World Wildlife Fund (WWF) taking A Stand On Global Sustainable Finance

Introduction

The World Wildlife Fund (WWF) was established in 1961 by a gaggle of nature fans who needed to guard habitat and species which had been threatened by human improvement. Since then, WWF has grow to be a distinguished companion within the nature danger and world sustainable finance area.

After the current COP27 Climate Change meeting in Egypt and earlier than the COP15 Bio-diversity meeting in Montreal, I had the chance to study WWF viewpoints on assembly outcomes and expectations, in addition to their wide-ranging coverage initiatives.

I spoke with Maud Abdelli, Lead, Greening Financial Regulation Initiative (GFRI) and Benjamin Hunt, Senior Coverage Advocate, Worldwide Local weather Finance, Coverage & Authorities Affairs.

F – How did WWF get entangled in world sustainable finance points?

WWF has labored on sustainable finance for over a decade, participating banks, insurers, buyers, regulators and coverage makers to make sure the monetary system acknowledges nature’s true worth and contributes to its conservation.

Finance is an enormous lever for change that may assist ship an equitable, net-zero, nature-positive future – however we have now an financial system that doesn’t acknowledge the worth of nature and its companies. We’re confronted with coverage disincentives which allocate capital to nature depleting actions and fail to convey clear coverage alerts towards nature-positive actions. As per the Paulson Institute report, there’s at present a US$700 billion annual hole in financing for biodiversity.

WWF has a twofold technique to handle this – financing inexperienced and greening finance. Financing inexperienced fosters larger funding in sustainable improvement and nature-positive actions from all sources – public, non-public, home, and worldwide.

Greening finance seeks, by way of greening monetary structure and regulation, to avail sources for conserving nature, to align private and non-private monetary flows and to take away dangerous incentives.

F – What’s WWF’s evaluation of the COP27 Local weather Change conferences in Egypt?

WWF – Regardless of progress on “loss and damage”, and on the function of nature within the local weather course of, the talks had been a grave disappointment. The negotiations had been poorly organized, delivered little, and, within the essential difficulty of the power transition, even took the method backwards. Given these developments, WWF notes with concern that obstacles had been positioned on civil society involvement within the COP course of by the host nation and that the industrialized world nonetheless did not make good on its 2009 promise to direct an annual $100 billion in local weather funds to the creating world. Moreover, WWF regrets the shortage of progress in direction of a worldwide objective for adaptation. Lastly, WWF is shocked that the robust wording round 1.5°C of the Glasgow Declaration was weakened at COP27.

F – What are your expectations for the present COP15 Biodiversity conference in Montreal?

WWF – COP15 should end result within the settlement of an formidable Global Biodiversity Framework, prepared for Events to start implementing instantly by way of the setting of nationwide targets and the updating of Nationwide Biodiversity Methods and Motion Plans (NBSAPs) in keeping with the brand new world framework. However the present textual content proposed for the World Biodiversity Framework doesn’t go far sufficient to handle our biodiversity disaster.

F – Within the monetary realm what are WWF’s particular ambitions for 2030 and 2050?

WWF – WWF approaches finance and the worldwide economic system with system pondering to handle two of the extra complicated intertwined techniques on our planet: local weather and nature.

WWF, together with the World Financial Discussion board (WEF), developed the notion of a “Nature Constructive Financial system.” This framework targets that by 2030 no less than 30 % of land and oceans are protected, and the footprint of our manufacturing and consumption is halved, with none allowance for nature-based offsetting.

WWF is at present within the means of creating a Nature Positive Economic Roadmap that addresses each a part of our world economic system, not simply the monetary realm, and units the world on a particular path for each Nature Constructive and Web Zero.

Within the monetary realm, we all know local weather change and nature loss are two intertwined dangers for the planet, human well being and the worldwide economic system. The President of the European Central Financial institution, Christine Lagarde, famous in her keynote speech through the IUCN World Conservation Congress in 2021, “There is no such thing as a financial and monetary stability with out respect for nature and with out nature’s contribution, as a result of our economies rely on it. That’s why we have to guarantee that financial choices internalize the injury inflicted by our societies on biodiversity.”

F – WWF advocates that central banks take a precautionary strategy to local weather change and biodiversity loss. Are you able to outline this?

WWF – The precautionary strategy permits establishments to behave earlier than the total materialization of the dangers, primarily based on the science that non-action wouldn’t be impartial and can actually exacerbate the monetary dangers linked to local weather change and nature loss. Adopting a precautionary strategy requires that central banks and monetary supervisors combine monetary dangers and impacts associated to local weather change and biodiversity loss into their every day decision-making processes now, utilizing all of the monetary regulation and financial coverage devices they’ve at hand, and in a means that’s globally coordinated with their friends.

F – How does WWF envision this virtually?

WWF – WWF recommends a three-phase pathway by 2050 with middleman targets (2025 and 2030) to scale back Greenhouse Fuel (GHG) emissions and to revive biodiversity. Central banks and monetary supervisors must proactively and successfully encourage monetary establishments to undertake comparable measures.

