Mikael Homanen

Green Finance Institute Helen Avery 8-53% of the UK’s 7 Largest Banks’ Portfolios Exposed to Transition Risks 🎥 In my interview with Helen, Director, Nature Programmes and GFI Hive at the Green Finance Institute, she explains the methodology behind their recently released report, ‘Assessing the Materiality of Nature-Related Financial Risks for the UK’, authored by Dr Nicola Ranger, Environmental Change Institute, University of Oxford, and Tom Oliver, University of Reading. 🌍 The conversation explores the report findings which show how #biodiversity loss and environmental degradation can create material risks for the UK economy and #financial sector, placing a ‘value at risk’ (nVaR) on nature. 💲 This has helped identify that the deterioration of our natural environment could result in UK Gross GDP falling by as much as 12%, with sectors such as agriculture, manufacturing and services being the most impacted and in turn, will correlate to the impact on bank portfolios. This will be the central theme of https://lnkd.in/g_Fm32F 2024 Finextra ResponsibleRisk Ltd Sandy Trust Marianne Haahr Rich Stockdale PhD Robert Gardner Gerrit Sindermann Andy Bennett Jessica Smith Cathrine Armour #Sustainablefinance #NatureRisk https://lnkd.in/eRjRcS5K

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𝐓𝐚𝐱𝐨𝐧𝐨𝐦𝐲 𝐚𝐬𝐭𝐫𝐨𝐧𝐨𝐦𝐲: 𝐓𝐡𝐞 𝐠𝐥𝐨𝐛𝐚𝐥 𝐬𝐞𝐚𝐫𝐜𝐡 𝐭𝐨 𝐝𝐞𝐟𝐢𝐧𝐞 𝐬𝐮𝐬𝐭𝐚𝐢𝐧𝐚𝐛𝐥𝐞 𝐟𝐢𝐧𝐚𝐧𝐜𝐞 Taxonomies began as simple lists of sectors and activities (with the Climate Bonds Initiative in 2012: and have increased in complexity over time.  A new Toolkit from Sustainable Banking and Finance Network (SBFN) https://lnkd.in/gbjsHZqF shows that, as of April 2024, 47 sustainable finance taxonomies (ranging from formal regulatory tools to more simple lists of eligible activities such green bond frameworks) have been issued globally, While three-quarters of advanced economies are now covered by a national or regional sustainable finance taxonomy, just over 10 percent (~24) of emerging markets and developing economies are covered. This could slow their ability to attract capital looking for sustainable investment opportunities. While taxonomies serve as a valuable foundation to guide complementary policies to promote sustainable finance, it is important to recognize that they are not a panacea. There are limitations to their applicability and effectiveness in addressing the complex challenges of sustainable finance, and they should be seen as part of a broader set of strategies and policies to accomplish climate and sustainability goals.  That said, these taxonomies do have the potential to become not only a powerful ‘astronomical guidebook’ for policy makers and regulators but also a source of clarity and confidence for corporate and financial sector actors.  Source: A new Toolkit from Sustainable Banking and Finance Network (SBFN) https://lnkd.in/gbjsHZqF

It is going to be a busy day for all of us in sustainability roles - The Financial Conduct Authority has just published two highly anticipated documents! 1️⃣ Finalised Guidance FG24/3 Finalised non‑handbook guidance on the Anti‑Greenwashing Rule 🔗 https://lnkd.in/eJCsGS_u 2️⃣ Consultation Paper CP24/8** Extending the Sustainability Disclosure Requirements (SDR) regime to Portfolio Management  🔗 https://lnkd.in/eXPUdMAs 🧐 We look forward to sharing our comments in due course! Please DM me or email us at ESG ACCORD (Accord Initiative) if you have any questions. #AccordInitiative #compliance #esginvesting #climate #sustainableinvesting #financialplanning #esg #wealthmanagement

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This week, on the back of my new paper and blog, Bloomberg sustainable finance journo Alastair Marsh asked me whether financed emission is a useful metric and whether its methodological limitations were irresolvable. I do see the appeal of the metric, and I know that most everyone working to promote and improve it is acting in the best faith. I also fear that the complications from combining estimates of emissions, financial exposure, and financial value for each financial counterparty relationship, and then combining them across the portfolio, may be a Gordian Knot. For more thoughts from me and others (and links to the paper and blog), check out Alastair's article below.

