This article was published in \"Valori\". An Italian monthly publication on social economy, ethical finance and sustainability, n° 145, February 2017 (


When the final curtain fell on the twenty-second United Nations’ Climate Change Conference, the COP22 in Marrakech, it seemed as if an intermediate phase had been simply touched on. Indeed, no great progress was made on the front of the fight against climate changes. The “developed” countries confirmed their intention to allocate 100 billion dollars a year, from now until 2020, in the final document approved in Morocco. This promise however appears dated by now considering it was put forward for the first time eight years ago. It was then confirmed in the Paris Agreement which was reached at the end of the COP21 in 2015. 

At Marrakech, after the developments made in France regarding declarations of intent, we expected it to be time for action. The Conference had set the objective of “putting into practice” the decisions taken a year before in Paris. In any case, despite the direct appeal made by UN Secretary General, Ban Ki-moon (who stated that “funding and investments are essential to creating resilient societies, capable of minimising greenhouse gas emissions”), it is not yet clear how the Green Climate Fund, established after the Copenhagen COP in 2009, will be financed. Rich countries, for now, have promised only 83 million dollars, of which 50 from Germany, which will however, finance another fund, the Adaptation Fund which was established in the Kyoto Protocol framework. A mere drop in the ocean. 


Finding funds... 

In Morocco, the government gave themselves two years to figure out how to find a way to guarantee this 100 billion. Said Karrouk, climatologist and member of the IPCC (Intergovernmental Panel on Climate Change), Nobel Peace prize winner in 2007, explained to French daily economic newspaper La Tribune that “when, back in the Paris COP21 final declaration, the astronomical transfer of 100 billion dollars from the richest countries in the world to the developing nations was confirmed, we could have legitimately asked certain questions regarding the sincerity of these promises. Above all, considering the current economic and financial context. The theory that we are talking about a statement intended to get Africa to bide their time, as far as I can see, is not just the result of mere paranoia. I only hope at least that it is not nothing more than a bluff.” 

It should be noted that last October the rich countries published (for the first time) a document demonstrating how these commitments are expected to be fulfilled. According to the OECD calculations, in this way, in 2020, 67 billion dollars of public funding (including donations and loans) will be made available. Apart from that, the governments count on leverage which is capable of driving private investments totalling between 77 and 133 billion. But, here, we are talking hypothetically: “The publication of this document, which is more specific than a simple promise, is progress. However, let us continue to be cautious: States often exaggerate sums,” commented Armelle Le Comte, of the association Oxfam. The provision of around ten billion granted by China through another fund, the South-South Coordination Fund, is more sound.


... and using them

It will be necessary to verify if the rest of the world is just as ready. Let us be optimistic and imagine that the funds are found over the next few months. At that point, we will need to decide how to use them. And how to allocate them. This, too, was a matter of great dispute between the nations of the North and South of the world meeting in Marrakech. 

“The discussions no longer regard the amount of money used – underlines Mauro Albrizio, in charge of Legambiente’s European office in Brussels – but three fronts: the calculation methods, those regarding fund granting and whether to allocate them to mitigation or adaptation to climate change policies.” Basically, the OECD’s calculations have been contested by the poor nations, “because – continues Albrizio – it is clear that while donations are one thing, loans are quite another. As regards the latter, it is necessary to verify what interest rate will be granted. Obviously, developing countries will only accept cash with very low interest rates. If they have to run up debts at market rates, they can just as easily deal with banks. Why should they wait for the rich countries to intervene?” Furthermore, for now, only 20% of the public funds registered by the OECD are intended for adaptation, that is, for the systems which the most vulnerable nations will have to use in order to adapt to climate changes: “It is clear that private citizens are not interested in investing in this way. They are much more tempted to co-fund technology transfer, and focus on the amount allocated to mitigation.” 


The “Noes” of the South of the world

This situation is unacceptable for the governments of developing countries that have proposed to raise adaptation funds to at least 50%. The request was officialised by the African Union, which would accept to have around 30-40 billion dollars at their disposal. “In any case – Legambiente’s leader observes – we should clarify that this sum is not in the slightest sufficient since it will only covers the first step. Some UNFCCC informal estimates, which circulated the negotiating tables in Marrakech, indicate that between 140 and 300 billion dollars a year will be needed in 2030.” 

The final chapter of the North-South dispute regards loss and damage costs, that is, compensation for damages suffered. “At the COP22 – concludes Albrizio – a five-year programme was defined which will have to indicate how these contributions are granted. Developing countries have accepted the principle that future catastrophes will be indemnified but past ones will not.” This, however, will start from the moment in which the mechanism becomes operational.*


*This information was taken from “Finanza sostenibile e cambiamento climatico,” published by the Italian Sustainable Investment Forum.




