 Good afternoon, everyone. Welcome to the fourth session of the Green Horizon Summit – exploring the framework for financing a whole economy. Private finance will fund the initiatives and innovation needed to get to net zero. Our job for COP26 is to ensure it has the necessary information, tools and markets to enable this investment. That's why our objective for COP26 is to build the framework so that every private financial decision takes climate change into account. To explain more on this, we have with us today Antonio Guterres, UN Secretary-General, and Mark Carney, the UN Special Envoy for Climate Change. We will then hear from the reporting panel chaired by Francine Lacroix from Bloomberg with a message from Minister Shaw in New Zealand. I very much look forward to hearing the discussion. Without further ado, let me hand over to the Secretary-General. Excellencies, ladies and gentlemen, I'm pleased to join you for this important meeting. Over the next 30 years, global greenhouse gas emissions must fall sharply and permanently to net zero. Otherwise, we'll not be able to limit temperature rise to 1.5 degrees Celsius. The science is clear. Failure to meet the goals of the Paris Agreement means irreparable catastrophe for people, communities, economies and nations. Recently, we have heard encouraging announcements. The European Union, the United Kingdom, Japan and the Republic of Korea, together with more than 110 other countries, have pledged carbon neutrality by 2050. China has announced it will do so before 2060. That means 50% of the world's GDP and half of global CO2 emissions are now covered by a net zero commitment. These announcements sent unmistakable market signals to investors ready to fund a faster global transition to renewable energy. They will also spur a faster decline in investments in coal and other fossil fuels. As my special envoy for climate finance, Mark Karnaya stressed, decarbonization is the greatest commercial opportunity of our time. Markets are moving, they are moving fast, and those who move first will benefit the most. But to make this transition permanent and transformative, everyone will need to play their part. So today I have a message for each of you. First, governments. You need to align the long-term objective of net zero emissions with your short-term COVID-19 recovery plans and your nationally determined contributions under the Paris Agreement. And to get to net zero by 2050, CO2 emissions must drop by 45% by 2030 compared with 2010 levels. Your action will provide the framework the private sector needs to invest in a net zero future, namely putting a price on carbon ending subsidies for fossil fuels and making climate-related financial disclosure mandatory. Second, development finance institutions, multilateral development banks and climate funds. We need you to significantly scale up your role in improving the risk return profiles of investments and to align your portfolios and pipelines with net zero goals. This will help to attract private capital for mitigation adaptation, including in the developing world. Third, asset owners and managers. We need you to act urgently to shift the trillions of dollars you invest towards the sustainable economy. Price seen and disclosed climate risks and only pursue investments that have accounted for these risks. Ensure all your portfolios align with net zero goals. Join a multistakeholder initiative, such as the UN-convined net zero asset owner alliance that is taking concrete measures to promote portfolio-wide net zero alignment. And use your voting powers in companies to accelerate their decarbonization by systematically supporting climate resolutions in shareholder meters. Fourth, and finally, I have a message for financial authorities and regulators. You need to embed net zero measures in fiscal and economic policies, public bank mandates and procurement standards. Support net zero through incentives and regulation to level the playing field. In closing, let me emphasize that everyone has a crucial role. All governments, cities, financial institutions and private businesses must establish their transition plans for net zero emissions by 2050 and start with concrete policies now. Together, we can achieve carbon neutrality for a sustainable future. Thank you. Thank you, Secretary General, and thank you for your message and thank you for your leadership. I know you take an intense personal interest in this agenda, the private finance agenda. I have a series of texts and late night phone calls that attest to that, and I'm pleased to say that we are making progress. More needs to be done. Earlier, we were speaking about the thousands and thousands of organizations in the private sector, in the public sector, the NGO sector, the third sector that are working as part of this agenda. And we're very privileged to have some representatives of that work here with us to go through each of the main pillars of what's needed for the framework to make sure that every financial decision can take climate change into account. With respect to reporting, the goal for COP26 is to improve both the quantity and really the quality of climate-related financial risk disclosure and to promote pathways to climate change. We are going to be working on the timing of the first pandemic. But it's hard to say that this is going to be a mandatory T-C-F-D reporting. Make sure that it's comprehensive and consistent. And the first panel will delve into what that means in practice. We'll start, as Lord Mayor said, with a