Navigating climate risk: approaching a point of no return?

While busy with everyday life, we often overlook the complex web of interconnected systems shaping our world. The 2023 Interconnected Disaster Risks report by United Nations University - Institute for Environment and Human Security (UNU-EHS) offers sobering insights into the inter-linked risks we face, exposing the invisible threads that bind our water, food, and information systems. Below the surface, it introduces the notion of "risk tipping points"—pivotal moments where our intricate systems face risk of irreversible collapse.

As we advance towards these tipping points, driven by indiscriminate resource extraction and ecosystem disruption, the urgency of the situation becomes starkly evident. Groundwater depletion, a key focus area of the report, emerges not just as a risk that could cause regional crisis, but also as a global threat with repercussions echoing through food systems and economies.

The report examines six interconnected risk tipping points:

1. Accelerating extinctions
2. Groundwater depletion
3. Mountain glaciers melting
4. Space debris
5. Unbearable heat
6. Uninsurable future

The points paints a vivid picture of the challenges transforming lives globally. It underscores the interconnected nature of climate, ecosystems, society, and technology.

The report offers a paradigm shift in our approach to solutions. It advocates for transformative actions instead of delays, calling for collaborative, integrated strategies aligned with a sustainable future.

As the clock ticks, the report leaves us with a poignant choice: Will we act decisively to avert catastrophe and shape a sustainable future, or passively witness the unraveling of the interconnected systems sustaining us? The time for action is now.

The report in the news:

Financial Times: Amazon drought sparks fears of climate tipping points

The Brussels Times : New report warns about tipping points with irreversible impacts on people and planet

UN News : ‘Tipping points’ of risk pose new threats, UN report warns

A second major publication is?a new paper ?by scientists from a dozen institutions, showing that world’s average temperature will surpass 1.5 degrees Celsius above preindustrial times within the next several years — much faster than most existing forecasts.

The study was led by James Hansen , who as a top NASA scientist famously and accurately warned Congress in 1988 that global warming would soon become evident. The study, which appears in the journal Oxford Open Climate Change , asserts that many previous forecasts of future warming have used faulty assumptions about the sensitivity of the Earth’s atmosphere to greenhouse-gas levels.

The paper is covered by an article and by a LinkedIn post by Darius Nassiry , who also covered the issue of record-breaking heat in a subsequent post .

In the news

Financial Times: ‘Hot mess’ as Earth heads for warmest year on record in 2023

Financial Times : Shell sues Greenpeace for $2.1mn in one of largest claims against group

Financial Times : Progress towards net zero is slow but steady

ESG Today : CFA Institute Launches Climate Investing Certificate

ESG Today : Sustainable Bond Issuance on Track to Grow to $950 Billion in 2023, Despite Q3 Pullback: Moody’s

Bloomberg : Why Those Bank Emissions Numbers Are So Rosy

France 24 : McKinsey & Company pushes fossil fuel interests as advisor to UN climate talks, whistleblowers say

The Intercept : When Idiot Savants Do Climate Economics

ENDS Europe : NGOs flag risk of financial sector escaping environmental due diligence

SustainableViews : UNEP: how to standardise climate reporting

Responsible Investor : Ulf G. Erlandsson on Bond market innovation can unlock private capital for sustainable development

Responsible Investor : France outlines a new SRI label with fossil fuel exclusions and transition lan requirements

Recommended Readings

World Energy Outlook 2023 : The report by International Energy Agency (IEA) explores how structural shifts in economies and in energy use are shifting the way that the world meets rising demand for energy. It also examines what needs to happen at the COP28 climate conference in Dubai to keep the door open for the 1.5?°C goal. Key findings:

Results of a fact-finding exercise on corporate reporting practices under the Taxonomy Regulation : This summary of findings by European Securities and Markets Authority (ESMA) encompasses the results of an inquiry into corporate reporting practices aligned with the EU Taxonomy regulation. Anthony Raivellur outlines the main findings in his post.

EU Taxonomy Implementation and Sustainable Finance Roadmap in Estonia and Latvia: a technical support instrument under DG REFORM has published Sustainable Finance Roadmaps for Latvia and Estonia . The roadmaps are rather basic and lack more detailed action points or concrete steps for implementation, casting a doubt over real change in the near future.

The 2023 state of the climate report: Entering uncharted territory : This pulication by William J Ripple et al underlines a climate emergency with 15,000+ scientist signatories, highlighting alarming climate trends, disasters, and inadequate progress On the basis of time series data, most of the vital signs are now showing record extremes:

Bank Action Guide: Towards a just transition for small–medium enterprises (SMEs) : Cambridge Institute for Sustainability Leadership (CISL) has published a Bank Action Guide to aid banks in facilitating just transitions for vulnerable SMEs and strengthening their role as community partners for a more sustainable global economy.

