EBRD joins call for more reporting of climate risk
World leaders meet virtually in the Netherlands today for the Climate Adaptation Summit (CAS), whose aim is to galvanise and scale up global efforts to adapt to the impacts of climate change, with their significant implications for human and economic development.
Today, adaptation is an important part of climate action worldwide, in parallel with efforts to limit the greenhouse gas emissions that cause climate change. There is little doubt that the world is warming.
Even if current pledges made to implement the 2015 Paris Agreement on keeping warming below 2°C are fully implemented, they would only limit the projected temperature rise to between 2.9°C and 3.4°C by 2100, leading to potentially catastrophic impacts, from rising sea levels, heat stress, and more severe storms to ecosystem destruction.
The EBRD, whose President, Odile Renaud-Basso, is among summit speakers, is a strong supporter of financing for climate resilience. The Bank operates in some of the world’s most climate-vulnerable countries.
For example, Jordan and Uzbekistan are amongst the most water-stressed countries in the world, where climate change poses existential threats to livelihoods and food security. In Central Asia, the rapid shrinkage of the region’s glaciers threatens the delicate balance that sustains food production, energy generation and regional stability.
During the summit , the EBRD was also part of a call led by UNEP-FI, the United Nations Environment Programme Finance Initiative, to encourage more financial institutions to move towards a market-wide, comparable and standardised approach on physical climate risk aligned with the voluntary reporting advocated since 2015 by the Task Force on Climate-related Financial Disclosures (TCFD).
This will allow the financial sector to independently assess climate risk, thus building finance sector resilience and helping to identify where and how to adapt to a changing climate. The EBRD was one of five organisations already signed up to the TCFD to issue a Physical Risk and Resilience Statement urging others to join.
The EBRD’s Annemarie Straathof, Vice-President, Risk and Compliance, said: “Climate change presents material risks to business, financial markets, and society as a whole – and these will only increase as the impacts of climate change become more apparent.
“Within the EBRD, we are operating in some of the world’s most climate-vulnerable regions, and so we fully understand the importance of assessing, managing and disclosing the physical climate risks that affect our business operations. We applaud UNEP-FI’s important work towards a wider understanding and building more capacity in this vitally important area.”
Today’s summit is the culmination of the “Year of Action on Adaptation” of the Global Commission on Adaptation, which was launched in 2020 with a mandate to encourage the development of measures to manage the effects of climate change through technology, planning and investment.
Former United Nations Secretary-General Ban Ki-moon leads the Commission, with Microsoft’s Bill Gates and Managing Director of the International Monetary Fund Kristalina Georgieva as co-chairs. The parallel global efforts in 2020 to contain and adapt to the coronavirus pandemic only further underlined the importance of ensuring that our economies and societies are resilient.
The CAS summit is also a milestone on the road towards the global climate summit, COP26, due in Glasgow in November 2021. The UK COP26 Presidency has made climate adaptation/resilience one of the four priority themes for COP26.
The COP26 private finance priorities also emphasise the need for a transformation in the financial system in order to build a low-carbon and climate-resilient future, which they call the “risk-reporting-returns-mobilisation” strategy – in other words, encouraging wider reporting of climate risk across financial markets globally.
The Bank has been a pioneer in mainstreaming physical climate risk disclosure, having signed up as a supporter in March 2018 and published its own first stand-alone report on the steps it is taking to follow TCFD recommendations last October. It has also established credentials for innovating and scaling up the use of climate resilience bonds and green bonds for climate resilience, with the issuance of the world’s first dedicated climate resilience bond in September 2019. More recently, the Bank is working with the Global Center on Adaptation and the Climate Bonds Initiative to share experience with investors and potential issuers on the potential for green bonds to support climate resilience financing.
“The EBRD has a strong track record on climate resilience finance and has done much to support the mobilisation of financial markets and private capital towards climate resilient investment”, says E2C2’s Craig Davies who leads the Bank’s climate resilience business operations. “Looking forward, financing climate resilience is now a key pillar of the EBRD’s Green Economy Transition (GET) approach for 2021-25, which commits the Bank to make more than half its financing green by 2025.”
Over the past decade, the EBRD has financed more than 300 climate resilience investments with a total business volume greater than €9 billion and adaptation finance exceeding €2.5 billion. It and other multilateral development banks have collectively pledged to raise total adaptation finance to US$ 18 billion per year by 2025, a commitment that is well on its way to being met.
Other participants and contributors at today’s summit include Dutch Prime Minister Mark Rutte, German Chancellor Angela Merkel, French President Emmanuel Macron, British Prime Minister Boris Johnson, Canadian Prime Minister Justin Trudeau, UN Secretary-General António Guterres, First Vice-President of the European Commission Frans Timmermans, and others.