message from Minister Shaw from New Zealand, who helped guide New Zealand to become the first country to make the T-C-F-D mandatory. Our panelists are Mary Shapiro, who's led the years ago. Lucretia Reiklin, who has many roles but very importantly is heading up the work for the IFRS Foundation as they look at a whole new area of reporting, sustainability reporting. And Audrey Choi from Morgan Stanley who will discuss their perspectives on why climate related reporting is so crucial and what we need to do in designing and implementing those disclosure regimes. And we all look forward to hearing their perspectives as we move forward on to this. The second session will focus on risk management. Again, our goal for COP26 is to ensure that both companies and financial firms can effectively measure and manage climate related financial risks. And that means going beyond the static, in other words, climate footprints or carbon footprints today to the strategic, how they are going to be managed over time as we move towards net zero. It requires forward looking disclosure and it requires judgment, judgment about the resilience of companies and of financial firms and the resilience of their strategies during the transition. And let's be frank, this is a new area, it's an area where we all need to develop skills in both the private and public sectors. And I can think of no one better to lead that discussion or provide that perspective than Sarah Breeden, the executive director at the Bank of England who will describe the work of the NGFS, which she has helped lead in terms of publishing scenarios for transitions, but also providing supervisory perspectives and supervisory guidance to firms in the financial sector. Finally on returns, we will be joined by David Blood, who is co-founder of Generation Investment Management and who has led a task force as part of the broader TCFD efforts entitled Measuring Portfolio Alignment. It is published today, it's in the Knowledge Resources section of the TCFD website, I would encourage you to go through it. And it gets to the crucial question of how investors can assess their position on this transition. So both as a risk management and return optimization tool for investors, but very importantly as well for clients, for all of you, so that you can make decisions so that you can make your money matter. And I will have an opportunity to discuss that with David in a while. And up for me, let's hear directly from the true experts. In order to start this session and to build on the building blocks, we're going to have a panel on the TCFD, chaired by Francine Lacqua from Bloomberg. But first we will begin with a message from New Zealand and I give you Minister James Shaw. Tena koutou, tena koutou, tena koutou katoa. Thank you very much to the Green Horizon Summit for the opportunity to share with you the steps that our government is taking to address climate risk in the financial sector. A few weeks ago I was delighted to announce that Aotearoa, New Zealand will put climate change at the heart of financial decision making by becoming the first country in the world to introduce a mandatory climate related disclosures regime across the financial system. The idea is simple, to make sure that large organizations understand how climate change will impact their business in the future. Crucially, when businesses have this information they can change, they can adopt low carbon strategies that will not only be good for business but help cut emissions. Over the last three years Aotearoa, New Zealand has put in place an ambitious legal and institutional framework to tackle climate change. An essential part of this is the zero carbon bill which was passed by parliament unanimously last year and sets a legally binding commitment to keep Aotearoa, New Zealand within the globally agreed limit of 1.5 degrees Celsius of global warming. As you all know this is a huge task and the window of opportunity is closing but it is possible if we choose to act now, not after we have dealt with the economic crisis brought about by the pandemic but right now. Bringing climate risks and resilience into the heart of financial decision making will help to accelerate those emissions reductions and the transition to a low carbon economy. Our new reporting regime for climate risk will apply to publicly listed companies and large insurers, bank and investment managers on a comply or explain basis. In total around 200 organisations equivalent to approximately 90% of financial assets under management in New Zealand will have to make annual disclosures covering governance arrangements, risk management and strategies for mitigating any climate change impacts. If they are unable to disclose they must explain why. Disclosures will have to comply with one of the reporting standards that New Zealand's external reporting board is starting to develop. These standards will be based on the task force on climate related financial disclosures framework. An independent monitoring, reporting and enforcement regime will also be introduced as the responsibility of the financial markets authority. As we transition to a low carbon economy the introduction of new policies, changes in technology and the growing risks from more extreme weather, droughts or flooding will impact on the value of financial assets. These changes that we are introducing will mean that companies can provide clear, comprehensive and complete reports on these risks and the impact that they will have on their business. While New Zealand