Commercial banks and institutional investors who fail to switch their investment focus and to prepare for a greener-and-cleaner world risk being left behind by their peers, the World Bank’s head of climate change has warned. John Roome, senior director for climate change at the multilateral, said there has been a “sea-change” over the past year, as a cluster of financial institutions, from Danish and Canadian pension funds to Spanish lenders and even cumbersome Chinese state banks looking to eliminate some of the more carbon-intensive operations and assets from their books. “Banks need to begin to shift the balance of their investment into greener sectors,” Roome told Emerging Markets. “Banks with greener portfolios are getting better investment rates of return than those without.”
He added that the next step-change would happen when banks are forced, under international rules and norms likely to be inculcated in the years ahead, to disclose how much of their assets are invested in ‘dirty’ or ‘non-green’ assets. “The G20 group of nations and the Financial Stability Board talk about voluntary disclosure, but the real change will come when we can take the next step, toward mandatory disclosure,” he said. “Banks should be revealing how much of their balance sheets are invested in carbon-intensive assets. The savviest banks and investors know they are at risk in the long-term if they don’t disclose this kind of detail.”
Roome insisted that the push to transform climate change into an asset class in its own right — bringing borrowers together with investors seeking higher returns on clean projects, many in the emerging world — is gaining momentum. “Nigeria and Morocco are both looking to issue sovereign green bonds” in the months ahead,” the World Bank’s climate change supremo said. “The drive is coming from the highest level of government and state in both those countries. Morocco will host the COP22 climate change conference in Marrakech in early November, the event starting a few days after the Paris climate deal, which has now been ratified by 73 nations accounting for 57% of all global greenhouse gas emissions, is activated.
Roome said the next stage for governments would be to move from the abstract — agreeing to COP21 and COP22 accords — to the practical. That will mean convincing their ministries to work together to generate new ‘green’ investment bonds, funds, loan and credit facilities, and major infrastructure projects, which will attract and drag in capital from leading institutional investors and lenders. “Some governments, such as Côte d’Ivoire, Ethiopia, and Morocco, are already doing this,” he said. “Their finance and planning ministries are working in harmony to bring it all together. The next aim will be to mainstream these processes”, ensuring that it becomes common practice at state level.
Commercial banks and institutional investors who fail to switch their investment focus and to prepare for a greener-and-cleaner world risk being left behind by their peers, the World Bank’s head of climate change has warned.
John Roome, senior director for climate change at the multilateral, said there has been a “sea-change” over the past year, as a cluster of financial institutions, from Danish and Canadian pension funds to Spanish lenders and even cumbersome Chinese state banks looking to eliminate some of the more carbon-intensive operations and assets from their books. “Banks need to begin to shift the balance of their investment into greener sectors,” Roome told Emerging Markets. “Banks with greener portfolios are getting better investment rates of return than those without.”
He added that the next step-change would happen when banks are forced, under international rules and norms likely to be inculcated in the years ahead, to disclose how much of their assets are invested in ‘dirty’ or ‘non-green’ assets. “The G20 group of nations and the Financial Stability Board talk about voluntary disclosure, but the real change will come when we can take the next step, toward mandatory disclosure,” he said. “Banks should be revealing how much of their balance sheets are invested in carbon-intensive assets. The savviest banks and investors know they are at risk in the long-term if they don’t disclose this kind of detail.”
Roome insisted that the push to transform climate change into an asset class in its own right — bringing borrowers together with investors seeking higher returns on clean projects, many in the emerging world — is gaining momentum. “Nigeria and Morocco are both looking to issue sovereign green bonds” in the months ahead,” the World Bank’s climate change supremo said. “The drive is coming from the highest level of government and state in both those countries. Morocco will host the COP22 climate change conference in Marrakech in early November, the event starting a few days after the Paris climate deal, which has now been ratified by 73 nations accounting for 57% of all global greenhouse gas emissions, is activated.
Roome said the next stage for governments would be to move from the abstract — agreeing to COP21 and COP22 accords — to the practical. That will mean convincing their ministries to work together to generate new ‘green’ investment bonds, funds, loan and credit facilities, and major infrastructure projects, which will attract and drag in capital from leading institutional investors and lenders. “Some governments, such as Côte d’Ivoire, Ethiopia, and Morocco, are already doing this,” he said. “Their finance and planning ministries are working in harmony to bring it all together. The next aim will be to mainstream these processes”, ensuring that it becomes common practice at state level.