Financial services powerhouses, led by former Bank of Canada governor Mark Carney, commit to net-zero push

This article was written by Jeffrey Jones and originally published to The Globe and Mail on September 21, 2021.

Big-name stock exchanges, rating agencies, auditors and index providers have banded together in a group led by former central banker Mark Carney.To focus its actions on achieving net-zero carbon emissions as countries prepare to meet new commitments in the fight against climate change.

Seventeen organizations, including the London Stock Exchange Group, Moody’s Investors Service, S&P Global Inc., PricewaterhouseCoopers and MSCI Inc., have committed to “align” their products and services to meet climate goals as part of the group, which Net Zero Financial Services. Provider Alliance, or NZFSPA. None are Canadian-based.

The financial industry, through the allocation of capital, exerts a massive influence on the pace and intensity of emissions reductions across all sectors of the global economy. Rating agencies, proxy advisors, stock exchanges and auditors can provide the tools that banks and asset managers need to assess how best to invest money to generate financial returns while having the greatest environmental impact is done.

The launch is led by Mr. Carney, the UN Special Envoy on Climate Action and Finance. The group’s founding joins another part of the world’s financial industry in a push that began in April with the formation of the Glasgow Financial Alliance for Net Zero, or GFANZ, which now includes more than 250 banks, insurers and fund managers. are, accounting for US$88. – trillions of assets.

Mr. Carney, former governor of the Bank of Canada and the Bank of England, was also a driving force behind this. “By joining the alliance and GFANZ, these firms are committed to supporting a high-ambition, reliable net-zero transition to their products and services, which we need to achieve our 1.5-degree goal,” he said in a statement. the wanted,”Referring to the target set by the Paris Climate Agreement.

In August, the UN Intergovernmental Panel on Climate Change released a report that clearly outlined the urgency to take action to reduce emissions. Devastating heat waves, wildfires and devastating storms only raised hopes for the multinational action, known as COP26, scheduled for Glasgow in November. The financial sector will play a major role in the negotiations, which aim to incorporate new goals and policies into the Paris Agreement in 2015.

In Paris, countries agreed to try to limit global temperature rise to 1.5 to 2 degrees above pre-industrial levels by 2050 by achieving net-zero emissions. Scientists say this is necessary to prevent the worst effects of climate change. Getting there involves simultaneously reducing greenhouse gas emissions and offsetting those that cannot be cut.

Under the agreement, members of the Net Zero Financial Services group will set interim goals within the first 12 months of joining to align products and services with climate goals, and by using the recommendations of the Task Force on Climate-Related Financial Disclosure. Will report progress. TCFD is seen as the gold standard for climate reporting. They will also ensure that asset managers and financial institutions have the data and products they need to meet their goals.

Commitments vary for different types of members. Investment advisors will include net-zero investment options and explanations with advice to be offered to clients. Stock exchanges would require, or at least promote, companies to disclose all necessary climate-related data to market players in order to make investment decisions.

Proxy research and advice providers will take into account net-zero-aligned corporate policies when making recommendations to clients. Bond rating agencies will take into account net-zero initiatives in their assessment of credit risk as and when they deem it relevant.

Companies that provide ratings on environmental, social and governance factors will do so by using consistent methods to examine net-zero schemes among companies, securities and governments.

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