Climate Finance Insights

I'm thrilled to announce the release of UNEP FI's 2024 Climate Risk Landscape Report! This resource builds on the insights of our previous edition and our climate risk database, aiming to empower finance professionals, policymakers, and regulators with a deeper understanding of the evolving climate risk tools landscape. Here's what you'll find in there: 🔍 Deep dives into the latest innovations and methodologies in climate risk assessment. 🚀 Unveiling new developments and addressing the ongoing hurdles in the climate tools arena. 💡 Actionable strategies to harness climate risk tools for impactful decision-making within financial institutions. 🛠️ Step-by-step guides for seamlessly integrating these powerful tools into your strategic processes. A heartfelt thank you to our collaborators for their invaluable contributions and support in developing this resource! ➡ Access the report here: https://lnkd.in/etrHGXCq Check out a teaser below for some of our insights! #climate #climaterisk #climatefinance #risk #finance #regulation #stresstesting #climatescenarios #physicalrisk #transitionrisk #emissions #financedemissions #tcfd #issb #ngfs #climatetools #climatedata #decarbonization #netzero #banking #investing #greenertogether #data #linkedincreators #research #climateresearch #environment United Nations Environment Programme Finance Initiative (UNEP FI)

UN Environment Programme says $220 billion flows into nature every year. Governments provide most of it. That number sounds large - it isn't. To meet global biodiversity, climate and land restoration targets, nature-based solutions need $571 billion annually by 2030 - more than double of today. The gap is already striking. But look inside the $220 billion and the picture gets sharper. Public finance accounts for $197 billion - around 90% of the total. Private finance stands at just $23 billion. $23 billion. In a $100 trillion global capital market. Now add the supply side. Up to 40% of the world's land is already degraded. Every year, 12 mln ha of land are lost to desertification and drought alone - enough to produce 20 million tonnes of grain (UNCCD). Natural capital is critical infrastructure that is undervalued and deteriorating. The pool of high-integrity, investable natural assets - functioning forests, healthy farmland, intact peatland - is shrinking. Demand is rising. Supply is contracting. That is the definition of scarcity. And scarcity, in any asset class, has only one long-term direction for pricing. Here is what the performance data says about the opportunity: 1. Natural capital funds have historically delivered 7–8% returns, with certain strategies reaching around 13% (WEF). 2. When US inflation neared 9% in 2022, farmland values rose 10–12% (USDA). In a world of uncertainty, that inflation-resilience alone warrants a serious look. Timberland and farmland have also historically maintained near-zero correlation with equities and bonds - a genuine diversification benefit that is increasingly hard to find. 3. 730 companies representing $22 trillion in assets under management have committed to TNFD nature disclosures, with a formal ISSB standard expected in Q4 2026 (BC ESG). When disclosure becomes mandatory, corporate demand for verified natural capital - including the credits it generates - becomes structurally driven. Not by conviction alone. By compliance too. This isn’t a story about awareness. For years, the conversation has focused on how to get more private capital in - build investable pipelines, improve metrics and disclosures, create the enabling conditions for finance to flow. But the latest figures suggest that private participation is still small. That gap is also where the opportunity sits! The top 50 natural capital investors currently manage around $155 billion in nature-based assets (WEF). For an asset class underpinning >50% of global GDP, that's a market about to pick up. The assets are shrinking. The capital hasn't arrived in full yet. The window between is where early investors make asymmetric returns. Economics are clear. So what’s the single biggest thing holding private capital from nature yet: liquidity, regulation, or something else? 🤔

Double Materiality 🌎 Beyond compliance with key regulations like CSRD, double materiality assessments are essential for businesses to develop a comprehensive sustainability strategy. This framework helps companies identify how their activities impact society and the environment while also assessing how sustainability-related risks and opportunities affect financial performance. Impact materiality examines how a company’s operations influence people and the planet, covering topics like climate change, biodiversity, and social equity. Financial materiality focuses on how sustainability factors, such as regulatory changes, resource scarcity, or reputational risks, impact business performance and long-term growth. Some issues, like climate change mitigation, resource management, and labor conditions, fall under double materiality, meaning they are significant for both external impact and financial outcomes. By integrating double materiality, companies can align sustainability efforts with business objectives, risk management, and investor expectations, strengthening corporate resilience. This approach ensures that sustainability is not just a compliance exercise but a strategic tool to drive innovation, operational efficiency, and stakeholder trust. It also supports transparent reporting, helping businesses meet increasing demands from investors, regulators, and consumers for credible sustainability disclosures. Sectors like finance, manufacturing, and retail are already leveraging double materiality insights to guide decision-making, investment strategies, and supply chain management. This matrix developed by Vestas in their sustainability report is a great example of how to structure a double materiality assessment, clearly linking environmental and social impacts to financial performance and strategic decision-making. #sustainability #sustainable #business #esg #climatechange #doublemateriality #materiality