When finance meets climate change 

Direct and indirect instruments for fighting climate change

by Elisabetta Tramonto


What environmental risk has got to do with pension funds 

Environmental risks as part of investment strategies – a mandatory part of European pension funds. Last 24 November, the European parliament did indeed approve the amendments to the IORP (Institutions for Occupational Retirement Provision) II Directive, which updated the regulations on activities and supervision regarding pension funds and other European pension schemes, also introducing the obligation for fund managers to adopt ESG (that is, environmental, social and corporate governance) criteria in investment choices. Investors, the new directive specifies, must communicate their risk analyses to the competent authorities, including those “regarding climate change, resource use, the environment, the social sphere and depreciation of assets as a consequence of regulatory changes.” These are so-called stranded assets – assets which are substantially blocked since incapable of remunerating investments. These include enormous reserves of gas and oil which the introduction of stricter regulations on greenhouse gas emissions (and, thus, the use of fossil fuels) are an important factor for in terms of depreciation. “This is a great success in terms of supporting investments into sustainable products,” commented German MEP for the Greens, Sven Giegold, adding that the law “is opening the way to fossil fuel divestment by European pension funds.”

As regards the environmental impact of investments, France has made an advance move. In summer 2015, the Loi relative à la transition énergétique pour la croissance verte was approved, obliging, with article 173, pension funds, insurance companies and all big investors to measure and communicate the carbon footprint of their investment portfolio, along with their climate risk management strategy, from 2016.


The green bond boom 

So-called “green bonds” are one of the most innovative instruments for funding businesses with a positive impact on the climate. These debt securities are associated to funding projects with positive environmental effects (renewable energies, sustainable management of waste and water resources, biodiversity protection, energy efficiency). This market has experienced exponential growth over the past years, reaching, in 2015, over 40 billion dollars in overall global issues – 272% compared to 2013 (data from Climate Bond Initiative, “Year end review 2015,” The bonds are issued mostly (61%) by international organisations such as the World Bank or the European Investment Bank (EIB). The remaining part (39%) are company bonds. The first green bond was launched by the EIB in 2007 and is named “Climate Awareness.” It funds projects focusing on solutions to climate changes. At the moment, there is no binding standard of reference for issuing green bonds: A report published recently by the WWF underlines the importance of reserving the adjective “green” exclusively to bonds whose issuer can demonstrate a positive, measurable environmental impact, certified by an independent body according to shared standards.


ETFs and low carbon indexes

ETFs (Exchange-Traded Funds) which replicate low carbon indexes. The supply of so-called “passive” management incorporating the matter of climate change is also increasing. These are ETFs which include securities which are lower in carbon than the benchmark of reference, thus reducing the overall CO2 footprint of the portfolio. Indexes can be composed based on the exclusion strategy, eliminating the most polluting sectors from the investable universe (typically, the fossil fuel sector), or using a best in class approach, which, within each sector, selects the companies able to manage the risks/opportunities connected to climate change most efficiently. An example of these low carbon indexes can be found on the Montréal Carbon Pledge website:


Impact investing against climate change

Impact investing is a sustainable finance strategy which is particularly indicated for contrasting climate change and favouring the transition towards a low-emission economy,” reads the “Finanza sostenibile e cambiamento climatico” report published by the Italian Sustainable Investment Forum. “Compared to other instruments, impact investments intend specifically to generate a measurable social and environmental return.” In 2015, the value of the masses managed on the basis of the impact investing strategy totalled circa 60 billion dollars, as highlighted by the annual JP Morgan and Global Impact Investing Network (GIIN) study. Furthermore, a JP Morgan, GIIN and Rockefeller Foundation investigation estimated that, in 2020, the masses managed according to impact finance criteria could reach 400 to 1,000 billion dollars. 


Initiatives for funding clean energy and against climate change

Initiatives for funding projects developing clean energy, or, in general, for contrasting climate changes are increasing throughout the world.

  • The Africa Renewable Energy Initiative (AREI) is an African initiative for exploiting the continent’s abundant renewable energy resources. Launched at the COP21 in Paris in December 2015, it is receiving great international support from development partners that are committed to mobilising at least 10 billion dollars cumulatively in order to exploit the potential of renewable energies in Africa and increase access to energy throughout the continent. Financially supported and sustained by the governments of Canada, France, Germany and the United States, the AREI aims to add 10 GW of energy produced from renewable sources to the African energy mix by 2020 and then another 300 GW by 2030.

