Climate change is happening rapidly. We have less than 10 years to reduce greenhouse gas emissions and limit the global temperature rise to 1.5°C. This will only be possible if the finance sector takes bold climate action.
In order to make sure finance flows into sustainable projects and industries, financial institutions need to understand the risks and impacts of their investments, as well the effects on the bottom line.
That’s why we’re proud to announce our partnership with the Oxford University Sustainable Finance Group, which will help align the financial system with the goals of the Paris Agreement.
Sustainable finance action
The partnership will enable the Oxford University Sustainable Finance Group to undertake four major projects over three years. These are:
The Spatial Finance Initiative (SFI)
A lack of quality data makes it difficult for the financial sector to measure and manage climate and environmental risks. The SFI will publish consistent, comprehensive and accurate asset-level data for the most polluting sectors. This will help make climate and environmental factors facing assets, companies and portfolios completely transparent.
The Public and Third Sector Academy for Sustainable Finance
Public sector and civil society organisations lack expertise in sustainable finance, which prevents them from designing effective policies, regulations and campaigns. The Academy will provide governments, regulators, central banks, charities and philanthropy with knowledge, networks and skills in this area. In doing so, it will help them shift tens of trillions of dollars away from unsustainable activities to those aligned with the Paris Agreement.
Energy Transition Risk and Cost of Capital Project
To support the transition to net zero, the cost of capital for clean investments must come down while the cost of capital for polluting investments must increase. This project will track changes in the cost of capital for polluting companies and the factors which influence these changes. Its insights will inform policies, regulations and campaigns that could transform the energy sector.
The Future of Engagement Project
While financial institutions are using engagement to attempt to deliver climate action, current strategies are not going far or fast enough. This project will develop, pilot and scale new and more impactful forms of financial institution engagement and stewardship.
Liz McKeon, Head of the IKEA Foundation’s Climate Action Portfolio, says: “We need the private sector, civil society, and government officials to recognise and rise to the challenge of the climate crisis. And we also need academic institutions, like the University of Oxford, to provide the north star—the compass—so that we’re getting the best information possible to ensure our actions benefit people and the planet.”
Dr Ben Caldecott, Director of the Oxford Sustainable Finance Group, says: “This partnership and funding will enable us significantly to scale up our world-leading research and teaching. This is about going after the big wins, not slight improvements and incremental change.”