India’s Green Financing Opportunity Could Shape a Century   India stands at a defining moment where a growing economic momentum meets an urgent climate imperative. The capital we choose to deploy today, and the priorities that guide this deployment, will influence not just our development trajectory but also the century that India shapes for the world.   At a global scale, the key outcomes from the recently concluded COP30 point towards the immediacy of climate action and the pivotal role of green financing. With strategic policymaking and the emergence of a climate-focused entrepreneurial ecosystem, India has a real opportunity to lead the global cleantech transition and achieve its commitment to reach net-zero by 2070.   Today, Green finance is powering innovation and scaling climate action while enabling entrepreneurship and opening avenues in infrastructure and job creation. At the heart of this transition is India’s rapidly expanding climate-tech or cleantech entrepreneurship ecosystem. Entrepreneurs are building impactful solutions across solar microgrids, battery storage, EV charging, carbon capture and sustainable packaging. According to a news report published by Inc42, Indian climate tech startups attracted over $2.2Bn in new funding over the last 18 months. Despite this momentum, early-stage climate ventures, especially in Tier 2/3 regions, often face barriers in accessing institutional capital. The government is addressing this through policy pivots that strengthen transparency and build confidence in the climate innovation ecosystem.   Subsequently, upper-layer NBFCs, lenders and development finance institutions are collaborating to bridge funding gaps. We are also seeing the rise of innovative financing structures, including blended finance models that combine concessional and commercial capital, thematic green funds to de-risk early-stage investments and ESG-aligned investment frameworks. These tools are helping channel capital to the most impactful and scalable climate innovations. As policy intent aligns with an expanding pool of capital, I truly believe India is well-positioned to become a global cleantech hub. This convergence of finance, innovation and sustainability promises to power India’s transition, strengthens local economies, create green jobs and ultimately shape the green trajectory of the next century not only for the Global South, but for the world.   Now is the time for policymakers, lenders, investors and corporations to take unified action. If India accelerates its green financing architecture with the same ambition as digital and infrastructure transformation, India could set a global benchmark for climate-led growth. The next century will be defined by those who fund the future and India is on the right track to lead the change.

Being “out of scope” of the #CSRD does not mean being out of scope of social and environmental risk. A new study shows how banks are already pricing in future climate risks when giving out loans. If a business has operations in a country that is more exposed to climate change, loans become more expensive, even if the firm hasn’t been hit by a disaster yet. Climate vulnerability raises loan costs by about 0.4% (on average). This is precisely why many "descoped" firms cannot simply step back from climate-related reporting, even if they are exempted under the Omnibus. The expectations of banks, investors, and business partners are not easing, and neither are their risk models. 👉 Markets are adjusting to climate realities regardless of whether regulation is “simplified” or whether we believe there is a "backlash". For banks, it is a risk calculation. That's all. === The study analyzes ~86,000 syndicated bank loans issued to 9,251 firms across 77 countries.

Did we get climate finance all wrong? Yes, I tell Akshat Rathi on his Bloomberg Green podcast, Zero. The core problem is that we use "climate finance" to describe many fundamentally different objectives: managing physical & transition risks, financing decarbonization, pricing & distributing risk, building resilience, ensuring fiscal stability, etc. These objectives involve different institutions, mandates, incentives & tools. Some protect/maximize financial value; others aim for climate safety & societal protection. For 10+ yrs, we have profoundly conflated these purposes, institutions and tools. When results don’t materialize, we blame accountability to, and precision of, the frameworks - spending more time refining disclosures, metrics, and methodologies, and pushing for more financial regulation. In 2015, Carney famously (correctly) warned that markets would feel climate impacts only when it was too late to self-correct. But the field drew the wrong implication, focusing on the idea that if long-term climate risk were better understood, priced, and disclosed, markets will reallocate capital to reduce that risk. That fundamentally misunderstands how finance works. Information on how climate affects markets helps institutions manage exposure. It does not make non-viable projects viable or substitute for the coordination, market design, and risk-sharing needed to make modern, integrated, decarbonized, energy systems financeable. (https://lnkd.in/enp6hqun) A related consequential confusion: we atomized the imperative of achieving global, atmospheric 'net zero' emissions into entity-level methodologies, as if the sum of individual net-zero targets would achieve systems decarbonization. But entities cannot, on their own, decarbonize their power, transport and industrial value chains, so the result has been increasingly elaborate accounting exercises that often bear little relationship to physical realities: https://lnkd.in/eN65DrGx The irony is that these confusions obscure the good news: decarbonized energy systems are eminently achievable, and often economically compelling, when the right conditions are in place. We are not constrained by capital or technology. Where clean solutions are cheaper, finance is driving deployment. Where investment stalls, it's because of unaddressed offtake risk, policy uncertainty, currency risk, system integration challenges, or missing coordination, NOT because investors don't understand climate risk. This relates to a final inversion: finance can't phase out fossil fuels; only decarbonizing the consuming sectors can. Fossil finance will end when clean alternatives are cheaper, more reliable, and more accessible -- which, as I note, is possible if we're clearheaded about the approach. 🎧 listen to the podcast here: https://lnkd.in/ecRKR4wR (I look forward to a new Zero episode every thursday as I 🚲 to work, so it was an incredible privilege and joy to meet Akshat in London for this convo.)

