Green finance in the spotlight

November was a busy month for all things climate change/green-finance related, writes the WFE’s Head of Research & Public Policy, Siobhan Cleary.

Bonn, Germany hosted the 23rd World Climate Conference (COP 23) while in Singapore, local and international delegates gathered for a one-day seminar on ‘Making Markets Work for Green Finance’.

The event, organised by ASIFMA and the GFMA, was co-hosted by UN Environment and the Monetary Authority of Singapore. Participants in the event included representatives from the finance sector, central banks, regional regulators, NGOs and corporations. Topics discussed encompassed the growth and mainstreaming of the green finance sector, promoting the availability of climate-related and other environmental data and mobilising finance for green projects.

Joining participants from HSBC, BlackRock and WWF on a panel about 'Climate-Related Disclosure, Environmental Analysis and Publicly Available Environmental Data', Yeo Lian Sim, Special Advisor, SGX and Vice-Chair of the Task-Force on Climate-Related Financial Disclosures (TCFD) spoke about the work of the exchange in encouraging good quality ESG disclosure by listed companies. Jean Stampe, from WWF encouraged issuers to adopt science-based targets and disclose performance against these.

Looking at the topic of mobilising finance for green projects, the WFE’s Head of Research & Public Policy, Siobhan Cleary, explained how exchanges played an important role by providing a credible framework for green issuance. She highlighted the work of WFE members such as the Luxembourg Green Exchange and more recently, the Johannesburg Stock Exchange, with the launch of a dedicated green segment for bonds, indices and products such as REITs.

Other speakers, such as the Banque de France’s Anne Le Lorier stressed the importance of reducing costs for both issuers and investors of and investors in green finance, and moving to a more consistent, global definition of 'green' (recognising that regional differences may remain). While many speakers identified the importance of good quality data, they also acknowledged ongoing challenges in clearly linking climate and other environmental risks and economic impact. Despite this, several banking regulators and market supervisors noted that they were investigating how to include climate-related risks into their supervisory activities, including stress testing.

Audience members were asked to vote on a range of questions over the course of the day’s events. Some of the results of these snap polls were as follows:

• Over half the audience believed it was not possible for the green finance sector to scale significantly without public support.
• The majority of participants identified 'ongoing monitoring' as the greatest challenge for climate-related disclosures.
• Lack of environmental data and lack of investable projects were identified as key barriers to scaling finance for green projects.

Overall, however, participants were largely positive about the continued growth and development of the green finance market. More generally, there was a sense that issuers, investors and lenders increasingly understood the importance of environmental and climate-related risks and opportunities and were incorporating this into their business thinking. Green is definitely becoming mainstream.