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How green is your bank? This #EarthDay Bank.Green released a first-of-its-kind climate performance ranking of 103 of the most popular banks and building societies in the UK and found many are still funding fossil fuels at an alarming rate. 🚫 31% of banks rated either provide significant financial support to the fossil fuel industry, or there is strong evidence to suspect they do. Which means your money could be funding the climate crisis! 😡 16 banks provided no disclosure of whether they lend to fossil fuel companies (and consequently received poor ratings) Visit this link to read the full findings: https://lnkd.in/eC9EYQ-Z #ClimateCrisis #DirtyBanks #BankGreen #EarthDay2024 #EarthDay #FossilFinance

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A fantastic brief and essential read for directors of financial institutions on water risk from CDP and Annabel Nelson The brief outlines a clear call to action for Boards: 🌍 1. Adopting a systems approach: Understanding how climate change and water are interrelated, aligning internal governance to embed consideration of water into strategy and business decision-making. 🧐 2. Assessing risks and opportunities: Identifying and evaluating your business’ impacts, dependencies, risks and opportunities on water. 💪🏻 3. Using change levers: Using your influence to support sustainable water usage and management. 📄 4. Documenting and disclosing: Transparency drives accountability, supports trust and helps to mitigate risk. Easy reading at 17 pages, get it downloaded for your train journey. https://lnkd.in/d98ZvQpf

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📢 New Policy Recommendations for UK Climate Finance 📢 Bankers for Net Zero (B4NZ) are proud to share a new climate finance policy playbook edited by David Carlin, David Aikman, Dr Marc Lepere, and Luca Taschini which included a chapter from our CEO, Heather Buchanan. Heather used her chapter *Empowering SMEs for a Net-Zero Future: Challenges, Solutions, and the Importance of Collaboration* to explore the challenges SMEs face in sustainability reporting and to recommend the UK government develop standard reporting frameworks and automated tools like Project Perseus to streamline data collection and improve access to green investment. The e-book brings together experts from business, finance, international organisations, and academia and makes several climate finance policy recommendations for the new UK government. Key recommendations include: 🔼 Higher Capital Gains Tax for heavy carbon emitters ✅ Streamlined listing rules for green companies The e-book features contributions from nearly forty thought leaders, including with contributions from World Benchmarking Alliance, Global Systems Institute, University of Exeter, E3G, PwC, Climate Bonds Initiative, Chapter Zero, Global Association of Risk Professionals (GARP) and many others. The 25 practical evidence-based recommendations in the e-book could help to transform the UK into a net zero finance hub within the next six months. 🌱 Explore the recommendations in full using the link below! 🌍 King's Business School University of Edinburgh Business School

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All to avoid the incoming EU regulations? The grapevine suggests that avoiding extra scrutiny that comes with the regulations, and the ability of companies to challenge the ratings more, are pertinent aspects to this dramatic u-turn by Moody's... One to keep watching! The Credit Rating Research Initiative #ESG #data

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The UK is one of the most regionally unequal countries within the 38-member Organisation for Economic Cooperation and Development. The Impact Investing Institute's latest report shows that place-based impact investing remains a key issue, one that is gaining momentum, writes Danielle Rossingh. #impactinvesting #placedbasedinvesting #socialimpact https://lnkd.in/eiZ4nx2G

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[#climatefinance #scenarioanalysis] How effective is the RCP/SSP framework for financial decision making❓ In a recent article, Dherminder Kainth dives deep into the RCP/SSP framework, a central construct in policy-making for #climatechange mitigation. Main insights: ✔️ The scenarios, developed using a series of models should be subject to scrutiny using well established model #riskmanagement approaches. ✔️ The framework is deliberately built as a set of scenarios with no associated probabilities, which is challenging for investors to use meaningfully with no view as to likelihood, dispersion and risks around the single paths. ✔️ He highlights areas where the design might lead to an underestimation of the risk, potentially giving rise to a false sense of security on the impacts of climate change and how transition might unfold. Access the full article, originally published in Investment & Pensions Europe (IPE) and Pensions & Investments supplements: https://lnkd.in/dNuJf5sK