Yesterday's investor call lasted 12 minutes. (they only asked these 5 questions) They scanned past the usual suspects: - Carbon neutral by 2050 - Science-based goals  - Pretty charts - 2030 targets And went straight to: 🚨 "Show us your water stress map." Your water availability analysis for key sourcing regions. Because that Spanish tomato supplier you depend on? They're facing allocation cuts next season. 🚨 "What's your stranded asset timeline?" That new plastic packaging line you're installing has a 15-year depreciation. Meanwhile, EPR fees are doubling annually. They want to know when it stops being an asset and becomes a liability. 🚨 "How are you pricing climate volatility?" Fixed-price contracts assume predictable harvests. After 3 of the 5 worst UK harvests happened since 2020, investors know those assumptions are dead. They're calculating whether your procurement strategy survives 40°C summers. 🚨 "Where's your transition revenue?" They've seen companies turn carbon credits from regenerative agriculture into new income streams. Early movers are already offsetting transition costs through carbon farming partnerships. If you're not exploring this, you're leaving money on the table. 🚨 "What happens when your biggest customer demands Scope 3 data?" Last month, a brand lost its biggest retail account. The buyer asked for Scope 3 emissions data. They had a year to respond. They still didn't have it. The climate conversation changed… From 2050 targets to 2026 risks. From "doing good" to operational resilience. From carbon metrics to water, volatility, and stranded assets. You CAN’T impress investors by ambition anymore. They're looking for evidence you understand what's coming. P.S. Have you turned ANY climate risks into revenue opportunities?

𝗧𝗵𝗲 𝗕𝗮𝗻𝗸 𝗼𝗳 𝗘𝗻𝗴𝗹𝗮𝗻𝗱 𝗵𝗮𝘀 𝗷𝘂𝘀𝘁 𝘂𝗽𝗽𝗲𝗱 𝘁𝗵𝗲 𝗮𝗻𝘁𝗲 𝗼𝗻 𝗶𝘁𝘀 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗿𝗶𝘀𝗸 𝗲𝘅𝗽𝗲𝗰𝘁𝗮𝘁𝗶𝗼𝗻𝘀 𝗳𝗼𝗿 𝗯𝗮𝗻𝗸𝘀 𝗮𝗻𝗱 𝗶𝗻𝘀𝘂𝗿𝗲𝗿𝘀. 𝗧𝗵𝗶𝘀 𝗶𝘀 𝗮 𝘀𝗶𝗴𝗻𝗶𝗳𝗶𝗰𝗮𝗻𝘁 𝗮𝗻𝗻𝗼𝘂𝗻𝗰𝗲𝗺𝗲𝗻𝘁 𝘁𝗵𝗮𝘁 𝗺𝗮𝘆 𝗵𝗮𝘃𝗲 𝗴𝗼𝗻𝗲 𝘂𝗻𝗻𝗼𝘁𝗶𝗰𝗲𝗱. Banks now own climate risk in the same way they own credit, liquidity and solvency. The BoE’s new Supervisory Statement SS4/25 replaces the 2019 climate guidance and significantly raises the bar for banks and insurers on three fronts: 1. Boards and executives are now explicitly accountable for climate risk, with expectations to embed it into strategy, risk appetite and decision-making. 
 2. Scenario analysis is no longer just a disclosure exercise; it must inform capital planning, stress testing and product design. 3. Data gaps are no longer an excuse; firms are expected to use conservative assumptions where data is weak, which effectively raises the cost of risky exposures. Under PS25/25, the PRA is clear that climate risk must sit inside core risk frameworks, including ICAAP for banks and ORSA for insurers. This moves climate out of the “sustainability” silo and into the core prudential machinery. Regulators are treating banks and insurers as a coupled system. Insurers are told to factor climate into long-term underwriting, mortality and health trends. Banks are told to understand how loss of insurance, valuation shocks and physical damage flow into credit risk and collateral values. This is a massive step forward. 𝗠𝘆 𝗧𝗮𝗸𝗲 If insurers retreat from high-risk areas, banks inherit that risk on their balance sheets. If firms cannot show they are appropriately capitalised for these dynamics, the direction of travel points towards higher capital expectations over time. In short, climate risk is now treated as a transmission mechanism across the financial system, not an isolated ESG topic. This is the end of the “learning phase” on climate risk in UK finance. The PRA has signalled that if you do not quantify climate properly, you will pay for it in capital, governance scrutiny or both. For leaders, the question is no longer whether climate risk is material. The question is whether your board, models and data are credible enough that you would bet your capital requirements on them. If the answer is no, then this is where the real work begins! Source: https://lnkd.in/eN7nKjhr #ClimateRisk #FinancialStability #Banking #Insurance #ClimateGovernance #PrudentialRegulation #Sustainability ___________ 𝘍𝘰𝘭𝘭𝘰𝘸 𝘮𝘦 𝘰𝘯 𝘓𝘪𝘯𝘬𝘦𝘥𝘐𝘯: Scott Kelly

