Transparency and the issues around green investments, hologram NFTs, and the new greentech taxonomy
- Transparency may not be enough to make banks focus more on sustainable investments.
- Hologram NFTs are trying to save the oceans, GDFA launches the first greentech taxonomy, and more.
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.
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The green finance debate seems to be revolving around implementing climate impact disclosures for financial institutions to drive more ESG investments. But is transparency enough to make banks focus more on sustainable investments? A closer look suggests the issue is much more complex than that.
Transparency is important but not enough for a greener financial system
The financial sector is facing increasing pressure to reduce its support for the carbon-intensive sector, with banks’ lending practices getting more attention.
The main response from government bodies and regulators is to upgrade financial disclosure requirements to include climate risks and impacts. This aims to increase investors’ responsibility by making them report on the climate impacts of their investment portfolios.
However, the problem is much larger and more complex to solve than just shining a light on current practices.
While enhanced disclosures are an important step towards a sustainable economy, they are insufficient to fuel a mass diversion of capital towards the clean energy sector given the current financial system’s infrastructure. The idea that once we can see where the money is going, we can redirect it to sustainable portfolios may not be entirely feasible.
The issue with moving capital away from fossil fuels and towards clean energy is that the green investments market is still relatively small with low liquidity. Despite its rapid growth over the past decade, it’s still characterized by many small participants, often operating in only one market. This results in lower revenues and market capitalization, limiting renewables’ ability to attract investment.
What we're reading
Corporate responsibility
ECB Says Every Bank Reviewed Falls Short on Managing Climate and Environmental Risk (ESGToday)
Convergence in Sustainability Reporting: The Fog Is Lifting (ESGToday)
Transparency of ESG investment ratings faces regulatory scrutiny (Reuters)
Blockchain
Jack Dorsey is now focused on 'Making Bitcoin more than an investment' (Bitcoin Magazine)
Cryptocurrency snaps up 2% of VCU carbon offset supply (Environmental Finance)
Hologram NFTs at Art Basel Miami Are Trying to Save the Oceans (CoinDesk)
Green products and services
Gránit Bank becomes first commercial bank to make Mastercard Carbon Calculator available to its customers (FFnews)
SoftBank, BlackRock Invest in Sustainability Data and Analytics Platform Clarity AI (ESGToday)
GDFA launches first ever green fintech taxonomy (Finextra)