IIF Authors

Status: Will be live at 01/28/2020 02:55

IIF/EBF Global Climate Finance Survey: A Look At How Financial Firms Are Approaching Climate Risk Analysis, Measurement, And Disclosure

With a growing focus on sustainable finance, and particularly the need for a robust toolkit for climate risk management and disclosure, the Institute of International Finance (IIF) and European Banking Federation (EBF) conducted a joint survey of their members. The survey of 70 financial firms around the world, with total assets of nearly $40 trillion, finds that the streamlining of measurement and disclosure frameworks, and increased international collaboration, are key to strengthening the climate-related risk analysis and reporting toolkit.

Among firms that are not yet disclosing data on financed emissions, more than 50 percent said they are hesitant to do so given the lack of standardized accounting frameworks and data challenges. Encouragingly, 70 percent of all respondents expressed interest the creation of a collaborative, open-source framework to enhance these climate finance tracking and reporting frameworks.

Other key findings include:

  • Supply and demand of sustainable instruments is on the rise: More than half of respondents already issue their own sustainable instruments and 89 percent of respondents expect demand for sustainable investments to grow in 2020.
  • Better processes needed for risk management: Over 45 percent of survey participants stated that their risk management framework includes an explicit process for identifying and assessing climate-related risks and opportunities. However, only 17 percent of respondents have fully integrated this process into their organization’s overall risk management framework. 
  • Most financial firms at least partially follow the Task Force on Climate-related Financial Disclosures (TCFD) recommendations...: Overall, 60 percent of institutions are already implementing TCFD recommendations to some degree, with another 30 percent stating they are planning to do so in the future.
  • ...but adoption of TCFD recommendations varies widely across geographies: Only 37 percent of emerging market respondents reported disclosing information aligned with TCFD recommendations, compared with more than 80 percent of respondents in developed Europe.
  • “Shadow” carbon pricing on the rise: Over 20 percent of respondents reported using internal (shadow) carbon pricing in planning or decision making, while a further 14 percent reported plans to do so.