Fleet Financing

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Eric Usher’s agenda is filled with meetings with the executives of some of the world’s biggest banks. And although he has years of experience in the financial industry, his mission is not to profit. It is about supporting and encouraging banks and other financial institutions to lay the foundations for a more sustainable future.

Usher is the head of the United Nations Environment Program Finance Initiative (UNEP FI), a partnership between UNEP, banks, insurers and investment companies that established one of the frameworks of most important sustainability issues for the industry. Its goal is to align private money with the United Nations Sustainable Development Goals which aim to shift our economy to clean energy, end hunger, promote gender equality and achieve more than one. dozen other social and environmental goals.

In his role, Usher has worked with financial institutions to put sustainability at the heart of their business strategy.

“If we are to meet the global sustainability challenges, we absolutely need the support of the private sector,” Usher said recently. “There is simply not enough public money, especially in the aftermath of COVID-19, to fund the massive structural changes our societies desperately need. “

The Organization for Economic Co-operation and Development estimates that it will cost $ 6.9 trillion per year until 2030 to finance the Sustainable Development Goals.

Usher’s comments came just before the United Nations Climate Change Conference of the Parties, known as COP26. The rally came with the planet slipping dangerously behind the goals of the 2015 Paris Agreement and already suffering the effects of climate change. Progress towards the other Sustainable Development Goals has also been uneven.

Origins of a movement

UNEP FI was born out of a group of six banks that came together on the sidelines of the Rio Earth Summit in 1992, considered by many to be one of the most important environmental gatherings of the past three decades.

Almost 30 years later, more than 450 financial institutions are members of what is the United Nations’ largest partnership with the financial sector.

In the past year alone, member banks have provided access to financial services to 113 million vulnerable customers and advised more than 15,000 businesses on their climate strategies.

Not only does this work help people and the planet, it also secures the future of financial stability. The booming green economy is creating a multitude of new investment and lending opportunities. Institutional investors and retail banking customers increasingly demand that financial institutions meet environmental standards. And, perhaps most importantly, a growing number of financial institutions have realized that financing fossil fuels, and other projects that harm the environment, is bad for their long-term future.

“I truly believe that the next 30 years of our economy and our society cannot be like the last 30 years,” said Guy Cormier, CEO of Desjardins Group, one of the largest financial services companies. in Canada. “The activities of a financial institution can make a real difference in people’s lives and also in the environment.

To become more environmentally friendly, banks, insurers and investors need to redesign their business models, Usher explains.

“Traditional risk (in the financial industry) looks at what has gone wrong in the past,” Usher said, “With climate change, it doesn’t work. Now it is a question of forecasting the future, which is not easy and so it is an area in which we are working with our members to develop the norms and standards necessary to meet it.

The latest Intergovernmental Panel on Climate Change, released in September, finds that almost every corner of the world has been affected by climate change. The UNEP 2021 Emissions Gaps report found that, even with new national climate commitments and mitigation actions, the world is still on track for a global temperature increase of 2.7 ° C d ‘by the end of the century, which could lead to catastrophic climate impacts. To keep global warming below 1.5 ° C this century, the ambitious goal of the Paris Agreement, countries should halve their annual greenhouse gas emissions over the next eight years.

With that as a backdrop, Usher says the work of UNEP FI has never been more important.

“There really is no time to waste,” Usher said. “The current decade is critical in determining the future of our species and our planet. “

Guiding principles

To guide the financial sector towards sustainability, UNEP FI has unveiled a series of guiding frameworks, including:

These sector frameworks have garnered broad support among financial institutions. Some 80 percent of the investment industry has committed to the Principles for Responsible Investment while 260 banks, representing $ 70 trillion in assets, have signed the Principles for Responsible Banking.

The principles [for Responsible Banking] are closely linked to the Paris Agreement as well as the Sustainable Development Goals, ”said Siobhan Toohill, Head of Sustainability at Westpac. “It’s clear that climate change is a really important factor that banks need to tackle… and there are areas of impact that we need to pay more attention to, like biodiversity. “

A progress report, published in October, highlights the achievements of the Principles of Responsible Banking initiative. Among other things, he found that signatories raised at least $ 2.3 trillion in sustainable funding. In addition, 94% of banks see sustainability as a strategic priority.

Industry frameworks developed by UNEP FI help financial institutions integrate sustainability into all aspects of their operations. But with more than US $ 100,000 billion needed to bring the global economy to net zero emissions by 2050 – and US $ 32 trillion over the next decade – there is an urgent need to focus funding on achieving this goal.

Three groups organized by UNEP FI are working with more than 170 investors, banks and insurers to develop scientific tools and guidelines to use with their clients and the companies in which they invest to decarbonize their activities. Financial institutions set goals every few years and make their progress public through annual reports to ensure that their work can be measured and monitored, and that they are keeping their commitments on track.

The large number of financial institutions involved and the short-term action that was taken left Usher optimistic about the future.

“There is no doubt that we have a lot of work to do to make our societies more sustainable,” he said. “But in the private sector, the desire for real change is growing and it gives me hope. “

UNEP