CFA Institute co-hosts 10th Global Green Finance Leadership Program on the role of finance in climate transition and biodiversity conservation

CFA Institute, the global association of investment management professionals, together with the Institute of Finance and Sustainability (IFS) and GIZ, a German federal enterprise supporting international cooperation for sustainable development, recently co-hosted the 10th Global Green Finance Leadership Program, a two-day webinar on the role of finance in climate transition and biodiversity conservation. The webinar attracted a worldwide audience that heard from notable experts from mainland China, the UK, France, Mongolia, Thailand and Pakistan, about financial sector support for climate transition, biodiversity loss, and related risks along mainland China’s Belt and Road initiative.

“We believe there’s a gap between the willingness to take actions and actions taken. The key bridge to allow us to narrow the gap is through capacity building. At CFA Institute, we are accelerating our efforts to have the CFA Program include more about sustainable finance in the curriculum, to help the industry build and nurture this talent pool,” David Zhang, China Head, at CFA Institute, said.

In his keynote address, Dr. Ma Jun, IFS President, and co-chair of the G20 Sustainable Finance Working Group (SFWG), highlighted five pillars of SFWG’s transition finance framework. The pillars include the identification of transitional activities and assets, the reporting of information on transition financing, transition-related financial instruments, policy incentives to create an enabling environment for climate transition, and the need to assess and mitigate negative social and economic impact, such as unemployment, inflation and energy security issues.

Dr. Rhian-Mari Thomas, Chief Executive of the Green Finance Institute, pointed out that financial transition and other related innovations depend on measures to improve asset management and financial activities while considering potential risks, including the risk of greenwashing and transition washing.

Dr. Alexander Fisher, Director of the Sino-German Cooperation on Climate Change at GIZ, said that the German government has been working to phase out its coal-fired power plants (CFPP) with the help of a reverse auction mechanism, which encourages CFPP owners to retire their fleet at the economically earliest date.

Most of the existing transitional financial instruments are debt-based, such as sustainability-linked loans or bonds, and are primarily used to support renewable energy or energy efficiency projects. Other hard-to-abate sectors also need financial support, but many financial firms, especially those in developing countries and emerging markets, face unique challenges, such as a lack of capacity and understanding of transition pathways. Rhodri Preece, Senior Head, Research, at CFA Institute, shared recommendations for transitioning carbon intensive sectors towards a low-carbon or net zero future, including the expansion of a sustainable finance market and investor base, enhancing capacity building for all relevant stakeholders, providing more professional training and upskilling, and disclosure and data requirements.

The experts also had an in-depth discussion on biodiversity loss, and the related financial risks and economic impact. David Craig, co-chair of the Taskforce on Nature-related Financial Disclosures, and Deborah Lehr, Vice Chairman and Executive Director of the Paulson Institute, both emphasized that as much as half of the global economy is dependent on nature, as well as the importance of transition as a global issue. Miao Hong of World Resources Institute (WRI) China, said countries along mainland China’s Belt and Road initiative have tremendous infrastructure needs, and some investments can cause irreversible risks to animal migration and habitats. Biodiversity conservation projects along the Belt and Road could also mean huge financial needs and investments opportunities, such as the Ten Billion Tree Tsunami, which is a part of the Clean Green Pakistan campaign, and Mongolia’s One Billion Trees movement.

The working group on Environmental and Climate Risk Assessment under Green Investment Principles (GIP) has made a first step in exploring the financial risks stemming from biodiversity loss. Cheng Lin, Head of the GIP Secretariat office in Beijing, said GIP member institutions are at different stages of recognizing biodiversity loss and the related financial risks, and the working group would continue to work with relevant institutions and initiatives to build capacity, and develop tools and methodologies to help its member institutions quantify and manage biodiversity-related risks.

The webinar featured many other notable experts and speakers, including David von Eiff, Director, Institutional Relations, Asia Pacific, at CFA Institute, Robert Youngman, Team Leader, Green Finance and Investment, Environment Directorate, of the Organisation for Economic Co-operation and Development, and Gracie Sun, Managing Director of the Green Finance Center, and Senior Advisor of the Paulson Institute.