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Climate change’s impact on financial services, opportunities in green finance, and reducing climate change with a credit card

  • This installment of the Green Finance newsletter covers a wide range of topics, from carbon offsets to the COP26 conference
  • It's early days for financial services addressing climate change and the industry's influence on decarbonization.
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Climate change’s impact on financial services, opportunities in green finance, and reducing climate change with a credit card

Tearsheet’s Green Finance newsletter is about the intersection of money and the environment. We’ll be in your inbox every other week, and share what we’re currently thinking about, and what’s been happening at three key areas in the intersection: corporate responsibility, blockchain, and green products and services. You can subscribe here.

The UN’s Climate Summit, COP26, is taking place in Glasgow now and through next week. Its aim is to reach international agreements towards cutting greenhouse gas emissions, in efforts to slow the rise in the global temperature. Today, 20 countries committed to halting their financing of fossil fuel projects by the end of 2022; among those 20, however, were not many of Asian nations responsible for the global environmental toll. 
— Rebecca Alma Cohen, Tearsheet Producer 

‘Monitor, manage, and offset’: Behind the opportunities in the growing green finance market

Strong environmental concerns from the generations of consumers that are stepping into their prime earning years, such as Millenials, or beginning their financial journeys, like Gen Z, have generated a wave of climate-focused opportunities for the finance industry. 

Some banks and financial institutions have already started to look for eco-friendly products and services — Stripe has been investing in carbon removal projects over the past two years, and Mastercard revealed a carbon calculator back in April. However, the nascent green finance market remains small and disintermediated.

That’s why Patch and Doconomy recently collaborated on solutions for financial institutions and their customers to the environmental challenge ahead. By embedding Patch’s API into its platform, Doconomy enables banks and financial institutions to not only gather insights on the environmental impact of their transactions, but also counter it via the purchase of high quality carbon removal credits.

“Historically, one of the biggest detractors for carbon markets has been the fact that a lot of people just don’t understand what they’re buying. We contextualize all the underlying attributes of each tonne of CO2, because they’re not all interchangeable.” — Patch CEO Brennan Spellacy

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How to deal with climate change’s increasing threat to US financial stability, in 4 charts

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“Increasing adverse effects from climate change to households, communities, and businesses will exacerbate climate-related risks to the US and global financial systems if not addressed,” said the US Financial Stability Oversight Council.

In a new report on the effects of climate change upon the US’ financial system, the FSOC detailed the climate-related risks faced by the industry and offered recommendations for regulators and financial institutions to improve resiliency.

See the full article for a visual take on the main points of the reports:

  1. How climate risks translate into financial risks: the FSOC grouped climate-related financial risks into two broad categories: physical risks and transition risks.
  2. The need for better data: the key to understanding the risks faced by banks and the financial market as a whole.
  3. Enhancing public climate-related disclosures: an increased need for data also means better disclosures from market players. 
  4. Scenario analysis: an emerging tool in the study of climate-related financial risks that has been used internationally to measure current and potential future exposures. 

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What we’re reading

Corporate responsibility

  • Green pledged banks are called out for ongoing financing of fossil fuel industries (Forbes)
  • Over 450 banks and asset managers representing 40% of the world’s financial assets have now pledged to meet the goals set out in the Paris climate agreement (Bloomberg Green)
  • Morgan Stanley announces net-zero targets by 2050 for auto, energy, and power sectors (Environmental + Energy Leader)

Blockchain

  • Carbon offsets are a distraction for crypto — companies should build renewables instead (Coindesk)
  • BitMEX goes carbon-neutral and pledges to go the extra mile (Cointelegraph)
  • Mawson Infrastructure Group: a company that could make crypto mining carbon-free (Yahoo Finance)

Green products and services

  • Can you reduce climate change with a credit card? What to know about buying carbon offsets (WSJ)
  • ‘Green spending’ startup Future has launched the Visa FutureCard — offering cash back on ‘green spending’ (PYMNTS)
  • COP26: The role of investors and greentech startups in delivering decarbonization (Finextra)

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  • COP27 ended around a week ago, and by now we've all probably seen the headlines – an agreement was finally reached to create a loss and damage fund. But what about GFANZ?
  • To help us get a better sense of what happened at the conference, today we're chatting with Lubomila Jordanova, the founder and CEO of PlanA.
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  • GFANZ faces a serious question: what is the purpose of a net-zero alliance when members are allowed to continue investing in fossil fuel expansion?
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The Green Finance Podcast Ep. 13: Debunking carbon credits and voluntary carbon markets, with BeZero Carbon CEO Tommy Ricketts

  • We need more funds to flow towards climate solutions, and carbon markets can facilitate this by creating investable carbon assets. But we need to ensure that carbon credits are of the highest quality and that they are used mindfully.
  • My guest today is Tommy Ricketts, CEO of BeZero Carbon, a company that provides carbon credit ratings and research tools to support buyers, intermediaries, investors, and carbon project developers.
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  • As the COP27 climate conference unfolds, the narrative is moving from pledges towards implementation – all eyes are on the developed world to take the lead and finance the transition.
  • While the financial sector took center stage at COP26, now it is being pressured to build upon the pledges made last year and start its journey to decarbonize lending and investment operations.
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Green Finance Briefing: Marketing sustainability efforts is a tricky game for banks

  • The image banks sell to the end customer on the subject of climate change will come under close scrutiny from consumers and regulators, given their current reputation.
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