As president Joe bidenJoe BidenEmmer: Vulnerable Democrats who vote to raise taxes will lose West Virginia in 2022 to offer coronavirus vaccines to state basketball tournament participants.The United States has started to prepare to pull out from Afghanistan, said Chief General PLUS and the Securities and Exchange Commission consider improving climate risk communication and scaling up climate change mitigation initiatives, there is one key area that requires more attention from his administration: greening financial markets.

Billions of additional investments in carbon reduction technology, projects and services is necessary to achieve the goals of the Paris climate agreement. Smart regulations can help. But experience shows that sustainable investment instruments help decarbonize sectors that are often behind the political agenda. Meaningful government action would not only accelerate private sector investment in key carbon emitting areas such as buildings, industry and infrastructure, but would also bring greater accuracy and transparency to business emissions data. , thus reaching net zero faster and more reliably. Clarifying and rigorously defining what constitutes green is one of the most critical actions.

Tendencies in green investment show that targeted action by the financial community can lead to emission reductions in all sectors. Investor appetite for green financing instruments is strong, with most green bonds being oversubscribed. Despite COVID-19, in the first half of 2020, green bonds in USD averaged 2.6x oversubscribed, according to Climate Bonds Initiative.

From a business perspective, tying green financing to bottom line is also one of the most meaningful decisions a business can make. Johnson Controls was one of the first industrial companies to issue a green bond in the United States in 2020. One of the most important bonds of this type issued by an industrialist, it finances several clean technology projects. the extraordinary market response on the show made it clear that the financial sector understands the importance of green investments. Johnson Controls was also a pioneer in linking US dollar syndicated loans, such as variable interest and charges on credit facilities, to the achievement of specific performance targets for environmental, social and governance commitments. (ESG). In addition, its entire green finance framework is audited by an independent third party and is aligned with Green bond and Green loan principles developed by the International Capital Markets Association.

A greener finance market that uses instruments like green bonds and ESG-linked loans is not only a vehicle for one-off green projects, but also requires greater corporate responsibility and transparency. regarding data on carbon emissions. Potential investors seek rigorous and detailed information that goes far beyond the ecological commitments contained in sustainability reports. Transparent and comparable data is essential for disclosing climate risks and achieving meaningful reductions.

Yet challenges remain that currently limit investor confidence and the ability of green finance to contribute to progress towards net zero. Investors look for objective and reliable evidence that the funded projects are genuinely sustainable. The maze of competing frameworks and proposed standards makes it difficult to identify what constitutes “green”. Data on sustainability actions is not easily comparable or useful in decision making. Even in the green bond market, there are no common definitions, which has resulted in the exclusion of certain climate-related bonds from third-party green bond standards such as the Climate Bonds Initiative and certain bonds are considered “green” by sovereigns but do not meet the criteria of the Climate Bonds Initiative for “green”.

An additional challenge is the lack of harmonization of ESG reporting, which results in a low correlation between ratings and rankings. While many entities assess and rank corporate sustainability performance, approaches vary widely, making meaningful comparison between systems impossible. Promoting the clarity, standardization and consistency of ESG disclosures could enhance their usefulness as a tool for measuring climate action and performance.

The Biden administration can address some of these challenges by committing to three key actions. First, it should help develop definitions and parameters for green (and climate-related) bonds in cooperation with the global financial community, ensuring measurable impact. Second, it can work to harmonize reporting standards for emissions and climate data, increasing transparency and improving comparability. And third, the administration should involve the private sector – industry, service sector, technology community, finance and others – in discussions on how to identify and disclose climate risks and opportunities of a meaningful, measurable and transparent.

Meeting the climate challenge means that private capital flows must turn dramatically and decisively towards sustainability. The good news is that there are plenty of opportunities for green investment growth – the green bond market could reach a low. $ 1 trillion accumulated in 2021, but it is still only one percent of the total bond market of $ 100 trillion.

Catalyzing green transformation through private investment is a necessary step on the road to net zero, and smart public policy can serve as a key catalyst. Swift action by the Biden administration can help accelerate the global race for a net zero carbon economy.

George Oliver is President and CEO of Johnson Controls, which focuses on smart, healthy and sustainable buildings.



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