Toronto, August 11, 2021 – The financial sector should move quickly to seize opportunities opening up to finance the economy of a greener tomorrow, the Global Risk Institute says in response to the report Climate Change 2021: The Physical Science Basis, published August 9 by the United Nations working group Intergovernmental Panel on Climate Change (IPCC).
In a short opinion article entitled, “We Are on the Bell Lap: Top 5 Takeaways from the IPCC’s New Climate Science Report”, Canada’s premier agency on risk management offers five key takeaways for financial institutions in response to the IPCC’s latest report which sent a shot across the bow for humanity on the state of the climate.
“Now is the time for Canada to come together across government, industry and academia and punch above our weight,” says Sonia Baxendale, President and CEO, Global Risk Institute.
“Industry must pick up the pace. We have an obligation to our stakeholders, shareholders and future generations to face an unprecedented challenge and drive the innovation needed to create a sustainable low-carbon economy today – not in the distant future.”
Canadian financial institutions provide capital and leverage to the country’s societal and economic activity. Accordingly, they must play their part in managing and mitigating climate risk and accelerating low carbon opportunities.
The paper offers five key takeaways from the IPCC report for financial institutions:
1. Canada is in the cross-hairs, and the world agrees – modelled projections see a larger than average temperature increases for Canada due to its geographic location. In a year of catastrophic storms, fires and droughts, Canada must accelerate the urgency to lower carbon emissions in the short term.
2. Clearer, data-drive future scenarios are now possible – recent scientific breakthroughs now bring more resolution to climate risk assessment, better data for climate risk scenario analysis, and updated set of IPCC net zero pathways.
3. Liability risk set to rise as human influence on the climate is now “unequivocal” – amplified liability risk is expected from two breakthrough findings of the IPCC report: greenhouse gases by humans is causing climate change and scientists are now able to link specific weather events to human-made climate change.
4. Doubling down on transition finance and the move to a low carbon economy – financing and underwriting of fossil fuels must support energy diversification toward renewables, and transparency from firms about net zero portfolio alignment and climate-related financial risk must increase.
5. Investment in the one entity that can soften the blow: Mother Earth – with some major impacts of climate change such as sea level rise a certainty, there will be a scramble for financial resources to adapt, build resilience and invest in nature-based solutions to buffer the impacts. In response, the financial sector should develop ‘climate adaptation finance’ as a tool within the sustainable finance umbrella.
Read more about GRI’s five key messages for the financial sector coming out of the seminal IPCC report in the paper, “We Are on the Bell Lap: Top 5 Takeaways from the IPCC’s New Climate Science Report”, found on GRI’s website: We Are on the Bell Lap: Top 5 Takeaways from the IPCC’s New Climate Science Report | Global Risk Institute : Global Risk Institute
About GRI: The Global Risk Institute in Financial Services (GRI) is the leading forum for ideas, engagement and building capacity for the management of risks in the financial services sector. We are a non-profit, public and private partnership with 46 government and corporate members from asset management, banking, credit unions, insurance and pension management. GRI’s goal is to develop fresh perspectives on risks, to engage members, and to enhance risk management skills. Our activities support academics, corporations, policy makers and regulators. We take a global view of the risks facing the financial services industry from our base in Toronto, Canada.
Mary Lou Frazer
Global Risk Institute in Financial Services
Email: [email protected]