Every Finance Professional Must Develop Their Knowledge of Green Finance Principles and Practice
Responding to the ongoing climate emergency, 125 countries have now committed to achieving net-zero by 2050 at the latest.
This requires systemic economic and societal transitions – a green industrial revolution as substantial and as far-reaching as the first industrial revolution.
Every economic entity must align its strategies, operations and activities, and the finance sector – as set out in Article 2.1c of the Paris Agreement – is set to play a leading role, with the majority of capital required to fund the global transition coming from the private sector.
In late 2020, Mark Carney, former Governor of the Bank of England and now UN Special Envoy for Climate Action and Finance launched Building a Private Finance System for Net Zero – Priorities for private finance for COP26. This is the roadmap setting out the role for financial services not just in the run-up to the COP26 Climate Summit in Glasgow in November 2021, but beyond.
Carney writes: “the objective for the private finance work for COP 26 is simple: ensure that every professional financial decision takes climate change into account”. This may be simple and straightforward in terms of language, but is hugely ambitious and highly complex to implement. He sets out a framework to achieve this based on 4 pillars: reporting, risk management, returns and mobilization.
However, this is not sufficient. Ensuring that every financial decision takes climate change into account requires not only institutions but also individuals to align their activities and operations with this goal.
It is individual professionals working in accounting, business, banking, finance and professional services who need to take personal responsibility for taking climate change (and, I believe, broader sustainability factors too) into account in every decision.
To achieve this, a fifth pillar is required; to ensure that every finance professional – not just sustainability professionals - complete certified programmes of initial and continuing professional education to develop and demonstrate at least a basic knowledge of green and sustainable finance principles and practice. This should include at least some knowledge of the climate and environmental science underpinning green finance.
Green and sustainable finance must now become part of the core education and training of all finance professionals. Only then will every professional financial decision take climate change into account.