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On 17 April 2024 the Bank of England published a paper 'Measuring climate-related financial risks using scenario analysis' (by Lewis Holden, Jordan King, Harriet Richards, Caspar Siegert and Lukasz Krebel). The paper highlights that commonly used “out of the box” macro climate scenarios do not typically provide the granularity or data required to perform asset-level financial risk analysis. Therefore, users of macro climate scenarios must decide how to ‘extend’ these scenarios. This may involve estimating impacts to a higher granularity, deriving related variables and addressing timing misalignments or intra-sector variabilities. Firms should then be able to use their existing toolkit of models to measure financial risks under the ‘extended’ scenarios. The paper explains how the Bank is extending macro-climate scenarios to undertake granular asset-level analysis with respect to sovereign bonds, corporate bonds and residential mortgages, with the learnings expected to be relevant for other central banks, private sector financial institutions and the broader financial system. Whilst the paper references some of the recent critiques of climate-related scenario analysis (for example highlighting that the impact of tipping points are not reflected in scenarios, and that estimating damages from temperature rises is an area of ongoing research), it doesn’t propose ways in which scenario users might update their approach in light of these critiques. Nor does it articulate why the outcomes of the Network for Greening the Financial System (“NGFS”) scenarios can still be considered prudent given these concerns. We would welcome the Bank’s further discussion of these points and illustrations of its thinking on how they may be best incorporated into climate scenario analysis work. This would greatly support efforts to engage and better understand the potential tipping points, stress and tail scenarios illustrated in the more recent Institute and Faculty of Actuaries 2024 paper. To discuss the paper from the Bank, or climate scenario analysis please get in touch with your usual Milliman contact. Summary by Milliman Consultants Claire Booth and Nick Spencer. #climate #climaterisk #financialrisk #riskmanagement #complexrisks #insurance #financialservices #milliman #millimanuk

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🌳Ecosystem tipping points: Understanding risks to the economy and financial system🌳 Last month, a report on ecosystem tipping points provided hard data on the impacts the collapse of ecosystems will have on the global economy. But what does this mean in practice, and how might it impact directors… ❓What are ecosystem tipping points❓ 🌿These are critical thresholds within ecosystems that cause the system to lose resilience and undergo self-propelling change into a completely different state when crossed. 🌿These tipping points tend to be non-linear, irreversible, abrupt and self-propelling. This means that we do not know what combination of pressures triggers them, and cannot remedy, predict or stop them from unfolding once triggered. 🌿 Five critical ecosystem tipping points identified in the report include Amazon dieback, boreal forest dynamics, coral reef die-off, mangrove dieback and tropical peatland collapse. ❓What are the potential economic and financial impacts of crossing these tipping points❓ 📉Economic impacts: a few examples include the loss of agricultural yields (in double digits for some countries), hydropower generation (by 75% in some cases), and value of built assets. 📉Financial impacts: credit, market and underwriting risks increase due to more frequent flooding, acute wildfires and greater storms, all intensified when the tipping points identified are crossed. ❓Do directors have a duty to act❓ ▶️In many jurisdictions, national corporate law frameworks require directors to act with care and diligence and to promote the success of their companies.  ▶️These duties are exercised through strategic planning, oversight of foreseeable and material risks, and ensuring adequate disclosure and reporting.  ▶️Biodiversity loss and ecosystem breakdown can pose foreseeable risks to a company’s best interests. Therefore, directors have a duty to carefully consider these increasingly pressing issues as part of their strategic planning, rather than as a compliance exercise.  ▶️This is in keeping with the findings from a legal opinion recently published, co-commissioned by Commonwealth Climate and Law Initiative (CCLI), which found that directors in England and Wales could breach their duties if they fail to identify and mitigate latent financial risks arising from a company’s unaddressed nature-related impacts and dependencies.  ▶️Failing to do so could expose directors to increased shareholder scrutiny and legal consequences. 👇For more information, we recommend reading a Board Briefing CCLI co-authored, as linked in the comments alongside the ecosystems report. 📷by Maksim Shutov on Unsplash

