News15 November 2021
Climate summit COP26 sees financial institutions, business and the public sector progress in connecting the nature and climate agendas, and standardisation of sustainability disclosures advances
After two weeks of negotiations and events, the COP26 climate summit wrapped up with delegates from almost 200 countries adopting the Glasgow Climate Pact. The pact and other commitments made during the summit fall short of limiting global warming to the 1.5 degrees Celsius stretch target of the 2015 Paris Agreement, but full implementation of the commitments made throughout COP26 could limit heating to 1.8 degrees. Importantly, several nature-related mentions feature in the final agreed text of the Glasgow Climate Pact.
In the preamble, governments ‘note the importance of ensuring the integrity of all ecosystems, including in forests, the ocean and the cryosphere, and the protection of biodiversity.’ The adaptation section notes the negative impact climate change has on nature. The mitigation section, ‘emphasizes the importance of protecting, conserving and restoring nature and ecosystems to achieve the Paris Agreement temperature goal’. This explicit connection between the climate and nature agendas is more pronounced in the Glasgow Climate Pact than it was in the Paris Agreement.
Moreover, an increased number of individual countries’ climate plans now include nature-based solutions. 92 percent of updated government’s climate pledges mention nature, up from 82 percent in a previous assessment.
Outside of the formal negotiations, COP26 saw several significant announcements relevant to nature-related financial disclosures.
Deforestation commitments from finance and governments
More than 130 world leaders committed to end and reverse deforestation by 2030, with US$19.2bn of finance across public and private finance backing this new global forest finance pledge. The countries committing to the pledge cover over 90 percent of global forests. Forests play a critical role both in absorbing greenhouse gas emissions and preserving biodiversity.
Alongside the government pledge, financial institutions with cUS$8.7tn of assets under management committed to end investment in deforestation-linked activities. The group includes TNFD Forum members AXA, ACTIAM, Aviva, Impax Asset Management, SCOR, Storebrand Asset Management and Sumitomo Mitsui Trust Asset Management Co. A finance sector roadmap for eliminating deforestation was published to support financial institutions in delivering on the pledge in practice.
GFANZ institutions’ net zero commitment to include nature
Alongside this deforestation commitment from a group of leading financial institutions, the headline finance sector announcement at COP26 saw financial institutions with US$130trn of assets commit to net zero under the Glasgow Financial Alliance for Net Zero (GFANZ). While that commitment at the moment does not explicitly include any references to nature, co-chair of GFANZ Mark Carney commented on the need to integrate nature into GFANZ in the future: “We now have to shape [the finance sector’s commitments to net zero], and shape them to include biodiversity and nature.”
Speaking at a session with TNFD Co-Chair Elizabeth Mrema, Mark Carney said that the net zero term used by GFANZ “has the broader perspective that it needs” to encompass biodiversity and nature.
“We need to look at climate, biodiversity and land degradation as a three-fold crisis,” Elizabeth Mrema said. “We can’t look at them separately because the solutions are also connected.”
Financial regulators & development banks connect climate & nature
Finance ministers, central banks, supervisors and development banks also made various commitments to scale up their nature-related work.
In a Joint COP26 statement, the Chairs of the Coalition of Finance Ministers for Climate Action and the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), said: “Beyond the potentially significant economic and financial implications directly associated with nature loss, global climate and nature goals are closely intertwined. (…) Addressing these issues will be critical for a successful transition to net zero.”
In a separate NGFS Glasgow Declaration, the network of 100 central banks and supervisors committed to “keep exploring emerging topics such as the impact of the loss of biodiversity” alongside progressing on other climate-related work.
A group of nine multilateral development banks also issued a joint statement on ‘Nature, People and Planet’. The development banks committing to further mainstream nature considerations into their policies and operations included two TNFD Forum members, the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB). The TNFD’s Development Finance Hub, led by Agence Française de Développement, will leverage the expertise of all the world’s public development banks into the creation and delivery of the TNFD framework.
Disclosure standardisation progresses with launch of ISSB
COP26 also saw significant developments in the financial disclosures space, with the launch of the much-awaited International Sustainability Standards Board (ISSB). The new board, launched by the International Financial Reporting Standards (IFRS) Foundation, is tasked with offering a ‘comprehensive global baseline of high-quality sustainability disclosure standards.’ As part of the IFRS’s efforts to consolidate the sustainability disclosure space, the Climate Disclosure Standards Board and the Value Reporting Foundation (home to the Integrated Reporting Framework and the SASB Standards) will be absorbed by the IFRS, whose standards are used in more than 140 jurisdictions.
TNFD welcomes the launch of the ISSB and the further consolidation of sustainability disclosures. Building first on existing work around climate-related standards and disclosure, also aligned to the Task Force on Climate-related Financial Disclosures (TCFD), the ISSB is expected to expand into other sustainability-related topics in 2022. The TNFD looks forward to working closely with the new ISSB on nature-related disclosures.
Looking ahead: net zero, nature positive
COP26 has given finance and business a clear message that they need to simultaneously shift to nature-positive and net zero. “In every conversation I’ve had [at COP] about [climate] transition and resilience plans, nature has come into the discussions,” said Bill Winters, Group Chief Executive of Standard Chartered, TNFD Forum member, speaking at COP26 alongside TNFD Co-Chair David Craig and Mark Carney.
“At this COP, talk about nature [was] everywhere,” said TNFD Executive Director Tony Goldner. “[For finance & business] it’s now not a question of whether nature-related risks are coming, but when.”
TNFD recognises that nature loss poses direct and immediate risks to the global economy and financial system, while also exacerbating climate risks. The TNFD will build upon the structure and foundation of the TCFD with the goal of enabling organisations to adopt the two frameworks in tandem. At COP26, Mark Carney commented that TNFD’s job is harder than TCFD’s job, due to the complexity of measuring nature relative to climate.
In early 2022, TNFD will launch a beta version of the framework so that market players can test the framework and provide feedback.
“TNFD is a few years behind TCFD, which is why we’re moving quickly,” said TNFD Co-Chair David Craig.
Hear from TNFD Taskforce Members, Co-Chairs and Executive Director in these recordings of key TNFD-relevant events from COP26:
- ‘“Next Big Thing” in Green Finance: Valuing Biodiversity’ by the NYT Climate Hub. Hear TNFD Co-Chair Elizabeth Mrema speak alongside Mark Carney, UN Special Envoy on Climate Action and Finance; Mindy Lubbers, CEO of Ceres; M. Sanjayan, CEO of Conservation International; Professor Andy Purvis of London’s Natural History Museum.
- Nature session at ‘Wake Up to GHS – Green Horizon Summit’ by GFI. Hear TNFD Co-Chair David Craig’s remarks about nature, finance and TNFD alongside Mark Carney, UN Special Envoy on Climate Action and Finance; Bill Winters, CEO Standard Chartered; Huw van Steenis, Senior Advisor to the Chief Executive, UBS and many more.
- ‘How to deliver investment in Nature’ by McKinsey. Hear from TNFD Executive Director Tony Goldner on, as well as UBS’s Huw van Steenis, HSBC Asset Management Chief Executive Nicolas Moreau, Brambles CFO Nessa Sullivan, Greensphere Capital’s Divya Seshamani and Giulio Boccaletti of the Smith School of Enterprise and the Environment.
- ‘COP Talks: Natural Capital and Biodiversity’ by IIF. Hear from TNFD Co-Chair Elizabeth Mrema, and TNFD Taskforce Members Mariuz Calvet Roquero, Director, Sustainability & Responsible Investing, Banorte, Marine de Bazelaire, Group Advisor on Natural Capital, HSBC, Judson Berkey, Head of Sustainability Regulatory Strategy, UBS, as well as Gill Lofts, Global Sustainable Finance Leader at TNFD Forum member EY, and Vian Sharif, Head of Sustainability, FNZ.
- ‘Getting Ahead of Nature-Related Financial Risk’ by S&P Global. Hear TNFD Taskforce Member Celine Soubranne (AXA Group) speak on a panel moderated by Divya Mankikar (S&P Global). The session also featured TNFD Stewardship Council Vice Chair Andrew Mitchell and James Scriven, CEO of InterAmerican Development Bank (IDB) Invest.
Cover image: Matthias Koch, Unsplash