Leaders from across the globe are gathering in Glasgow at the end of the month for the 26th United Nations Climate Change Conference (COP26). The summit brings parties together to discuss commitments to combatting climate change.
A big topic this year is climate finance. To achieve decarbonization goals, funding must be mobilized at a large scale and at a quick speed.
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Monica Trauzzi, who leads NEI's Environmental, Social, and Governance (ESG) initiatives, sets the stage for these conversations by answering some of our questions about the current state of climate finance.
Where is the conversation right now on climate finance?
There is broad acknowledgment among the financial community that the climate crisis is the world’s biggest sustainability challenge of our time. And there has never been more of an emphasis on climate-focused investments as a result. Events during this year’s proxy season send a clear signal that investors want to see the business community act on climate. Stakeholder groups are using the momentum to encourage the financial community to move their actions beyond performative, to impactful. Just this month, JPMorgan Chase & Co announced it was joining the United Nation's Net-Zero Banking Alliance, a group of global banks that have committed to dramatically reducing financing that goes towards carbon-intensive industries and activities. It’s a big signal ahead of COP26.
What gets measured gets managed. How do you see disclosure frameworks playing a role in the climate finance conversation?
Disclosure frameworks will eventually become standardized; this will help create a level playing field for measuring impact. Right now, ESG raters and data providers are unregulated and lack transparency, despite the trillions of dollars ESG frameworks are driving into climate-focused investing mechanisms. This means there is a strong potential for ESG frameworks to paint the picture that companies are acting on climate when, in fact, the actions aren’t grounded in impact.
Where does nuclear stand in sustainable investing?
The world is setting ambitious goals on climate change, and we need deep decarbonization to achieve them. We know nuclear energy has to be a part of the climate solution, and to ensure that it is, investments need to align with zero-carbon goals. Nuclear power is at the core of reducing greenhouse gas emissions. Wind, solar and geothermal are on the rise, but the smartest policies and investments will ensure these technologies are complemented with nuclear carbon-free energy production.
Nuclear contributes to achieving the UN’s Sustainable Development Goals (SDG), which are a key tool used by raters and screening organizations. The SDG’s feed ESG screens, which ultimately will trend in a more impactful direction. There is a growing understanding among the financial community that nuclear is both a necessary and good investment.
What do you think motivates private companies to invest in decarbonization?
Ultimately, big businesses are driven by shareholders. This past proxy season, BlackRock voted against more than four times the number of board directors it voted against last year because they failed to act on climate issues. There’s urgency in this moment, and the private sector is no longer waiting on certainty from policy frameworks to take action. There’s also a broad understanding that decarbonization can be a more lucrative opportunity for investors. Emerging technologies, like advanced nuclear, will be at the core of bridging the technology gap that exists as we look ahead to a zero-carbon future.
