Yesterday’s Economist discussions covered that governments need to be attune to the barriers presented to decarbonisation and climate resilience by planning and policy delays. And crucially, start to address them while the interest from capital markets to invest continues to gather apace.
It’s predicted that by 2025 we could see $5tn annual green investment, after 10 concurrent years of investment growth in climate solutions.
Lloyds defines green financing as “a loan or investment that supports environmentally-friendly activity, such as purchasing environmentally-friendly goods and services or building environmentally-friendly infrastructure”. Ultimately the aim of green finance is to deliver environment-positive outcomes.
Green financing is a huge factor in building resilience and decarbonising, and one with its own growing debate – namely around how ‘clean’ impact funds actually are, if the current fund categorisations are fit for purpose, and about how susceptible the impact investment sector is to ‘greenwashing’.
In a session on the investment landscape on Monday, there was debate on effectively ‘mis-selling’ in the ESG space and how we identify or categorise impact funds. Christopher James, Founder and executive chairman, Engine no. 1 challenged the practicality of fund definitions – stating that “we won’t drive value of change by just divesting ‘bad actors’ from funds that are labelled as ESG.”
So should we re-assess what a sustainable fund means based on impact, versus ‘cutting out’ polluters from funds? It sounds uncomfortable, but as Christopher James put it, solutions are not easy and divestment won’t ‘clean up’ the environmental funds in a way that still achieves maximum impact. Essentially by his marker environmental outcomes need to be viewed holistically and as a core focus of ‘sustainable’ investing.
Today, we’re looking forward to the next session on how banks can gain competitive advantage by accelerating green finance, with Managing director, centre for carbon transition, JP Morgan, president at Infosys and Former Board Member & Champion of Sustainability ING Bank all weighing in on this issue of accountability and measuring impact.
