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COP23: Finance and investment highlights from the second week

A round-up of the main investors news from Bonn

The second week of COP23 had a heavier focus on the private sector – so much so that it kick-started on November 13 with a day dedicated to climate finance.

Officials in China said the country’s long-awaited carbon market was ready for approval, after a series of delays. The national system, which will replace regional pilots to become the largest carbon market in the world, was due to launch earlier this year but has been stalled owing to complications. Xie Zhenhua, Beijing’s lead negotiator at COP23, said in a speech that “preparations for the carbon market are basically complete and after approval it can go ahead”, according to reports. Much like the European trading system, the scheme will target established industries and carbon futures trading will not be included.
The top 10 asset managers for climate impact have been named in an initiative by CDP and ISS-Ethix Climate Solutions (part of ESG research house ISS). In a joint initiative called Climetrics, the pair say that Amundi, BNP Paribas, Commerzbank, Danske Invest, Deutsche Bank, Nordea, Pictet, SEB, Swedbank and Union Investment have the highest proportion of top-rated funds, based on an assessment of 2,800 equity funds and ETFs available in Europe. The best-rated funds are available online, but Climetrics currently doesn’t reveal the worst-rated funds.

ISS launched a report on how investors are affected by the transition to a low-carbon economy. The document, in collaboration with FERI Cognitive Finance Institute, concludes that investors can take several steps to manage risks and opportunities arising from the transition: evaluating progress towards a low-carbon economy, monitoring technology exposure and assessing company strategies.

The world’s biggest chocolate companies have teamed up with governments to commit to frameworks around deforestation and sustainability. Household names like Nestle, Ferrero and Hershey are among those to have agreed to implement monitoring systems which will track supply chains.

The Sustainable Stock Exchanges Initiative has launched a “voluntary action plan” to help exchanges “start or further enhance their work on green finance”. The guidance includes a checklist with 12 points, which the initiative says can be used as a self-assessment tool to help exchanges identify areas they can improve on.The World Resources Institute (WRI) has secured $2.1bn of private investment to restore degraded lands in Latin America and the Caribbean. The body, through its Initiative 20×20 programme, has attracted 19 unnamed investors to support more than 40 projects. WRI said the move “demonstrates strong private sector interest in restoration in Latin America and across the globe”, adding that $300bn will be needed to restore degraded and deforested land globally.

InsuResilience – a G7 initiative – has launched a partnership to kick-start climate risk insurance models. The InsuResilience Global Partnership for Climate and Disaster Risk Finance and Insurance Solutions includes G20 countries, V20 countries (those most vulnerable to climate risk) and industry players. It will promote data and risk analysis, capacity building and the design of concrete risk finance and insurance solutions. The UN launched a ‘Clearing House for Risk Transfer’ that will use artificial intelligence to connect countries with insurance. InsuResilience recently launched a fund to support the development of climate risk insurance products.

The European Investment Bank and the Luxembourg government has bought shares in Luxembourg’s Green for Growth Fund to stimulate private finance into climate projects that would otherwise struggle to attract private investment. The pair have committed €5m via their recently-launched Luxembourg-EIB Climate Finance Platform.

Unilever has reportedly partnered with the Norwegian government to launch a $400m green fund. Reports say the pair will work with other partners to establish the vehicle, which will invest in businesses that support forest conservation and sustainable agriculture. It is not clear whether it is Unilever’s corporate arm, or its pension fund that will invest. The fund is claimed to be explicitly aligned with the objectives of the Paris Agreement, the 2030 Agency and the Sendai Framework for Disaster Risk Reduction.

Twenty countries, including the UK, Canada, France, Finland and Mexico have formed the Power Past Coal Alliance, committing to “accelerating clean growth and achieving the rapid phase-out of traditional coal power”. Businesses have also made commitments to phase out coal as part of the initiative. The group will share their own experiences and develop best practices on the topic, which will cover climate finance. The group is expected to reach 50 partners by next year’s COP.