[Opinion] Financial sector aligns with climate change

Achieving decarbonization targets and resilient economies by 2050 will involve an investment of approximately $6 billion per year according to the United Nations Environment Program. In this context, what role do companies play?

Climate finance total has increased steadily over the past decade, but remains insufficient. In the 2019/2020 period, $632 billion was allocated, 10% more than allocated in the previous 2017/2018 period, according to the Global Landscape of Climate Finance 2021. This context represents an opportunity for companies that make or receive investments and must assess the impact of climate change.

To help companies manage their business in the face of a climate context, the  Task Force on Climate-related Financial Disclosures (TCFD), a working group established by the Global Financial Stability Board, which develops recommendations on how to align corporate governance, strategy, risk management and the use of metrics and objectives of each company towards an approach that incorporates climate change risks and opportunities.

The financial sector is already implementing the TCFD framework through the definition of net-zero goals at 2050, inclusion of climate change in its risk management, and emissions impact assessment in their investment portfolios. Since its launch, more than 3,800 organizations have adhered to the TCFD recommendations, of which 1,500 are financial institutions, responsible for assets worth $$217 trillion.

With these recommendations, the companies have information to evaluate your investment efforts,  also considering that investments in climate change adaptation could have a return on investment of up to $10 for every dollar invested (Global Commission on Adaptation). 

In Peru, the main insurance companies and pension funds, representing more than 90% of the investment assets of these industries (approximately USD 49 billion as of November 2022), are beginning to be trained on TCFD recommendations. and show an average progress of 44% in disclosing their GHG emissions and its associated risks, according to the report issued by the Latin American Climate Assets Disclosure Initiative (LACADI - 2023) for Peru.

If the companies identify and quantify the material impact of climate change on your business ution of the TCFD's recommendations, will be able to calculate the return on their investments with more certainty. It is essential for companies to make an effort to measure and address the climate crisis in order to generate better business profitability, be sustainable in the long term and demonstrate their responsibility to the present and future of the planet.