Mainstreaming Climate Change into Financial Governance: Rationale and Entry Points

Fixing Climate Governance Policy Brief No. 5

June 17, 2015

Today, the financial sector is exposed to the physical risks associated with climate change and the impact of climate policies. Securing global financial and economic stability and scaling up low-carbon, climate-resilient investments are not conflicting, but rather mutually reinforcing, objectives. The fifth policy brief in the Fixing Climate Governance series argues that while crucial, classic climate policies do not appear sufficient to address the challenges from climate change that the financial sector is facing. Policies affecting and instruments matching the demand side and supply side of finance need to be aligned with climate objectives to efficiently shift investments toward a low-carbon, climate-resilient economy.

Once the link between climate change and the mandates of international financial sector governance and regulatory institutions is understood, the existing tool kits and processes of these institutions — common standards, principles and guidelines with various levels of legal force, country surveillance and technical assistance — present entry points to mainstream climate-related risks and opportunities into their core operations.

Part of Series

Fixing Climate Governance Series

Climate scientists agree that human activity has been changing our planet’s climate over the long term. Without serious policy changes, scientists expect devastating consequences in many regions: inundation of coastal cities; greater risks to food production and, hence, malnutrition; unprecedented heat waves; greater risk of high-intensity cyclones; many climate refugees; and irreversible loss of biodiversity. Some international relations scholars expect increased risk of violent conflicts over scarce resources and due to state breakdown. Environmentalists have been campaigning for effective policy changes for more than two decades. The world’s governments have been negotiating since 1995 as parties to the United Nations Framework Convention on Climate Change (UNFCCC) . Their 2015 Paris Agreement created a new regime for joint action; among other things, it is the first UN climate agreement to oblige all parties to make some contribution. Each party made a pledge pertaining to the period 2020 to 2025 or 2030. But it is widely agreed that if they are all implemented, together these 2015 pledges will still fall far short of what is needed to meet the collective goals and avoid widespread catastrophes. Important details of the Paris Agreement itself also remain to be negotiated. Nor is the UNFCCC the whole of international climate governance. Many initiatives have also been launched by smaller sets of countries, national governments, provinces, cities, civil society, and private investors and companies.   This project was designed to generate improved ideas for both the United Nations Framework Convention on Climate Change (UNFCCC) process and other possible sites of climate governance. In 2015, we published nine policy briefs and papers, which can be found below. The ideas in two of them appeared in Paris during COP21. Several offered original recommendations for more effective action outside the UNFCCC. A new series of publications appeared in 2016-2017.  

About the Authors

Sáni Zou is Climate Finance Research Fellow at the IDDRI. She holds an M.Sc. in environment and development from the London School of Economics and Political Science and a B.Sc. in mathematics and economics from the University of Warwick (United Kingdom). 

Romain Morel is project manager at CDC Climat Research. His work focuses on the leveraging of public and private sources in the fight against climate change as well as the measure of its impacts and efficiency. He holds a Master in Aerospace Engineering from ISAE-SUAPERO in Toulouse (France) and holds a Master in Energy and Environmental Economics from University Paris X-IFP School-Ecole polytechnique (France).

Thomas Spencer is program director for Energy and Climate Change at IDDRI. He holds an M.A. from the University of Western Australia and an M.Sc. from the University of Edinburgh. 

Ian Cochran is the research unit manager on investment, climate and decision-making support at CDC Climat Research. Ian holds a Ph.D. in economics from Université Paris-Dauphine (France), an M.P.A. from Sciences-Po Paris (France) and a B.A. in policy studies from the Syracuse University Maxwell School of Public Affairs (United States).

Michel Colombier is scientific director of the IDDRI. He holds a Ph.D. in economics from l’École des hautes études en sciences sociales.