is taking this step I want to acknowledge that we are not alone. There are now over 110 regulators and governmental entities from around the world supporting the task force on climate related financial disclosures. We are also watching with interest the UK's consultations on requiring mandatory disclosure from premium listed issuers and large pension schemes closely and hope to work together as this develops in our respective countries. In recent years our government has put in place policies and legislation that will bend the curve of New Zealand's emissions downwards. Requiring large organisations to report on climate risk is very much a part of this. It's another step on the journey that Aotearoa New Zealand is taking towards a low carbon future and a clearer, safer planet for future generations. It's hard to overstate how important this is. Organisations that think ahead and align their business models to the transition to a net zero world now will be amongst the most successful in the future. However those businesses that do not those that delay action will be the ones to face the greatest disruption and the longer that action to cut emissions is delayed the more the risk grows. This really is the choice that companies face. When I travel around Aotearoa talking to businesses about climate change I often tell the story of the chief executive who said to me during the passage of our government's zero carbon bill that his young daughter had told him one evening that she no longer wanted to have children because of the climate crisis. What do I say to her? He asked me. Well because of the changes that we are making I'm pleased that I can now say to him that there will be businesses up and down the country who will soon understand exactly how they can play their part in making this world cleaner and safer. A world I'm sure he is hoping will one day be home to his grandchildren. Well good afternoon and good morning everyone and thank you of course to Minister Shah as we were just hearing achieving a net zero economy really requires a whole economy to transition. I'm delighted to welcome my panel. I know Mark Carney has already done so but this is a panel on reporting the future of climate-related financial disclosures as we heard Mr. Carney say. Now if I were in person or if we were all in person in the same room I'd ask you to give a big round of applause to my panelists but you can do so now from the comfort of your own home for Mary Shapiro vice-chair of global public policy and special advisor to the founder and chairman of Bloomberg, Lucretia Reiching professor of economics at London Business School but also trustee IFRS and Audrey Choi the chief sustainability officer of Morgan Stanley. So thank you all for joining us Mary. Let's start off with you. What is the future of climate change reporting and are we moving in the right direction? Sure thank you and I want to congratulate Minister Shah for the incredible steps that New Zealand has taken and I hope you will be a model for the rest of the world. So maybe the best way for me to talk about this is to just give you a little bit of an overview of the TCFD status report, the third status report that was just issued after presentation to the financial stability board last month and what we saw with this status report is that we've seen really substantial progress in mainstreaming TCFD disclosure requirements and that's really been driven by investor demand such as BlackRock or legal and general investment management, GPIF, Climate Action 100 plus, so many large institutional investors really pushing for this kind of information to help inform their capital allocation decisions. We've seen it also driven by the policy and regulatory actions of central banks. The minister just mentioned more than a hundred regulators around the world have endorsed climate reporting or the TCFD specifically. We've seen it with national governments, we had eight national governments that have endorsed TCFD reporting. We also see it with being driven by green recovery programs in countries like Canada where participation in the large employer pandemic recovery program required a commitment to report on climate related risk by those companies and then of course we see it and I know Audrey will speak to this being driven by good business practices. Companies with more than 12 trillion dollars in market capitalization support the TCFD and have begun reporting using the TCFD framework. 42 percent of companies with a market cap over 10 billion dollars disclose at least some information in line with TCFD and as Mark Carney said earlier this morning energy companies lead buildings and materials follow and and then we've also seen that european companies have the highest percentage of TCFD aligned disclosure. So we're making a lot of progress. We do see companies struggle with translating climate impacts on the business strategy into financial terms and we see them struggle a bit with the conduct of scenario analysis which is one of the key recommendations of the TCFD. So we've tried to respond to that by providing guidance for example with respect to scenario analysis. We've published practical process oriented guidance for non-financial companies on how to organize themselves internally to conduct scenario analysis and how to disclose those results. We've also published guidance on how to integrate climate risk into broader risk management processes and a consultation as well on the usefulness and the challenges of forward-looking metrics such as