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⚡Rendesco, a low-carbon alternative to gas grid infrastructure, raises £6m to rapidly expand its operations and further develop its solutions in the UK and European energy markets. The new investment has been led by Clean Growth Fund, Eurazeo’s Smart City fund, and Aviva Ventures. They join existing investor Copley Point Capital, demonstrating that investor confidence in ground source heat pump technology as the UK transitions to a decarbonised economy. "Their collective expertise and support will be invaluable as we pursue our ambitious growth plans, rapidly expanding our clean heating solutions to reach millions of homeowners and making a major – and much needed – dent in the UK’s carbon reduction efforts.” - Alastair Murray, CEO and founder at Rendesco Read more about the fundraising and how Rendesco intends to utilise the capital to transform grid infrastructure across the UK and Europe, in the article linked in the comments below. 👇 #RealEstate #sustainability #investment ---- 💡 Follow PropTech Connect for daily Real Estate and PropTech news and insights.

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Our #Definedbenefit (DB) research sheds light on the divergent paths of #pensionschemes, dictated by their size, funding positions, and endgame objectives. 👉 Large schemes, boasting assets over £1 billion, overwhelmingly prioritise derisking towards their endgame, with 50% placing it at the forefront of their priorities. In contrast, for smaller schemes with assets below £1 billion, only 34% share this focus. 👉The majority of smaller schemes (51%) are channeling their efforts to improve and maintain funding levels, underlining a nuanced approach to financial stewardship. To learn more about the priorities of UK DB pension schemes, read our full report: https://bit.ly/3V9YpdR

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Assessing Climate Transition Risk:Methodologies and Roles for Financial Institutions #climatetech #climatechange Hyperledger Climate Action & Accounting Special Interest Group

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France’s financial regulator has called for caution in sustainable fund marketing to avoid “major greenwashing risks” after analysing 52 sustainable thematic funds. The Autorité des marchés financiers (AMF) – France said it observed “inadequacies” in the funds’ compliance with the regulator’s minimum standards for non-financial criteria – effectively its national rules for ESG terms in fund names – and urged managers to ensure the marketing of funds is “correct, clear and not misleading”. A spokesperson for the AMF told Responsible Investor that for funds to be aligned with its guidance, sustainability claims must be backed by a “measurable and binding commitment” in the legal documentation in order to be used as part of the marketing communications. The study found that 28 percent of the funds analysed breached the AMF’s minimum standards, which were introduced in 2020. Shortcomings included issues with the data used by funds to back up their sustainability claims in various materials. The regulator said discussions have been initiated with stakeholders based on these findings. It noted that all funds that did not meet the criteria are domiciled overseas. #SustainableInvesting #SDGs #SFDR

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Very honoured to contribute to IEMA Sustainable Finance Insight Journal Volume 2: Disclosure, Transparency and Reporting in Sustainable Finance. #CSRD is on everybody's agenda so when guest editor David Luck MIEMA, CEnv (thank you!) asked us to write about #doublemateriality we were very happy to provide Datamaran perspective. However, Marjella Lecourt-Alma and I didn't want to write yet another piece on how materiality is used for reporting. As Simon Zadek and Mira Merme pointed out already 20+ years ago, #materiality in sustainability means more than just a threshold for reporting, it is actually a #corporategovernance framework. For example,  #ESRS require disclosure of how frequently governance bodies, such as steering committees and Board committees, are informed about and consider the material sustainability matters and their impacts, risks, and opportunities (#IROs) in their decision-making. Under #CSRD, making a materiality judgment is not simply about setting a threshold for reporting, it is an affirmation of accountability, involving the highest levels of governance in the organisation. Given the double perspective of materiality, for the first time, this is not simply about what can affect the value of the company, but also and more importantly about how the company affects and impacts the environment and society. The expansion of materiality beyond the boundaries of reporting and into governance deserves more academic research. This is something that we explored together with Di Wang, Chris Chapman, and Stuart Cooper - check our paper Sustainability (ESG) Reporting: Field Evidence on Materiality here https://lnkd.in/ekyttcZf The full issue of the IEMA Sustainable Finance Insight Journal is available here: https://lnkd.in/e8vfDQ_J Our article is in very good company with David Carlin, Valentina Cavanna, Roger Cruz, Paul Flood, Robert Fullerton, CFA, Nathalie Gaullier, Satoshi ISHIHARA, Emilie Goodall, Will Goodhart, Albert Seoane Miguel, Cécilia Vernhes

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