Financial Energy Review
Despite a wave of support for carbon neutrality goals, banks, insurers, asset managers and owners are still struggling to make concrete commitments to transition away from fossil fuels. However, financing for fossil fuels has declined for the second year in a row.
This formed one of the key takeaways identified in the Global Synthesis Report on Climate Finance 2022. Climate Chance published the 4th edition of the Global Synthesis Report on Climate Finance on October 25, during the Paris for Tomorrow Week (from October 24 to 28) organibed by Finance for Tomorrow in conjunction with Climate Finance Day (October 27).
The international event brought together the financial community, local and public authorities, and civil society to highlight issues and solutions related to financing and achieving climate and the Sustainable Development Goals (SDGs).
The Global Synthesis Report on Climate Finance also showed that $632 billion in climate finance flows were mobilised in 2019-20, 10% more than the previous two years. It adds that despite a 53% increase from 2017-2018, financial flows for adaptation in 2019-2020 remain far from the desired targets specified under the Paris Agreement. Mitigation therefore still accounts for 90% of this funding.
With the adoption of European regulation SDFR which focuses on the impact of financial products on the environment and green taxonomy, Europe is a world leader in climate finance transparency. The increase in the number of taxonomies, both recent (ASEAN) and older (China), and the rules on climate transparency for financial actors (United States) strengthen the regulation of green investments, but also call for harmonisation between players.
In France, the Netherlands, the United Kingdom, and the European Central Bank, the first climate stress tests conducted by regulators reveal the particular vulnerability of European financial actors to transition risks. However, due to their experimental nature, none of these initial stress tests should lead to climate-related capital requirements.
The rapidly growing ESG market is seeking to standardize transparency standards. A record number of funds were invested in ESG products in 2021: but the market remains plagued by shortcomings in ESG data transparency, reliability, and standardisation.
According to figures from the Organisation for Economic Co-operation and Development (OECD) published at the end of July, climate finance amounted to $83.3 billion in 2020, falling short of the promise made by Global North countries to commit $100 billion per year, from 2020 onwards to those in the Global South. In the lead-up to COP7, organised this year on the African continent in Sharm El-Sheikh, the climate negotiations will focus on the issue of financing and commitments, the drivers of climate action.
Given the need for consistent action by the financial sector in relation to climate and environmental issues, the Global Synthesis Report on Climate Finance 2022 provides a global overview and an essential analysis of all financial flows that enable the implementation of actions that have a positive impact on mitigation (reducing GHG emissions) or adaptation to climate change.
Created in partnership with Finance for Tomorrow, a branch of Paris EUROPLACE, the new report provides a detailed overview and follow-up of climate action carried out by banks, insurers, and investors. It also presents the trends in the market regarding the evolution and offer of green financial products.
“One year before the Global Stocktake, which will mark the first assessment of States’ progress in implementing the Paris Agreement, this fourth edition of Global Synthesis Report on Climate Finance by Climate Chance and Finance for Tomorrow is a major contribution to observing how far we have come in mobilising financial actors and instruments for the climate,” said Ronan Dantec, President of Climate Chance.
“The challenge for finance now lies in its capacity to support the ecological transition in order to make it an economic reality. I am delighted with this unique partnership between Finance for Tomorrow and Climate Chance, which allows us to establish a comprehensive and detailed analysis of the main trends in climate finance in order to inform all stakeholders,” submitted Thierry Déau, President of Finance For Tomorrow.
