Ecological, social, and economic impacts of climate change are worsening. The intensity, rhythm, and power of climate disasters have been growing in the last years. In this context, mitigation efforts need a new push and adaptation to climate change must be a priority for our countries. Two years ago, the adoption of the Paris Agreement during COP21 represented a key milestone in the climate negotiations and a new hope in the fight against climate change. Not only had this Agreement reconciled views of 195 countries around ambitious objectives, but it was also the opportunity to demonstrate the strong commitment of non-state actors in implementing the ecological transition, including the financial sector.
The financial community has taken important steps forward to tackle climate change and to accelerate the greening of finance. Private capital flows are now being directed towards low-carbon projects, transition risk management and green infrastructures. This incentivises the financial sector to better account for environmental and social risks in the long-term and brings a response to market demand. However, are these evolutions enough to meet the goals that we set two years ago to limit warming to 1.5°C or below 2°C and to build a resilient economy? Where does the financial sector stand in terms of objectives, pathways and climate policies?
Accelerating the greening of finance is an urgent matter to carry out credible climate actions and to achieve very concrete results. In order to play its role in the fight against climate change, the private finance has to take up three challenges.
First, better information is needed for stakeholders to best integrate climate change-related issues in their analysis. That is why we need all economic actors to improve climate-related reporting, in ways that must be tailored and adapted for each of them. In that sense, I fully support the conclusions drawn by the Taskforce on Climate Financial Disclosure (TFCD) in their report delivered last June. At the EU level, I am convinced that the conclusions of the high-level expert group on sustainable finance will give a new impetus. In France the implementation of article 173 of the Energy Transition Law for Green Growth (August 2015) was perceived as a key evolution by private actors and could set an example for other countries. It expands the climate reporting of firms to the emissions related to the use of their products and services and introduces a framework for Environmental, Social and Governance (ESG) reporting by financial institutions. I warmly encourage each country to define appropriate and ambitious solutions to ensure the implementation of the TCFD recommendations and improve its climate reporting standards.
Developing financial instruments dedicated to financing the transition is one of the other key challenges for the private sector. Expanding the current green bond market is one option. France has taken decisive action on that matter by issuing the largest sovereign green bond — €7bn — in January 2017. France also intends to be a constructive partner in the discussion on how to structure the global green bond market, both by creating a clear taxonomy and by defining rigorous processes. The Paris Financial Center will continue to develop this market.
Finally, private initiatives need to complement the role of governments in the greening of private finance. Private actors need to play a leading role when it comes to the development of disclosure standards, climate scenario analysis or sectoral impact evaluation standards. To accelerate this process, consideration of sustainability criteria or accounting frameworks in credit ratings should be reinforced. The constitution of green financial centres is also key to push forward this dynamic.
Mobilising climate finance, public as well as private, for increased climate action in terms of greenhouse gases emissions reduction and adaptation will be one the key objectives of the upcoming Summit that will be held in Paris on December 12. This Summit, organised in close collaboration with the United Nations and the World Bank, will highlight very concrete solutions and initiatives that will foster the transformation of the financial sector so that it can efficiently support the ecological and energy transition that we need to achieve the Paris objectives. Greening public and private finance will also be at the heart of the Climate Finance Day and the meeting of the International Development Finance Club (IDFC) that will take place on the eve of the Summit. By launching the initiative Make Our Planet Great Again, France demonstrated its willingness to stay at the forefront of fighting against climate change.
The world is at a tipping point. All the voices of change and all the energies need to gather in Paris in order to set in motion the world of tomorrow.
I look forward to meeting you in Paris.
Emmanuel Macron is President of France