Optimism for 2023
Alya Kayal
“I see 2022 as a turning point for regulation in the field of sustainable finance mandating climate and ESG reporting across the capital markets. With the new US Securities and Exchange Proposed Rules, the Sustainable Finance Disclosure Regulation (SFDR), The International Sustainability Standards Board’s Exposure Drafts, widespread adoption of Task Force on Climate-related Financial Disclosures (TCFD), as well as the development of the Taskforce on Nature-related Financial Disclosures (TNFD), I see momentum building towards greater transparency and accountability on a global scale. The path forward is one of consolidation and exploration, particularly around biodiversity as an integral factor in investment risk and returns.
Listening to the skeptics, who may be distracting at first, was also stimulating as I see them as inevitably helping to strengthen the methodology and results. While the Inflation Reduction Act, a major US climate-related legislation, was a step in the right direction, more needs to be done. I think it may still be a long time before we see the US joining the EU and Asian markets in adopting these risk analysis factors.
But with all the progress made in 2022, I am hopeful there will be substantial developments in 2023: sustainable finance regulation will accelerate and be accepted as critical to transparency and accountability in global capital markets.”
Judith Moore
“Current global investments toward climate transition are estimated at about $630 billion per year, but upward of $6 trillion a year are needed. Private sector firms, however, control some $210 trillion in financial assets, much of which will need to be reallocated.
The global challenge--and ImpactARC’s mission--is to help the private sector accelerate its investments into low-carbon, adaptive, and resilient solutions. But these transition investments often suffer from high upfront costs, poor data or transparency, and uncertain market and regulatory changes. To meet the future, we need strong data platforms, harmonized taxonomies for thematic investments, and clear disclosure of both financial and non-financial commitments and impacts.
We are seeing top data providers such as Bloomberg, MSCI, ISS, S&P dramatically scale up their climate analytics, and new data providers are entering the market daily to challenge their capabilities. Refining and harmonizing “green” taxonomies is accelerating, with the EU and China leading, but others such as the US and UK paying close attention. Shared understanding of green, social, and transition standards will only help investors shape their portfolios more efficiently. Impact and thematic investments such as green, blue, sustainability-linked, and transition investments have surged over the last 3 years, showing greater investor awareness of their importance in shaping a sustainable future.
I am hopeful that regulators, standard-setters and data providers will continue to respond to the growing demand and that investors will accelerate their support for low-carbon solutions.“
Monika Kumar
“These days, I find climate anxiety coming up frequently in my conversations. This is not surprising as UNICEF’s first child-focused climate risk index found that one billion children (that’s one-eighth of the planet’s population) were at "extremely high risk" as a result of climate change. Subsequently, findings like this explain why a study in late 2021 concluded that almost 60% of youth between the ages of 16-25 are very or extremely worried about climate change. While there are no official studies about climate anxiety amongst the adult populations, we can anticipate similar numbers.
So, for 2023 I am taking inspiration from profound proposals such as the Bridgetown Initiative which create stronger investment opportunities for countries on the front line (geographically located between the Tropics of Cancer and Capricorn) that are already facing loss and damage four times greater. This Initiative puts forth steps to give these countries greater access to concessional finance and flexibility in times of disasters inevitably caused by climate change. Additionally, it gives me faith to see actions by asset owners calling on asset managers to integrate the systemic investment risk presented by climate change as part of their fiduciary responsibility - for example the September 21, 2022 letter by Brad Lander, New York City Comptroller to one of their key asset managers. The letter was direct and solution-oriented, and I am optimistic that more asset owners and managers will quickly join the drive for systems change that we need.”
Daisy Nicholls
“While headlines are full of stark statistics of the loss of biodiversity (wildlife populations have declined by an average of 69% since 1970), I was shocked at how few companies are talking about biodiversity risk and impact in their financial and sustainability disclosures. There has been a wave of companies pledging to reduce their emissions; however, commitments relating to nature are still thin on the ground.
This is why I eagerly followed the discourse at the 15th Conference of the Parties to the United Nations Convention on Biological Diversity, or COP 15, where government and private sector representatives from across the world came together. An exciting ‘historic’ agreement was reached: 200 countries signed a ‘Paris Agreement for nature’ comprising 4 goals and 23 targets, one of which is to protect and sustainably manage at least 30% of the planet’s land and oceans by 2030.
While the ‘30 by 30’ goal is certainly ambitious and there have been some criticisms, it provides an overarching goal and is a crucial step in the right direction.
This year also marked the release of the third beta framework from the Taskforce on Nature-related Financial Disclosures (TNFD) and nature-based solutions were mentioned in the COP27 text for the first time.
I am optimistic that nature will continue to be pushed up the agenda and that it will become more widely recognized that climate and nature need to be addressed hand-in-hand.”