Towards carbon risk and climate performance recognition in the financial sector
This article was published in Private Sector and Development, run by Proparco (a subsidiary of Agence Française de Développement).
by Fabien Hassan, Analyst, 2° Investing Initiative; Hugues Chenet, Co-founder, 2° Investing Initiative; & Pierre Chastroux, research internship, 2° Investing Initiative
26 November 2015
Despite the clear need for their involvement, finance-industry players currently remain largely disengaged from the investment needs of the low-carbon economy. ‘Carbon risk’ and ‘climate performance’ are two relevant approaches the finance industry can take to effectively address the climate challenge.
Limiting climate warming to 2°C above pre-industrial levels will not be possible without the financial sector’s involvement. Climate-aware investment occupies an increasingly central place in both international negotiations and the specialist literature. As the IPCC emphasises, reallocating capital to the low-carbon economy is a key challenge. Unfortunately, private investments currently remain largely disengaged from the energy transition movement (Morel et al., 2014), creating the risk of a disconnect between the financial markets and the real economy.