The annual Global Impact Investing Network report identified several particularly relevant initiatives (quoted in the “Finanza sostenibile e cambiamento climatico,” published by the Italian Sustainable Investment Forum):

  • the Breakthrough Energy Coalition created by Bill Gates, Mark Zuckerberg and another 20 HNWIs that will invest in initiating clean energy and technology initiatives throughout the world;
  • the Climate Investor One created by FMO to promote funding renewable energies on emerging markets;
  • the UN Convention to Combat Desertification’s Land Degradation Neutrality Fund aims to redevelop 12 million hectares of compromised land every year, with the objective of mitigating climate change and favouring biodiversity; there will be over one billion dollars in investment opportunities through the fund.


Climate and finance: international initiatives  

2° Investing Initiative

This association, founded in 2012 in Paris, is a group of multi-stakeholder experts which develops projects aiming to align the financial sector with 2 °C’s objective. Specifically, the group’s research and activities aim to: make investment processes coherent with 2 °C scenarios; develop methods and instruments for measuring financial institutions’ climate change performance; encourage the introduction of regulatory incentives to direct resources towards funding energy transition.


Green Climate Fund

The fund was created as part of the UNFCCC (United Nations Framework Convention on Climate Change) with the objective of applying the Paris Agreement (COP21) and increasing collective action in response to climate changes. The fund aspires to mobilise resources for investing in low carbon-impact development projects which are resilient against climate change.


Green Infrastructure Investment Coalition

Founded at the Paris COP21, this coalition aims to support the funding of a rapid transition towards a low carbon-impact economy which is resilient against climate changes. The founding members of the coalition are: Climate Bonds Initiative, Principles for Responsible Investment (PRI), UNEP Inquiry and International Cooperative and Mutual Insurance Federation (ICMIF).


Institutional Investors Group on Climate Change

IIGCC is a collaborative platform for investors concerning the matters of climate change. The network is currently composed of 120 members, including several important pension funds and European managers. Its members represent almost 13,000 billion euros of assets. Its mission is to provide investors with a collaborative platform for encouraging policies, investment practices and conduct capable of facing the risks and the opportunities associated with climate change, from a long-term perspective.


Investor Network on Climate Risk

Founded in 2003, the Investor Network on Climate Risk (INCR) includes over 120 institutional investors representing more than 14,000 billion dollars of assets. The members of the INCR are committed to facing the risks and seizing the opportunities which derive from climate change and other challenges related to sustainability. 


Montréal Carbon Pledge

By signing the Montréal Carbon Pledge, investors commit themselves to measuring, publishing and reducing the carbon footprint of their investment portfolio, on an annual basis. The initiative was launched on 25 September 2014 at the PRI in Person33 in Montréal and is promoted by the Principles for Responsible Investment (PRI) and by the UNEP Financial Initiative (UNEP-FI). Supervised by the PRI, the Montréal Carbon Pledge has registered more than 120 investor members, with more than 10,000 billion dollars of managed assets. Etica Sgr and Fondo pensione Cometa are the only Italian signatories for the moment.


Natural Capital Declaration

The Natural Capital Declaration is promoted by UNEP-FI and the Global Canopy Programme. This financial sector declaration with a view to the Earth Summit Rio+20, explains the commitment to integrate considerations connected to Natural Capital in products and financial services in the 21st century. Ecosystem goods and services deriving from Natural Capital include climate security.


Portfolio Decarbonization Coalition

The Portfolio Decarbonization Coalition is an initiative promoted by UNEP-FI, UNEP, CDP and Amundi. This network of institutional investors and managers is committed to “decarbonizing” their investment portfolios. Portfolio decarbonization may occur by disinvesting, across all sectors, in carbon-intensive companies, projects and technologies and re-investing in companies, projects and technologies which are particularly efficient in terms of carbon emissions.


Regions of Climate Action

R20 Regions of Climate Action is a nonprofit organisation, founded in 2010 by governor Arnold Schwarzenegger and other world leaders, in cooperation with the United Nations. R20’s mission is to assist regional governments to develop projects regarding low-emission economic development which is resilient to climate changes. Specifically, R20 facilitates the setting up of collaborations between regions and the technological and financial sectors.


UNEP-FI Climate Change Advisory Group

Since the World Forum in Rio in 1992, the United Nations Environmental Protection’s financial initiative has incentivised the aligning of financial communities with sustainable development principles and, in the context of the dedicated Advisory Group, with the containment of the risks connected to climate change. UNEP-FI members include over 200 financial institutions (banks, investors and insurance companies). Its activities focus on achieving two main objectives: changing finance (favouring the integration of environmental aspects within financial processes) and financing change (encouraging the funding of projects with a positive environmental impact).