Forward of regulation, monetary establishments ought to arrange voluntary ESG danger administration frameworks and determine enterprise alternatives that can emerge with the brand new nature optimistic economic system.

As outlined in WWF’s “Criteria for net-zero commitments by financial institutions”, monetary establishments ought to pledge to achieve net-zero by 2050 or sooner. To attain this, monetary establishments ought to arrange a mixture of science-based, short-term (2025) targets, undertake funding insurance policies for essentially the most materials sectors that contain fossil fuels, deforestation- and conversion-related sectors (agriculture and forestry), high-carbon transport, high-carbon trade (e.g. cement, metal, chemical substances, and so on.). Finally, they need to report transparently on progress.

F – How does WWF understand the progress on Nature Constructive and Web Zero within the US?

WWF – Within the US, WWF has seen credible progress on a number of fronts within the final 18 months because the Biden Administration and the 117th Congress have joined collectively to push the ball ahead. These actions quantity to concrete steps that can remodel the US economic system over the subsequent 10 years. This has been good progress, however we’d like drastically extra within the years to return.

Our GFRI and a Ceres report present that the US has made inroads on monetary regulation and supervision as nicely. A number of businesses, amongst them the Federal Reserve Financial institution the Federal Deposit Insurance coverage Company (the U.S. Securities and Change Fee and the U.S. Division of the Treasury—collectively have taken over 230 public actions that can assist deal with climate-related monetary danger.

F – In your newest Residing Planet index, you revealed that just about 70% of untamed species had been misplaced because the 70s. What might monetary establishments do in an effort to not solely halt this pattern but additionally reverse it?

WWF – Certainly, the 2022 Living Planet Index exhibits a median 69% decline in monitored wildlife populations all over the world between 1970 and 2018.

In the meantime, WWF is aware of from its current Our Climate’s Secret Ally report that the world’s oceans, crops, animals and soils have absorbed 54% of artificial greenhouse fuel emissions up to now 10 years. Crucial ecosystems, reminiscent of wetlands, mangroves and coral reefs assist to guard us from the worsening hazards of maximum climate and sea- degree rise.

The enterprise and finance sector should assist restore nature and create equitable, net-zero, nature-positive markets and economies. Firms and buyers can cut back nature- and climate-related dangers by instantly making commitments, appearing and calling for change.

Monetary establishments can do that in three distinctive methods, by assessing impacts on nature-related dangers, utilizing instruments just like the Natural Capital Protocol and WWF’s Biodiversity Guide for Business, by factoring pure capital and climate- and nature- associated dangers into monetary decision-making, and eventually, monitoring efficiency and publicly report on progress. The latter could be achieved by aligning with Taskforce on Nature-related Financial Disclosures guidance and with reporting norms rising from the International Sustainability Standards Board (ISSB).

F – There may be a lot discuss in regards to the “simply transition.” What would this particularly entail and what can be the proper transition power combine be from now until 2050?

WWF – Solely by selling synergies between environmental, financial and social targets can we guarantee power transitions, which ship a future that can be honest, sustainable and local weather impartial. The holistic assist of your complete world group is required to impact the transition from fossil fuels to renewable power.

We will now not deal with power transitions individually from questions on social justice. Occasions in simply this previous 12 months alone, together with the historic flooding in Pakistan have underscored the dangers of not tackling local weather change, particularly to the poorest: they’re the least resilient to elevated excessive climate occasions and stay too uncovered to price-volatile fossil fuels. But almost 800 million individuals lack fundamental entry to electrical energy and consequently undergo the impacts of polluting and inefficient power techniques.

A gold commonplace for simply transition observe is captured by the International Labour Organisation’s Guidelines for a Just Transition to environmentally sustainable societies (2021), which WWF helps as a principal reference.

F – Central Banks and Monetary supervisors are enhancing necessities for environmental disclosure. However that is inadequate to realize change on the scale and pace required. What else must be thought-about?

WWF – Elevated transparency and disclosure merely aren’t sufficient. Regulators and central banks might play a way more pro-active function in defending towards the long run monetary dangers and instability posed by local weather change and biodiversity loss. Given the size of the dual disaster local weather change and nature loss, there’s an pressing want to maneuver past measurement and reporting. Central banks and monetary supervisors have at their disposal a spread of instruments to make sure a speedy and simply transition, together with necessities for regulated establishments to publish detailed transition plans, in addition to elevating capital necessities and systemic danger buffers, and tightening liquidity necessities, to make sure the dangers of investing in environmentally dangerous actions are correctly accounted for.

There may be already a wealth of data to tell buyers and monetary establishments of the long-term dangers of environmentally dangerous actions. Nevertheless, monetary establishments proceed to fail to include these knowledge into their financing choices, misguided by the deal with the short-term horizon and enticed by quick time remuneration insurance policies. Because of this, they typically don’t account for the catastrophic long-term dangers these investments might set off. It’s subsequently incumbent on regulators and central banks to behave in a precautionary means and pro-actively use their energy to beat this harmful mismatch between long-term dangers and short- time period lending and funding horizons and incentives.

