Connecting Financial Sector Sustainability and Climate Change

What is the connection between financial sector risks and climate change? This is the question Dr. Olaf Weber, Associate Professor at the School for Environment, Enterprise and Development (SEED) at the University of Waterloo, answered in his talk on March 11. Weber’s lecture focused on financial sector voluntary codes of conduct and regulations such as UNPRI and the Chinese Green Credit Policy and their impact on the sustainability of financial institutions.

Over the last few decades, climate change has been an ongoing issue constantly debated and discussed worldwide.  It is due to this, that the sustainability of the financial sector has been at the forefront of the political discourse since the onslaught of the financial crisis. Weber explained the financial risks that come with Climate Mitigation — loss of fossil fuel investments and changes in energy supply — but noted that the opportunities are greater in the long run. He argued that although voluntary codes of conducts such as the UNEPFI, UNPRI, and GABV are not implemented and enforced very well, it is still a step in creating a sustainable economy, providing outlines and promoting transparent reporting.

Weber stated that through regulations like the Chinese Green Credit Policy, countries could discourage investments in “dirty” economy, channel financial capital to green economy, and standardize and level the economic playing field.

In his findings, Dr. Weber was able to see that some of the countries that adopted these voluntary codes of conducts and regulations in regards to sustainability showed signs of a more sustainable financial sector and economy. Regulated central banks addressed sustainability issues more often after the implementation of the regulations compared to non-regulated central banks.

He concluded that voluntary codes of conduct and financial sector sustainability regulations are possible means to foster a sustainable economy as long as they are well designed and implemented properly within a country. 

(Text by: Leidy T.)