As the world plans for economic recovery following the global COVID-19 pandemic, major economies are looking to comprehensive strategies for addressing carbon risks and identifying green finance opportunities. Since Bank of England Governor Mark Carney and Michael Bloomberg began tackling climate change as a financial concern, the international financial community has been developing sophisticated analytical tools that will enable the success of comprehensive efforts to address carbon risks and identify green finance opportunities.
This timely publication offers a cutting-edge analysis of the financial aspects of climate change. It discusses the most important analytical tools, their origin, how they work, where they can go, and how they fit into a larger strategy. First, reporting frameworks can allow companies to see how well they are addressing carbon risks, in particular with respect to the recommendations of the Task Force on Climate-related Financial Disclosures. Second, by quantifying how much greenhouse gas companies emit into the atmosphere as a direct or indirect result of their operations, carbon footprint calculations can help identify carbon risks with particular companies, especially within supply chains. Third, brown taxonomies can help investors identify current carbon risks by classifying fossil fuel assets in a systematic manner. Fourth, green taxonomies can help investors identify current green finance opportunities by classifying sustainable activities in a systematic manner. Fifth, scenario analysis for assets can help investors identify future carbon risks and green finance opportunities. Finally, stress testing for liabilities can help insurers and banks address future carbon risks and better inform policymakers.
Scholars, policymakers, and business professionals will find this book informative. They will gain a comprehensive understanding of the analytical tools supporting efforts to address carbon risks and identify green finance opportunities. This will hopefully make these individuals more successful in their personal endeavors to build a more sustainable and resilient economy for future generations.
List of Figures
List of Tables
Preface
Acknowledgements
1. CLIMATE CHANGE BECOMES A FINANCIAL CONCERN
2. REPORTING FRAMEWORKS
2.1. Development
2.2. Harmonization with TCFD Recommendations
2.2.1. CDP Climate Change Questionnaire
2.2.2. GRI Sustainability Reporting Standards
2.2.3. CDSB Framework Using SASB Standards
2.2.4. French Energy Transition Law
2.2.5. NAIC Climate Risk Disclosure Survey
2.2.6. Comparing Reporting Frameworks
2.3. Emerging Efforts
2.3.1. United States Securities and Exchange Commission Requirements
2.3.2. Additional European Disclosure Requirements
2.3.3. Chinese Disclosure Requirements
3. CARBON FOOTPRINT CALCULATIONS
3.1. Quantifying Emissions
3.1.1. Emissions Scopes
3.1.2. Global Warming Potential
3.2. Aggregating Emissions
3.3. Evaluating Investments
4. BROWN TAXONOMIES
4.1. Carbon Bubble Hypothesis
4.2. Classifications
4.2.1. California Pension Funds
4.2.2. Climate Risk Carbon Initiative
4.2.3. Global Coal Exit List
4.2.4. Additional Taxonomies
4.2.5. Comparing Classifications
5. GREEN TAXONOMIES
5.1. Chinese Efforts
5.1.1. Guidance on Green Loans
5.1.2. Green Bond Endorsed Project Catalogue
5.2. Nonprofit Efforts
5.2.1. Green Bond Principles
5.2.2. Climate Bonds Initiative
5.3. European Union Efforts
5.3.1. European Union Taxonomy
5.3.2. European Union Green Bond Standard
5.4. Comparing Green Classifications
5.5. Emerging Efforts
6. SCENARIO ANALYSIS
6.1. Transition Risks
6.1.1. Energy Transition
6.1.2. Warming Potential
6.1.3. Carbon Price
6.1.4. Capex
6.1.5. Comparing Tools
6.2. Physical Risks
6.2.1. Generating Ratings
6.2.2. Applying Ratings
6.3. Comparing Risks
7. STRESS TESTING
7.1. Weather-Related Catastrophes
7.2. Metrics
7.2.1 Overview
7.2.2 Bank of England
7.2.3 Chinese Efforts
7.2.4. California Climate Assessment
7.2.5. Emerging Efforts
8. A COMPREHENSIVE STRATEGY REQUIRES ANALYTICAL TOOLS
Appendix A - Glossary of Terms
Appendix B - Timeline
Index
Biography
Aaron Ezroj is a graduate of UCLA School of Law and a Fulbright Scholar. He was a member of California’s delegation to the United Nations Climate Change Conference and managed carbon risk programs that the United Nations called groundbreaking.
"This book is the ultimate primer on green finance and carbon risk, written by somebody who has been instrumental in shaping and designing the world of carbon risk supervision described in the book. Ideal for somebody trying to understand everything you need to know to navigate the world of green finance." — Jakob Thomä, Managing Director, 2 Degrees Investing Initiative
"Ezroj demystifies carbon risk and green finance, while exposing the uninitiated to the current state of the art. The book decodes the alphabet-soup of protocols and initiatives taking place around the world, and doesn't shrink from pointing out the many challenges remaining in attaining scale and standardization." — Evan Mills, Founder, Energy Associates
"Our current climate conundrum needs campaigning as much as it needs scientific analysis. Responding to it necessitates policy changes at all levels, from the most local to the most international. It requires change in exotic matters such as ecological tourism, but also in more mundane sectors such as finance. In this volume. Aaron Ezroj draws upon his experience as a private practitioner and public servant, and his exposure to US federal and State, international and EU law, to paint a most insightful, non-hysterical picture of climate finance. Of what there is and what there ought to be. In a complete yet concise style he identifies the analytical tools required by both funds and investors to kill the two birds of climate and finance with one stone. Much recommended." — Geert Van Calster, Head of European and International Law, KU Leuven
"Carbon Risk and Green Finance" provides a useful overview of the laws, regulations and industry actions across the globe that are pushing this growing and impactful movement to incorporate climate change into financial decision-making. It's a perfect starting point for anyone wishing to familiarize themselves with this increasingly critical issue." — Ethan Elkind, Director of the Climate Program, Berkeley Law’s Center for Law, Energy and the Environment
