For Mark Carney, the lack of preparation for climate risks is a serious problem. The former Governor of the Bank of England describes them as “a tragedy of horizonâ- inevitable disasters in the future caused by a lack of risk management today.
To avoid Carney’s tragedies on the horizon, we need the recovery from the Covid-19 pandemic to be fueled by the green agenda.
It is not an extreme position to take. Between 2019 and October 2020, for example, the number of organizations supporting the Task Force on Climate-Related Financial Disclosures, which is a framework for monitoring emissions and promoting transparency, increased significantly: 1,500 companies had joined. initiated within this framework in October 2020.
However, there is some skepticism about the steps these companies will take to address climate challenges, with many people engaged in the framework having failed to report on their progress. And ING research a survey of 450 global companies reveals that 35% of companies believe their sustainability goals are too far into the future to warrant meaningful accountability today.
REQUIRED MOTIVATED COMPANIES
Marieke Blom, chief economist at ING Netherlands, sees the need for coordination to help companies achieve their sustainability goals.
As the economy involves complex relationships between businesses, banks, governments and regulators, greater coordination between them can make the SDGs more achievable, whether through frameworks that report on more robust climate advances or financial solutions that provide targeted means for environmental transformation.
âYou need a lot of coordination to counter these market forces, which in themselves are not sustainable,â says Blom. âYou have to think not only of your own needs, but also of the common good. “
And this kind of thinking must last. There is no guarantee, as the world begins to return to some degree of normalcy, that organizations will remain focused on green issues. What is needed is values-based motivation.
âTo change society and the world, you need people who are intrinsically motivated,â says Dr Roland Mees, Director of Sustainable Finance at ING. “They’re holding up no matter what.”
SUSTAINABLE FINANCE AND GREEN ECONOMY
With the right motivation in place, companies can start taking action to fund climate-related projects, and that’s where sustainable finance comes in.
Two instruments in particular offer significant advantages: green loans and green bonds. Green loans are typically made at lower interest rates, with borrowers being forced to communicate their environmental goals to lenders. Green bonds, on the other hand, offer companies a debt financing option that strongly encourages them to account for the use of the proceeds.
These products are more and more popular. An Institute of International Finance report released in July found that sales of durable debt more than doubled year-over-year in the first half of 2021 to more than $ 680 billion, with green bonds accounting for 35 % from new issue.
Mobile network operator Turkcell took advantage of this. He released a 50 million euros of green loan in 2020, revenues being directed to renewable energy projects. The company has also committed to share an annual report detailing the exact allocation of the loan.
If companies are serious about tackling these looming tragedies, embracing green finance will be just as crucial as being properly motivated and coordinating with everyone involved.
Or as Carney puts it, âWe cannot isolate ourselves from climate change. Rather than confusing independence and sovereignty, we must design a new form of international cooperation to meet the needs of many, not a few.