climate finance materials 2021
Class 1 (March 8): The Idea of Sustainable Finance
1. United Nations, Financing Climate Action
2. Lael Brainard, Member of Board of Governors of the Federal Reserve Board, The Role of Financial Institutions in Tackling the Challenges of Climate Change (Feb. 18, 2021)
3. US Climate Finance Working Group. Financing a US Transition to a Sustainable Low-Carbon Economy (Feb. 17, 2021)
4. EU Commission, Annual Sustainable Growth Strategy 2021 (Sep. 17, 2020)
5. Neil Gunningham, A Quiet Revolution, Central Banks, Financial Regulators and Climate Finance, Sustainability (2020) (this article does a very good job of framing issues in the area of climate finance (especially focusing on regulation)).
Optional Additional Reading:
Boston Consulting Group, GFMA, AFME, ASIFMA & SIFMA, Climate Finance Markets and the Real Economy (Jan 2021)
EU Commission, Overview of Sustainable Finance
Class 2 (March 15): Climate Change and Financial Stability
1. Financial Stability Board, The Implications of Climate Change for Financial Stability (Nov. 23, 2020)
2. Commodity Futures Trading Commission Climate-Related Market Risk Subcommittee of the Market Risk Advisory Committee (MRAC), Managing Climate Risk in the U.S. Financial System (Sep. 9, 2020) (please read the Executive summary (pp. i to ix) and pages 1-85, 111-117).
Optional Additional Reading:
Patrick Bolton, Morgan Després, Luiz Awazu Pereira da Silva, Frédéric Samama and Romain Svartzman, The Green Swan: Central Banking and Financial Stability in the Age of Climate Change Jan. 20, 2020 (115 pp)
Class 3 (March 22): Fossil Fuel Divestment
3 main themes:
– Campaigns may induce legislators/regulators to change the rules
– Changing public opinion about an area might affect how judges think about particular legal issues
– The importance of governance that isn’t about legal rules but about norms of behavior: beyond any potential impact on legal rules divestment is about changing how investors and financial firms behave.
Readings:
Julie Ayling & Neil Gunningham, Non-state Governance and Climate Policy: the Fossil Fuel Divestment Movement, Climate Policy (2015)
Kate J. Neville, Shadows of Divestment: The Complications of Diverting Fossil Fuel Finance 20 Global Environmental Politics 3 (2020)
Mikko Rajavuori, Divestment of Fossil Fuel Assets (January 3, 2020). Forthcoming, Harro van Asselt & Michael Mehling (eds.), Research Handbook on Climate Finance and Investment Law. Edward Elgar 2021., Available at SSRN: https://ssrn.com/abstract=3724464
Class 4 (March 29): Securities Laws and Climate Related Financial Disclosures
SEC Public Statement, Public Input Welcomed on Climate Change Disclosures (Mar. 15, 2021)
Hannah Vizcarra, The Reasonable Investor and Climate-Related Information: Changing Expectations for Financial Disclosures, 50 Environmental Law Reporter 10106 (2020)
GFMA and Boston Consulting Group, Climate Finance Markets and the Real Economy (Dec. 2020) pp 6-43, 104-140.
Communication from the Commission — Guidelines on non-financial reporting: Supplement on reporting climate-related information, C/2019/4490 (Jun. 17, 2019)
EU Taxonomy Regulation (Regulation 2020/852 on the establishment of a framework to facilitate sustainable investment, OJ L 198/13, Jun. 22, 2020)
Additional Reading:
Alliance for Corporate Transparency, 2019 Research Report: an Analysis of the Sustainability Reports of 1000 Companies Pursuant to the EU Non-financial Reporting Directive (pages 1-62)
Class 5 (April 5): Asset Management and Sustainable Finance
U.S. SEC Asset Management Advisory Committee, Potential Recommendations of ESG Subcommittee Discussion Draft (Dec. 1, 2020)
United Nations Principles for Responsible Investment, An Introduction to Responsible Investment for Asset Owners
EU Regulation 2019/2088 on Sustainability Related Disclosures in the Financial Services Sector, OJ L 317/1 (Dec. 9, 2019)
Stavros Gadinis & Amelia Miazad, Sustainability in Corporate Law (August 20, 2019) (you should be able to download the paper from this page)
Added April 10, 2021 (i.e. after this class) SEC Division of Examinations, Review of ESG Investing (Apr. 9, 2021)
Class 6 (April 12): Insurance and Climate Change
Climatewise, Policy opportunities on the road to net zero underwriting: Highlighting three key areas of influence for the insurance industry (March 2021)
Managing environmental, social and governance risks in non-life insurance business, PSI ESG Guide for Non-Life Insurance: Version 1.0 (June 2020)
EIOPA, Insurers’ Sustainability Reporting: EIOPA’s Technical Advice on Key Performance Indicators under Article 8 of the Taxonomy Regulation, EIOPA-21-184 (Feb. 26, 2021)
NAIC Climate and Resiliency Task Force web page (just to know this exists)
[added after this class: NYDFS Proposed Guidance to NY Insurers on Managing the Risks of Climate Change.]
