation from central banks, financial regulators and standard setters, who are incorporating sustainability factors into the rules that govern the financial system. He drew on examples of policy changes in banking, capital markets, insurance and institutional investment, drawing on detailed work in countries such as Bangladesh, Brazil, China, Colombia, France, India, Indonesia, Kenya, South Africa, the UK and the USA. Finally, he described how a number of these issues will be taken up by the Financial Stability Board Task Force that has been convened under the leadership of Michael Bloomberg in the run up to the G20 meetings in China in 2016. Within this process, the issue of climate-related risks and opportunities for the financial sector will be addressed.
Finally, Mr Antonio Garcia Perez, Environment and Climate Change Executive, Andean Development Corporation (CAF), discussed these issues from the perspective of a public development finance institution (DFI). In 2015, the important role of DFIs was broadly discussed – whether in the form of multilateral, bilateral or domestic institutions. They play a role in channeling resources, overcoming market failures and facilitating the blending of public and private resource to scale-up low-carbon, climate resilient investment. Mr. Garcia discussed how 26 public and private financial institutions have come together to launch ‘5 Voluntary Principles for Mainstreaming Climate Action within Financial institutions’. This initiative focuses on 5 principles to scale up capital and to manage risk:
- Commit to climate strategies
- Managing climate risk
- Promote climate-smart objectives
- Improve climate performance
- Account for climate action
Following these presentations, the floor was opened for questions from the room. Discussions focused on: how these institutions could support Intended Nationally Determined Contributions (INDCs); the importance of overcoming perceived obstacles linked to interpretations of short-term fiduciary duty; the wish-list from panelists concerning what they would like to see in 2016; how to overcome a number of the cultural barriers to mainstreaming climate – and more general other long-term sustainability concerns; and finally how to scale-up project pipelines and dealflow and the need for equity investments.
Finally, Mrs. Gabriela Ramos, OECD Chief of Staff and Sherpa to the G20, provided a number of concluding remarks. She noted that given the progress seen across public and private institutions that we should not worry about post-COP21 ‘blues’. While much will depend on the level of ambition of the final agreement, a number of independent actions that the OECD has studied and support – including work on carbon pricing, policy alignment with low-carbon objectives, and corporate and financial climate-relating reported – are creating momentum to support the needed medium- and long-term investment. She spoke of the role the OECD plans to play in supporting this agenda in 2016, including a needed “big fat tax” on carbon to resolve externalities as well as work on disclosure, helping evolve concepts of fiduciary duty and improve the tracking of international climate finance.