Climate Finance

• This first-of-its-kind equity fund provides critical capital to support African agribusinesses that help smallholder farmers adapt to climate change.
• Smallholder farmers feed the world, but they are among the most affected by the climate crisis, said ARAFs Managing Director Tamer El-Raghy.
• ARAFs impressive $58 million close, $8 million above our initial target for the fund, is a watershed moment and, with only 5% of climate investment directed toward adaptation, signals the beginning of a shift in climate finance.
• Poverty, climate change, and resilient agriculture are intrinsically linked : More than half of the people living in poverty are smallholder farmers.

• Bank of America today announced a goal of deploying and mobilizing $1 trillion by 2030 in its Environmental Business Initiative in order to accelerate the transition to a low-carbon, sustainable economy.
• This commitment will anchor a broader $1.5 trillion sustainable finance goal by both environmental transition and social inclusive development purposes, spanning business activities across the globe.
• Bank of Americas broader $1.5 trillion sustainable finance target is consistent with the United Nations Sustainable Development Goals (UN SDGs), and will spur transformative change nationally and around the world.
• Todays announcement increases Bank of Americas 2019 commitment of $300 billion to low-carbon, sustainable business initiatives , to $1 trillion by 2030 as part of its Environmental Business Initiative .

• "Historically, the real estate industry has contributed significantly to global carbon emissions which has catalysed climate change.
• It is incumbent on the industry leaders to ramp up climate change mitigation efforts now for a more liveable future.
• Looking ahead, the Company sees business opportunity in climate action, for example, in terms of global recognition and sustainable finance.
• The Group's two listed companies are NWS Holdings Limited (61%), and New World Department Store China Limited (75%).

SPEECH

Sustainable finance: transforming finance to finance the transformation

Keynote speech by Fabio Panetta, Member of the Executive Board of the ECB, at the 50th anniversary of the Associazione Italiana per l’Analisi Finanziaria (by videoconference)

25 January 2021

Introduction

• [1] Promoting high standards in financial analysis is vitally important for guaranteeing the development and the integrity of markets, to ensure they can serve the real economy.
• The AIAFs ability to keep pace with innovation is clearly reflected in its commitment to sustainable finance, the subject of my speech today.
• In recent years, addressing climate change and the transition to a sustainable development model more broadly have become increasingly important.
• Sustainable finance also known as responsible finance incorporates environmental, social and governance (ESG) principles into the decision-making processes of financial operators.

Sustainable development and climate-related risks in the time of the pandemic

• The challenge to find a sustainable development path which meets the needs of present generations without compromising the well-being of future generations is not new.
• The German economist Hans Carl von Carlowitz was already thinking about how resources could be used sustainably as early as the 18th century.
• This focus has gradually widened to include the extent to which our natural systems can cope with the effects of climate change.
• The pandemic has also emphasised the urgent need to address the problems that are affecting peoples well-being.
• [5] We may also see an increase in gender and generational discrimination owing to the severe impact the pandemic is having on women and young people.
• These worrying developments, which undermine the foundations of inclusive growth, are accompanied by environmental issues, in particular climate change.
• Natural disasters that occurred in 2018 caused more than 20,000 deaths worldwide and deprived 29 million people of livelihoods, resulting in damages estimated at USD 23 billion.
• It is clear that we need to ensure the sustainability of our development model, starting by gradually moving away from the use of fossil fuels.
• In recent months, the steps taken to limit the consequences of the pandemic have temporarily slowed the rise in emissions.
• Monetary and fiscal authorities are responding by introducing decisive policies designed to revive development.
• We must seize this opportunity to modernise our economy, reduce social and environmental vulnerabilities and bring about change that makes development sustainable.

The contribution of responsible finance

• The Paris Agreement explicitly recognised the vital role of the financial system in promoting responsible development.
• Since 2015 ESG investment funds have increased the total assets they manage by over 170%.
• Mixed funds are classified as equity or bond funds if the respective share of equity or bond investments exceeds 50%.
• ICPFs: insurance corporations and pension funds; IFs: investment funds.
• [13] According to the UN, implementing the 2030 Agenda will require total investment of between USD 5 to 7 trillion per year.
• [15] Whether investment programmes of this scale can be implemented will largely depend on the cost and availability of financial resources.
• [18] In order to boost the contribution made by sustainable finance, the financial instruments offered to investors must be trustworthy and easy to understand.
• Lenders also need to be able to assess whether investment projects are consistent with their own financial and non-financial objectives.
• The European Union is leading the way internationally in terms of regulating sustainable finance.
• But further progress would be welcome, also in view of the launch of the European Green Deal[20] and the European Commissions soon-to-be-published renewed sustainable finance strategy.
• There is a need for the definitive launch of the classification system (or taxonomy) of sustainable activities[23], planned for 2022.
• The use of this tool by analysts, banks and companies will require further steps, such as approving delegated acts and establishing guidelines.
• [24] Lastly, the development of sustainable finance requires global cooperation, also considering that around 90% of the global emissions are produced outside Europe.
• This years G20 presidency provides Italy with a unique opportunity to put these issues at the top of the international agenda.

What is the ECB’s role?

• The Treaty also states that, as a secondary aim, the ECB shall support the achievement of the EUs objectives.
• The monetary policy stance has at best only a negligible impact on environmental risks.
• This is due to both its very different time horizon compared with climate change[27] and the fact that it cannot target individual sectors.
• ECB Banking Supervision the ECBs supervisory arm has also recently published its expectations on how banks should manage climate and environmental risks in their balance sheets.
• Looking ahead, this could then influence banks capital and public disclosure, increasing awareness among intermediaries and investors of these risks.
• [31] Lastly, the ECB is actively involved in European and international initiatives aimed at improving information on the environmental impact of companies and intermediaries.

Conclusion