Banking on Destruction : How European Financial Institutions Drive Environmental Crises: A recent WWF report underscores that EU financial institutions have contributed to environmental and human rights harm, but the forthcoming Corporate Sustainability Due Diligence Directive has the potential to reduce such impacts. See press release for the summary.

Global Landscape of Climate Finance 2023 : Climate Policy Initiative 's analysis states that annual climate financing has surpassed $1 trillion, marking a significant achievement, although it falls short of averting considerable future losses. Explore the global climate finance flows along their life cycle in 2021 and 2022 on their interactive figure :

Environmental Sustainability Index Q4 2023 : 霍尼韦尔 's fifth Environmental Sustainability Index, produced with The Futurum Group , explores climate event impacts on corporate sustainability efforts. 62% expect a significant effect, including changes to oceans, extreme heat or cold, and weather-related natural disasters.

Redirecting financial flows to end plastic pollution : Comprehensive paper by United Nations Environment Programme Finance Initiative (UNEP FI) serves as a guide for negotiators and the financial sector, outlining their roles and needs in facilitating the shift to pollution-free economies. The graph below illustrates the progression of projects and technologies in the plastics value chain, categorised by their Technology Readiness Level (TRL):

Global Status of CCS 2023 Report : The report by Global CCS Institute , provides readers with a detailed yearly overview of the progress of CCS technology and deployment.

Slovak Industry Decarbonisation: Policy and Financing Roadmap: The study on Slovak industry decarbonisation by PEDAL Consulting examines CAPEX challenges in steel, cement, and chemical sectors until 2030, detailing policy, industry status, path models, cash flow projections, and financing comparisons. Publication offers viarious scenarious with the “Ambitious” scenario moving carbon neutrality to the year 2040.

Adaptation Gap Report 2023 : Report by UN Environment Programme states that developing countries face a massive $194-366 billion yearly adaptation finance gap as international public finance falls. Innovative financing strategies and global financial reform are crucial for effective adaptation.

Greening the Bond Market: A European Perspective : This groundbreaking work on green bonds, by European Investment Bank (EIB) which is part of the book series: EBI Studies in Banking and Capital Markets Law (ESBCML), is the first to provide a comprehensive international perspective. It analyses markets, intermediaries, and monetary policy, with contributions from diverse experts including lawyers, economists, academics, practitioners, and regulators. Join the online EBI Book Launch on 22 November.

Emissions Measurement in Supply Chains: Business Realities and Challenges : This paper by World Economic Forum provides an overview of the measurement of supply chain emissions in three key sectors, focusing on businesses’ challenges and preparedness, and flags some important issues for policy action. Antonio Vizcaya Abdo summarised the paper in his Linkedin post focusing on the Scope 3 Emissions Reporting Landscape:

NGFS Climate Scenarios for central banks and supervisors - Phase IV: The publication by Network for Greening the Financial System (NGFS) unveils the fourth phase of long-term macro financial climate scenarios. It includes updated scenarios, technical documentation, a data user guide, and a note on compound risks.

Fifty Years of Climate Failure : 2023 Scorecard on Insurance, Fossil Fuels and the Climate Emergency: The Scorecard by Insure Our Future Global examines the global insurance industry's impact on climate breakdown, focusing on 30 key insurers. It evaluates their policies on coal, oil, and gas, emphasising progress, loopholes, leaders, and challenges. Sylvain Vanston in his Linkedin post shares the report and express his disagreement with the authors on two items.

Definitions for Responsible Investment Approaches : The paper, a collaboration between Principles for Responsible Investment , CFA Institute and Global Sustainable Investment Alliance establishes common definitions for five responsible investment approaches:

1. screening
2. ESG integration
3. thematic investing
4. stewardship
5. impact investing

This clarity benefits investors by ensuring precise and consistent communication of responsible investment practices.

A CRISIS GONE TO WASTE… Why did we not learn the policy lessons from the pandemic? : A publication by Theia Finance Labs considers the COVID-19 pandemic represents a missed opportunity for substantial reform in corporate resilience, with limited action and minimal discussion about critical lessons and unattended system flaws.

Diversity & women's presence in the workforce : A new report called "Lifting financial performance by investing in women - Long-term capitalism at BlackRock" that argues that more women in the workforce equals better financial performance attracted strong criticism from Alex Edmans on his blog and across media outlets .

Online Community Insights

Linkedin Post : Federated Hermes Limited : What are the factors that underpin the greenium and how do the yields on green bonds and conventional bonds compare? Mitch Reznick, CFA , explains:

Linkedin Post : In his post, Antonio Vizcaya Abdo discusses the framework for net-zero targets, which underscores holistic strategies, governance, diverse stakeholder collaboration, and sector-specific policies as pivotal components in the journey towards sustainability.