Alastair Marsh's recent thought-provoking piece in @Bloomberg highlights critical challenges with the current climate tech investing landscape Climate tech projects are capital-intensive with long timelines. Unlike software, much of climate tech requires massive upfront capital for R&D, pilot plants, and manufacturing before significant revenue. This demands longer development and deployment cycles (often 7+ years to scale) that exceed typical 5-7 year VC exit horizons. The classic VC model - built for rapid, asset-light scale-ups - often misaligns with the realities of many climate tech solutions, especially "hard tech." While there’s an abundance of early-stage VC capital for entrepreneurs, later-stage growth that bridges these projects from venture to infrastructure stage is basically absent—that’s called the missing middle. We need to adapt and supplement that approach by layering in other types of capital and bridge the "missing middle." A broader array of financing instruments is essential for climate tech to scale, including patient equity and growth capital, project finance, blended finance, and specialized debt models. Marsh’s piece lays out how family offices are uniquely positioned to be catalyzing players in this space. Their flexibility allows them to deploy capital across diverse segments, filling the gap and driving significant financial returns alongside impact. https://lnkd.in/gUf85Bwy

The world isn’t ready for what’s coming next in sustainability data. We’re quietly living through the creation of a financial infrastructure for sustainability—and it’s happening faster than most realize. Over 2,000 sustainability regulations have emerged globally in the past decade, with a 155% surge in ESG-related rules since 2018. This isn’t just about compliance—it’s a fundamental shift in how we define value, risk, and performance. What’s driving it? • EU: CSRD & ESRS will impact over 50,000 companies, embedding double materiality. • India: BRSR Core is mandatory for top 1,000 listed firms. • China: CSDS expands carbon reporting in high-impact sectors. • California: SB 253/261 reshape U.S. climate disclosures. • Australia: AASB S2 aligns with IFRS S2, effective in 2025. • Brazil: CVM 193 adopts IFRS-aligned sustainability standards. • And more: Japan, Canada, Singapore, Nigeria, Turkey—all aligning with global standads. We’ve entered a phase where climate, nature, and transition risks are becoming embedded in financial decision-making—from underwriting and M&A to risk pricing and insurance modeling. In the real estate sector, GRESB has made third-party verified performance data (GHG, energy, water, waste) a best practice. ESG metrics are now more embedded in due diligence for loans, equity, and new acquisitions. Yes, today’s data is often backward-looking. And yes, we still need science-based thresholds and stronger assurance. But this foundational work is what allows us to get there. Without reliable, standardized, machine-readable data, we can’t scale action, track progress, or hold anyone accountable. Just as GAAP and IFRS created trust in financial markets, IFRS S1/S2, CSRD, and the GHG Protocol are setting the stage for credible, comparable sustainability data. It will not be a “parallel system.” in the future. We are building the groundwork for full integration into the global financial system. This shift will transform: • How we price risk • How capital is allocated • How resilient companies are rewarded • How we define long-term value creation It’s messy. It’s political. It’s imperfect. But it’s also historic. If you’re in this space, you’re not just reporting data—you’re helping build a new operating system for business and capital markets. One that rewards transparency, resilience, and climate alignment. Let’s keep building—with more rigor, more ambition, and more impact.