• Maxim Olliver, Director |
  • Richard Bernau, Management Consultant |
2 min read

From transition plans to the climate-nature nexus, there are 3 key COP27 themes that should be core to the ESG agendas for banks. Find out what we believe these themes are all about.

1. Transition Plans are key to lowering emissions

The launch of the Transition Plan Taskforce’s (TPT) gold standard guidance for climate transition plans sees a progression from target setting to implementation. For banks, assessing the credibility of counterparties’ transition plans, decreasing the intensity of carbon portfolios and supporting the lending to transition-resilient entities are key to achieving their net zero goals.

This guidance assists banks in the preparation of credible, useful, and consistent plans in line with the TPT disclosure framework and engaging with their counterparties.

You can learn more by reading our article on preparing your organization for climate transition plan.

2. Carbon Markets to play a larger role

Within the climate finance space, carbon markets will continue to grow in importance. Week one of COP27 saw announcements related to using the power of markets to increase the use of nature-based solutions through carbon credits.

Special Envoy on Climate, John Kerry, announced an Energy Transition Accelerator that would allow companies to purchase carbon credits to phase out coal-fired plants in developing countries. This is promising, but it remains the case that this early-stage market needs to towards high-integrity carbon credits.  This would secure real emissions reductions and carbon removals, and real benefits for nature and local communities. The longer this marketplace is without binding rules, the more we will it allowing opportunistic corporations greenwash their activities.

Banks need to be particularly aware of what they are financing.

3. Nature and Climate are inextricably linked

The overlap between the climate crisis and the biodiversity crisis was a key discussion point at COP27. Whilst previously the two have been treated separately, the cause and effect of nature degradation and carbon emission increase needs to be understood. The Task Force for Nature Related Disclosures (TNFD) released a third version of its beta framework ahead of its final recommendations, due in September 2023.

The TNFD has developed a proposed approach to scenarios that is designed to build on an understanding of critical climate and nature-related uncertainties, while encouraging organizations to think through material risks and opportunities that are related to the use of natural capital in their business model. Many responsible banks have begun to scope the risk associated with nature and biodiversity loss in their global portfolios.

What next for banking?

Make sure to prepare for these ESG themes. For further insights, you can: