March 2017    
Of task forces and climate risk: delivering the financial system we need 

Dear reader,

This newsletter comes to you as the members of the FSB Task Force on Climate-related Financial Disclosures gather for its plenary meeting in Berlin.  Fittingly, therefore, in this newsletter we focus on finance, climate and risk.

We take a look at how the work of the FSB Task Force should progress from here and build some of the conditions necessary for an orderly and inclusive transition to a global low carbon economy. Next, we take a look at the capacity of Principles for Responsible Investment signatory asset owners and investment managers to understand and manage the financial impacts of climate change and other ESG factors – and find that many appear woefully underprepared. We then take a deep dive into the options available to one highly carbon intensive sector at risk – the international oil majors -  to transition their business models to become 1.5/2°C compatible. Finally, we share a few reflections on how the European Commission’s new High Level Expert Group on Sustainable Finance can help European government and investors get on the front foot on these issues - and see Europe regain some of the climate leadership it has lost in recent years.

Thanks for reading,

Ingrid Holmes, Director

Bank of england building london uk Blog — 14 March 2017
What next for Carney’s climate task force?
by Sam Maule
With the FSB Task Force’s report now nearing finalisation, this blog looks at how their work can help ensure transparency around the financial impacts from climate change. It also sets out concerns that critical risks from the physical impacts of climate change and those that could arise from a late and sudden transition may not be picked up under the proposed framework. Briefing Paper — 21 March 2017
Missing in Action – The lack of ESG capacity at leading investors
by Florian Egli, Sam Maule
New analysis by E3G shows one-third 33% of signatories to the Principles for Responsible Investment (PRI) directly employ no ESG specialists and a further 20% employ just one. With over half of all PRI signatories directly employing one or fewer ESG specialists, questions are raised about whether these leading investors have the internal capacity needed to understand the risks and opportunities within the sustainable development agenda.

Ruins-70384 960 720 Blog — 17 March 2017
Stranded assets: it’s time to stop forecasting and start scenario planning
by Ingrid Holmes
Oil and gas companies face an existential threat from the transition to a low-carbon economy consistent with the Paris Agreement and its goal of a 1.5°C/2°C limit to global warming. The recent work of the FSB Taskforce on Climate Related Financial Disclosures, with its focus on the need for scenarios-based assessments of risk and opportunity, brings the challenges faced by these companies into sharp relief. Their financial heft means they are simply too big to be allowed to fail. Yet there is no doubt the industry does need to adapt and change and that ‘do nothing’ is not an option.

Oil majors Briefing Paper — 24 February 2017
Pathways to 1.5/2°c-compatible oil is managed decline the only way?
by Ingrid Holmes
The huge task that lies ahead in terms of delivering an economic transition that keeps the climate safe will now require an informed and sustained engagement between the fossil fuel companies and the rest of society. Tackling a problem of this magnitude will need all stakeholders to play a part – not just ‘energy decision-makers’. This discussion paper focuses on the challenges faced by one subset of fossil fuel companies, the oil and gas majors, and sets out their options to plausibly respond.

European central bank Blog — 27 February 2017
What next for Sustainable Finance in Europe? An E3G view
by Ingrid Holmes
Right at the end of 2016, membership of the EU’s new High Level Group on Sustainable Finance was announced. As one of the Group’s members Ingrid Holmes shares a few personal reflections on the Group, the opportunity it presents to help Europe get on the front foot in responding to the growing international green finance agenda.

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Capital Markets Union
Towards a Sustainable Capital Markets Union. Mitigating climate and wider environmental, social and governance (ESG) risks through disclosure, effective management and new investment approaches.
Featured document
 Missing in Action,The lack of ESG capacity at leading investors
Report — by Florian Egli, Sam Maule
 Pathways to 1.5/2°c-compatible oil is managed decline the only way?
Briefing Paper — by Ingrid Holmes