Class 7 (April 19): Banking and Climate Change
Office of the Comptroller of the Currency, Fair Access to Financial Services, 85 Fed. Reg. 75261 (Nov. 25, 2020) (the rule was finalized on January 14, but publication of the rule was paused on January 28)
BBVA, Report on TCFD (Nov. 2020)
American Green Bank Consortium’s Annual Industry Report, Green Banks in the United States (2020)
European Investment Bank, EIB Climate Strategy (Nov. 2020)
Archive of comments about classes:
Before the first class:
I am looking forward to beginning this class on Monday March 8. I will schedule the zoom meeting sessions through Blackboard. Reading materials are available via this blog.
My aim for the first class session is to begin to think about sustainable finance, a topic which is becoming more and more visible in the financial press. The readings I have assigned for this first session are authored by different actors: it is interesting to note that business groups are talking about issues of the climate and finance in similar ways to some governmental actors.
I’d like to begin by learning about you and your background and interests in this area. If you have chosen to take this class it is quite likely that you have a familiarity with environmental law and sustainability already. But you may be coming to this class with a background in finance or business law more generally. In a 1 credit class we cannot learn everything that could be learned about the subject of climate change and climate finance. But we can study some important aspects of the relationship between climate change and financial activity, relating to how financial institutions are changing their behaviors to become more sustainable. We will also examine whether some of the claims financial firms make exaggerate what is really happening on the ground.
Please read the Class Policies.
April 7, 2021: There are some news stories today about amendments to a Blackrock revolving credit facility agreement under which the interest rate Blackrock will pay will be reduced if Blackrock meets certain ESG related criteria. Matt Levine has good column which discusses this, pointing out that the lenders here are big banks rather than typical ESG investors.
April 10, 2021: The SEC Division of Examinations published a Review of ESG Investing (Apr. 9, 2021) which notes that firms approach ESG investing in different ways. The SEC will be examining firms’ disclosures for accuracy, focusing on portfolio management, performance advertising and marketing, and compliance (the document notes that staff have observed some issues). The Review document states:
…rapid growth in demand, increasing number of ESG products and services, and lack
of standardized and precise ESG definitions present certain risks. For instance, the variability
and imprecision of industry ESG definitions and terms can create confusion among investors if
investment advisers and funds have not clearly and consistently articulated how they define ESG
and how they use ESG-related terms, especially when offering products or services to retail
investors. Actual portfolio management practices of investment advisers and funds should be
consistent with their disclosed ESG investing processes or investment goals.
Assignment for last class (duplicated with comments on the choice of readings): Many of the issues that affect banks are the issues we have seen already in other contexts, so in the materials I am assigning for our last class I am trying to give you some new perspectives on this developing area.
1. Office of the Comptroller of the Currency, Fair Access to Financial Services, 85 Fed. Reg. 75261 (Nov. 25, 2020) (the rule was finalized on January 14, but publication of the rule was paused on January 28). This was an attempt to limit banks’ freedom to take account of ESG issues in lending decisions (it seems some state legislatures are sympathetic to this attitude).
2. BBVA, Report on TCFD (Nov. 2020). This is included as an example of a bank making disclosures in line with the TCFD. The descriptions of processes and governance illustrate some of what we have seen with respect to the Principles for Sustainable Investment etc.
3. American Green Bank Consortium’s Annual Industry Report, Green Banks in the United States (2020).
4. European Investment Bank, EIB Climate Strategy (Nov. 2020). This is relevant to the public-private cooperation issue we have discussed.
April 16: This week the Basel Committee on Banking Supervision published 2 reports relating to climate change: Climate-related risk drivers and their transmission channels and Climate-related financial risks – measurement methodologies.