LSEG Q&A: COP28 could revamp global financial entities

Jane Goodland says reforms would be geared towards aligning these with the sustainable development and climate action

Jane Goodland, London Stock Exchange Group


Michael Nelson

While significant progress has been made in addressing climate change and promoting sustainable finance, there remains an ambition gap between long-term sustainability goals and current actions, with COP28 presenting the opportunity to address this gap, according to Jane Goodland, group head of sustainability at the London Stock Exchange Group.

See also: – Sector-by-sector implementation plans crucial to investors at COP28

Here, Goodland answers ESG Clarity’s questions on the COP presidency’s four key objectives for the conference.

When the COP presidency talked about “reforming international financial institutions”, what did they mean and what does that entail?

It implies the necessity to revamp global financial entities like the World Bank, IMF and similar institutions. These reforms would be geared towards aligning these entities with the principles and objectives of sustainable development and climate action.

In practical terms, this could involve a multifaceted approach, first by increasing the funding allocation to climate-related projects and initiatives, recognising the pivotal role of finance in addressing climate challenges. Second, it could involve enhancing transparency and accountability within these institutions, ensuring that their investments and lending practices prioritise environmental and social considerations. And last, they could revisit the mandates and charters of international financial institutions to explicitly include sustainable development and climate goals, thereby making these objectives integral to their operations.

What frameworks need to be put in place to make sure private finance is utilised effectively?

There is a critical need for universally recognised green finance standards, which would serve as a foundation for consistency and trust in the realm of green and sustainable investments, ensuring that private investors can confidently allocate capital to environmentally friendly projects without ambiguity or confusions.

Risk mitigation instruments will be crucial, including guarantees, insurance products or climate bonds designed to reduce the perceived risks associated with investing in climate initiatives. Meanwhile, incentives and tax policies should be developed to incentivise private investors to channel their funds towards sustainable projects, with governments mandating information and disclosure requirements for companies to ensure that they disclose their environmental impact and climate-related risks transparently.

Finally, ‘public-private partnerships’ should be actively promoted to foster collaboration between governments and the private sector, jointly funding and managing projects that address climate challenges, thereby leveraging the strengths of both sectors.

Some say that carbon offsets merely legitimise and justify business as usual. Do you agree, and if not, what role should carbon offsets play?

It is certainly the subject of ongoing debate within the climate community; however, carbon offsets can play a constructive role if implemented properly.

See also: – Former BoE adviser says valuations don’t capture carbon cost

There are several principles which carbon offsets should adhere to, first and foremost being that they should demonstrate ‘additionality’ – genuine emissions reductions or removals that would not have occurred without the offset project. Robust ‘transparency and verification’ mechanisms should also be in place to guarantee the credibility of carbon offset projects as well, preventing issues like double-counting or fraud.

Finally, carbon offsets should prioritise ‘high-quality projects’ that not only reduce emissions but also offer positive environmental social co-benefits, including reforestation efforts, renewable energy initiatives or sustainable agriculture practices.

What opportunities exist to encourage more investment to unlock finance for innovation?

There are multiple ways of unlocking finance for innovation, including environmental impact investing emphasising ESG factors, increased funding for research and regulatory support. One significant avenue is incentivising green investments. Governments can play a pivotal role by providing tax incentives and subsidies for businesses and individuals who choose to invest in green technologies and sustainable projects. By making these investments financially more appealing, such incentives can channel funds towards eco-friendly options.

Moreover, the promotion of green bonds and sustainable financial products can be a catalyst for directing capital toward environmentally responsible initiatives. Creating a supportive regulatory framework for these instruments is essential. Public-private partnerships are another avenue worth exploring. Collaborative efforts between governments and the private sector can lead to innovative financing models for large-scale sustainability projects.

Are you generally optimistic about the potential outcomes this year?

The involvement of capital markets, the adoption of ESG strategies and the commitment of governments and companies to decarbonise are positive signs. However, optimism is tempered by the recognition that more needs to be done, and cooperation between governments, corporations, investors and civil society will play a pivotal role in driving progress and addressing the challenges ahead.

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