Linkedin Post : Alex Edmans ′s summarised the article "We Are All Quants: The New Era of Systematic Investing " by Campbell Harvey . He highlights parallels between AI in investing and ESG, emphasising the importance of expertise and avoiding oversimplification.

Linkedin Post : Vian Sharif discusses a question: "What does the TNFD mean for the private sector?" and provides readers with an article for further insights.

Linkedin Post : Is the world better place with ESG? Nawar Alsaadi, FSA, SIPC shares his perspective on whether the world benefits from ESG in his post and advocates for ESG.

Linkedin Post : Steffen Müller ?? informs that EFRAG has shared a spreadsheet containing ESRS Data Points. He also provides access links for the draft papers published on October 25 after the The Sustainability Reporting Board meeting.

Linkedin Post : Maximilian Müller writes about his and Charlotte-Louisa Donau′s study where they compare the quantitative metrics under ESRS with KPIs used in ESG ratings by Refinitiv (formerly Thomson Reuters Asset4). Despite being published in German, the author in his Linkedin post summarises key findings and concludes with a list of "core" datapoints for practitioners.

Linkedin Post : The post by Philippe Diaz urges credible assessments using resources like TNFD, ENCORE an Biodiversity Risk Filter. With CDP data indicating 70% neglect biodiversity impact assessments and a German study revealing 96% reporting little on biodiversity, these studies underscore the urgent need for comprehensive evaluations.

Podcasts

Flow-driven ESG returns : In this episode of the University of St. Gallen's Innovations in Sustainable Finance podcast, Professor Julian K?lbel engages in a discussion with Harvard Assistant Professor Philippe van der Beck . They delve into the impact of investing $1 in sustainable mutual funds, which can potentially enhance the value of environmentally friendly companies by 40 cents.

Einride: Decarbonizing Trucking with EVs, Automony, and Digitalization : Is the first episode of hard-to-abate series hosted by Mike Toffel features Linnéa Kornehed Falck , Einride's Founder, Deputy CEO and Board Member. The Climate Rising podcast by 美国哈佛商学院 explores Einride's fleet-based freight capacity-as-a-service model, aiming to revolutionise cargo trucking, enhance customer service, and promote sectoral decarbonisation.

Events

Brussels, Belgium: A hybrid conference: The decade of sustainable finance, half-time evaluation , Co-Organised by Paul Tang and QED will take place on 14 November 2023. The event will see interventions by EU Sustainable Finance Platform chair Helena Vi?es Fiestas , Nathan Fabian from Principles for Responsible Investment , Verena Ross , Sandrine Dixson-Declève , Petra Hielkema (she / her) and many others.

Prague, Czechia: Between 14 and 16 November, Prague European Summit will return to Prague. The sessions will focus on European security, democracy and sustainability - the full event agenda is available on the event website .

Brussels, Belgium: Microsoft will host a special event on 22 November focusing on CSRD (and European reporting standards) and the role of technology. The event will take place at Microsoft, Rue Montoyer 51, Brussels and more information & registration is available on the event website . Speakres include Ornella Cosomati-Koschwitz , Frank Callewaert , Linda Zeilina-Cross , Mathias Vergauwen , Elena Doms and Fabian Vandenreydt .

Zurich, Switzeralnd: On 24 November 2023?the ICMA - International Capital Market Association Iwill host the AMIC Forum: Investing for the longer-term though uncertain markets .

Budapest, Hungary: On 4 December, the Budapest Climate Summit will take place at Hotel Marriott.

Dubai, UAE: The Climate Action Innovation Zone at COP28 will be held from 4- 8 December 2023. It will incorporate multiple events such as The Sustainable Finance Forum on 6 December, hosted by Climate Action , Principles for Responsible Investment and UN Environment Programme (UNEP FI).

Online: EIOPA's 7th Sustainable Finance Conference that will take place on 14 December, will gather regulators, industry and stakeholders to critically assess efforts in delivering on sustainability goals.

Luxembourg: The European Investment Bank (EIB) Group Forum 2024 will take place on?7-8 February in Luxembourg. The event brings together key voices from the public and private sector to discuss a range of issues, including social inequality, economic stability, digitalisation and the green transition. More information on the event website .

Prague, Czechia 2024: The CEE Sustainable Finance Summit will return to Prague from 27 until 29 May 2024. The agenda will include deep dives into ESG reporting, implementation of ESRS, CSRD, SFDR, CSDDD, and biodiversity indicators. Register for updates on the event website or email [email protected] for more information.