The annual Ny-Ålesund Symposium brought stakeholders together to discuss how collectively, the financial system can navigate climate risks. Affirmative Investment Management (AIM), a leading dedicated impact bond asset manager, participated in the annual event, along with 53 other delegated researchers, investors, green bonds issuers and policymakers.
One of the emerging solutions that is gaining traction is the fast-growing green bond market - originating in 2008 and growing to approximately $400bn today but well below the required $1trn per annum of green finance needed.
While the need for decarbonisation to limit global warming and that global warming exacerbates extreme events, are accepted principles. It was clear from the Symposium that improved collaboration is needed over uncertainties in climate modelling; the financial sector requires data and tools to help translate climate risks into financial risk.
AIM has been working with South Pole, to develop a tool to understand green bond exposure to physical risks, which can be applied at both issuer level and asset level. The tool looks at the resilience of transition efforts by assessing the adaptive measures in place, taking into consideration different warming scenarios. Therefore supporting green bonds to become a more effective tool in managing climate risks.
As the 2018 IPCC report highlighted, to limit global warming and its potentially devastating consequences, broad and urgent action is needed that is adaptive and transformative. Business as usual cannot continue.
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