Sustainable finance shines a light on capital that is being deployed with specific outcomes in mind. It provides the transparency that different stakeholders need to determine how fast sustainability issues are being addressed. In 2018 the scientific evidence put forward by the Intergovernmental Panel on Climate Change reinforced an urgency to act, whilst the Katowice climate talks set out the operational guidelines to deliver the Paris Agreement. We see five key themes dominating the Sustainable Finance Agenda in 2019.

    Climate Governance: A key investor consideration is to assess how comprehensively the public entities and corporates are factoring climate change into strategic decision making. This includes areas that are relatively easy to identify, such as environmental impact, as well as less straightforward topics like how quickly and severely demand for high carbon goods and services might change in the future. Much work has already been done to facilitate climate disclosure but in 2019 we expect an increasing prominence on governance.

    Decarbonisation Roadmaps: Energy transition to a low-carbon framework is a critical factor for achieving climate goals. An obvious way to decarbonise the energy system is to scale up the use of renewable solutions in power and we expect corporates to help fuel demand for renewables by setting their own targets. However, in 2019 we also expect heavy energy use industrial sectors to step up with more comprehensive roadmaps showcasing decarbonisation strategies. Work by the Energy Transition Commission provides a starting point for this.

    Data and knowledge gaps: Scientific data is giving clear signals on the way the planet is changing in response to warmer temperatures, but the finance sector is in the early stages of translating these signals into economic drivers and outcomes. In May, an Intergovernmental Panel on Climate Change special report will refine the current methodology for Greenhouse Gas inventories. This is important because it will provide up to date emission factors, which in turn will allow investors to make more comprehensive judgements on the pace and scale of low-carbon transition, and act accordingly.

    Impact, resilience and just transition: In 2018, the HSBC Fragile Planet report looked at climate risk exposure of countries. All countries are being impacted by climate change but some are facing much more acute challenges than others. In addition, making sure that no-one is left behind on the transition to a low-carbon economy means setting up frameworks that enable job transition and social security for people. These issues are likely to gain traction in the run up to the UN 2019 Climate Summit in September, which is taking place in parallel to the High-level Dialogue on Financing for Development.

    Accelerating action in cities: Cities release about 70 per cent of energy related greenhouse gas emissions, and are extremely vulnerable to climate change since three-quarters of the world’s largest cities lie on a coastline. Avoiding ‘high-carbon lock in’ in resilient infrastructure projects is crucial to deliver Greenhouse Gas mitigation aims as urbanisation increases. Investment in smart power, transport and buildings can provide critical low-carbon pathways. The proposed theme of the UN Framework Convention on Climate Change standing committee on climate finance forum in 2019 is Climate Finance and Sustainable Cities.


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