F – WWF claims that biodiversity loss and local weather change are inherently linked to the core mandates of central financial institution and monetary supervisors. On what grounds is that this conviction premised and in that case, why is there nonetheless a widespread dialogue in regards to the true purview of central banks?

WWF – The dual disaster of biodiversity loss and local weather change is exclusive: there’s scientific certainty that the dual disaster will occur; there’s robust consensus on the extent of planetary destruction and loss that would happen if the dual disaster is unabated; there’s clear proof that these impacts are already occurring, and that they’re occurring at a sooner charge than predicted.

Different main dangers at this scale (reminiscent of large-scale or nuclear warfare or future pandemics) should not so sure to happen, and there are clear corrective actions that central banks and regulators can take now to restrict the dangers of the dual disaster. They need to take a long-term view and act on the scientific certainty that the dual disaster is at present producing important impacts, and, if left unchecked, will inevitably result in catastrophic dangers sooner or later.

F – In your analysis, you have got recognized “all the time environmentally dangerous financial actions” and “virtually environmentally dangerous corporations.” How ought to these actions and firms be approached by the central banks and monetary establishments?

WWF – Essentially the most environmentally dangerous actions are additionally the financially riskiest. These embody corporations concerned in coal, oil and fuel extraction, whose actions are driving the dual disaster and whose property are more likely to grow to be “stranded” because the world transitions. In addition they embody cement (with some exceptions), mining and deforestation corporations, energetic in biodiversity hotspots.

Monetary establishments which can be lending to corporations concerned in environmentally dangerous actions ought to face far increased capital necessities to account for the long-term dangers concerned. A number of components are essential to notice:

WWF suggests 3 ways in an effort to determine “all the time environmentally dangerous”: first by way of a sector lens, second by way of an organization lens, and third, by way of an financial exercise lens.

The general publicity of the monetary sector to the fossil gasoline trade and actions associated to deforestation are of the very best precedence, as they’re the core driver of GHG emissions and biodiversity destruction. These exposures current the very best monetary dangers. By diverting monetary flows away from damaging actions in direction of inexperienced investments reminiscent of renewable power, inexperienced applied sciences, or tasks to guard and restore nature, reminiscent of nature-based options, they could be a highly effective software for tackling the dual disaster of local weather change and biodiversity loss.

Regulators, just like the ECB, have been calling for a “brown taxonomy” to outline environmentally dangerous actions, akin to the inexperienced taxonomy defining sustainable financial actions.

With this all the time dangerous listing, corporations might solely be faraway from the listing in the event that they respectively publish time-bound, science-based goal(s) for the environmental points that create materials dangers to their operations, publish five-year detailed implementing transition plan(s) and yearly report on the progress in direction of the achievement of the goal(s).

F – The ISSB will shortly launch their last suggestions for voluntary climate related risk disclosures. Is the monetary and investor group ready for an additional set of voluntary danger disclosures? What’s WWF’s stance concerning ISSB’s inclusion of Scope 3 emissions and the double materiality function?

WWF – WWF welcomes the ISSB developments in relation to the harmonization of reporting requirements. Hopefully these voluntary requirements will grow to be obligatory. There may be nonetheless a must work intently with the Taskforce on Nature associated Monetary Disclosures on the combination of nature-related dangers.

Within the US, WWF identifies that the SEC’s new rule addresses systemic danger inside the US monetary system whereas affording corporations a number of new alternatives to have interaction extra absolutely within the new, inexperienced economic system.

Relating to scope 3, WWF helps the proposed rule’s inclusion of Scope 3 reporting, but additionally acknowledges that Scope 3 measurement and reporting requirements are nonetheless maturing. WWF endorses the rule recognizing the issue in offering an correct estimate of Scope 3 emissions, eradicating the requirement for smaller reporting corporations (SRCs) to report Scope 3 emissions, and phasing in assurance for Scope 3 emissions from giant corporations and accelerated filers.

In reference to materiality, WWF notices that corporations and buyers are understanding that the monetary materiality of local weather change and nature loss is systemic. Sadly, within the US, local weather emissions and associated monetary materiality have been confined to firm-focused danger. Given the magnitude of the challenges forward, we have to deal with each firm-level monetary dangers and systemic dangers of local weather change that affect each firm. American companies stand strongly to profit from this SEC rule which helps them translate and navigate broader systemic environmental points to firm-level danger.

F – The place does WWF stand concerning a worldwide carbon value, akin to what exists globally for currencies (Euro/$) and commodities (ounce of gold)? And what in regards to the implementation of Art.6 within the 2015 Paris agreement?

WWF – WWF helps a broad-based carbon value that will increase over time, together with a minimal world carbon value, particularly for internationally uncovered sectors. Nevertheless, there are various political, fairness and sensible obstacles that have to be overcome on the best way to this worthy objective. An essential component is settlement on robust guidelines below Article 6 negotiations that guarantee rigor and transparency in transactions between jurisdictions, and to the extent doable, within the voluntary carbon market.

COP27 clarified a number of the Article 6 Rulebook points left unsolved within the Glasgow determination. We’re proud of the choice to call non-authorized items “mitigation contribution 6.4 items”. These items should not be utilized by corporations as a foundation for offset claims.