Publication of the report: Climate risk in finance
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The scientific community is unanimous on the scale of the climate and ecological crisis. Faced with the urgent need to act, the Paris Agreement has set international ambitions, endorsing the need to redirect financial flows in order to limit global warming to below 2°C. Finance, now at the heart of climate negotiations, has become aware of its responsibility to anticipate risks and support opportunities linked to the ecological transition. But this mobilization needs to accelerate, as the situation continues to deteriorate and the ‘cost of inaction’ continues to grow. To rise to the challenge, we need to fully integrate the climate issue into our decision-making processes, which means rethinking the tools used by the financial industry. In particular, it is of crucial importance to develop harmonized and convergent climate risk measurement models that can be used by all.
At a time when the European Commission is implementing its ‘Action Plan for Sustainable Finance’, Finance for Tomorrow wishes to highlight the French experience to encourage the implementation of concrete strategies and tools to deal with climate risk, on a European and international scale. Indeed, French players have developed recognized technical expertise and led innovative individual and collective initiatives. This ecosystem has been supported by pioneering national regulations, which have prepared players for climate-related transparency constraints. This momentum will now be reinforced by the creation of an observatory, steered by Finance for Tomorrow and the industry federations, to monitor and measure the gradual alignment of the Paris marketplace with climate objectives.
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This publication is part of this approach: with the players in the Paris financial marketplace, brought together in a ‘Climate risk and methodologies’ working group, Finance for Tomorrow wanted to provide keys to understanding for all players concerned by climate risk management in finance, be they investors, companies or other stakeholders. This unprecedented collective effort, at least on this broad scope, should help to better identify and, we hope, converge methodologies and indicators linked to financing the ecological transition and portfolio decarbonization strategies. This project has opted for transparency and information sharing. And the gamble paid off: thanks to presentations of tools and solutions, this document provides the keys to developing a common language and a strategic vision for the long term, both for the Paris marketplace and as a contribution to European work. The mapping of methodologies that illustrates and summarizes the document is a fine exercise in synthesis, making clear a landscape that was previously only accessible to the initiated.