implied temperature rise or climate bar. The report also I think is very helpful in that it discusses what experts view as the most useful disclosures for them to make investment decisions. Climate impacts on business and strategy and information by sector and geography are the most useful according to our survey and the report also provides lots of examples of effective disclosures and even a number of case studies. But as I said despite steady progress we need more to be done to ensure as Governor Carney would say that every financial decision considers the risks of climate change and that's why I think so many jurisdictions are now on a path to mandatory adoption of climate risk disclosure hopefully using the TCFD framework as the foundation. We've pushed for voluntary disclosure that was our remit from the financial stability board but to I think to get a compelling number of companies actually disclosing mandatory approaches are increasingly necessary. The financial stability board has asked us to continue our work for another year and we'll focus on deep deepening implementation given the global coalescence around the TCFD as the framework. We want to understand the gaps in asset owner and asset manager disclosure and we will work with standard setters such as IFRS and regulators on filling out the TCFD framework with standards so we can avoid fragmentation and divergence in approaches to creating standards. So a lot of progress a lot more to do I think we're in a pretty good place and I know we'll maybe perhaps talk about the U.S. election later I think that that is only a positive for the future financial reporting on climate risk. Yeah we certainly will Mary thank you so much we'll talk about what a Biden administration means for financial reporting but Lucrecia can you take stock in in you know the reports or the progress we've done so far is it despite COVID or is almost thanks to COVID that companies want to do more disclose more? Well I think that you know the directional travel has been a good one and in fact it's a pleasure to talk after Mary who has been really led the work on you know building a credible green reporting infrastructure I mean to lay the foundation through the work at the TCFD and also her role at SASB. So we have seen you know more and more work in this area and this is a very difficult area both at the conceptual level because you know Mary has talked about stress testing you know this is something that you know these are tools that are used in risk management or you know for banks you know prudential tools but you know for reporting this is quite an innovation and if you ask an accountant who is used to do financial reporting you know this is a completely new world so it's challenging from a conceptual point of view it's challenging because you know different companies different countries want to do different things and so we need that harmonization we have had a lot of players recommending different things so now it is important to go under disclosure in my view to a framework which would allow mandatory standards and it would be sufficiently harmonized so that to become global. Now has COVID helped? Well maybe this was a shock that made us you know scare everybody of you know because it is conceivable that you know various pandemics are related to changes in climate and we have to take this very seriously and you know so reporting is one component of that together with public policies and of course other tools that are there. Audrey your initial thoughts thank you Lucrezia your initial thoughts and actually what could be done for this financial reporting and disclosure to really accelerate in terms of the trend that we've seen so far. Yeah thanks so much Anthony you know as always it's a it is great to follow Mary as Lucrezia said because and really I think we just need to follow Mary's lead because what we really need for more progress is frankly it's just to have more facts and to have more data right we all know you know if we're so lucky that we get to the state where I think we basically are at that people understand the realities of climate change and how material that is to business risk right then we can only then you know you have to manage to it and you can't manage to something if you don't have measurements and metrics and so you know for example the the work of the the PCAF partnership for carbon accounting financials where we were extremely honored to be able to be the first US institution to join the steering committee of PCAF and the working group there you know I think that work is very foundational to be able to say we have to come to a commonly agreed upon widely accepted business useful way of talking about carbon emissions so then we can all be reporting on it and then people can really make decision useful comparisons of how is company A doing versus company B and if you are an investor who is concerned about climate change and and really concerned about managing your own climate risk how are you gonna think about these two different players and so I I am actually very optimistic on this because I believe that you know the the recognition is extraordinarily widespread that this is no longer an optional right what I mean frankly what Mary and Governor Carney have been saying for years is that this is material to business this is a potential threat to financial stability and this has to be something that any prudent risk manager whether or not they have care in air quotes about the environment any prudent risk manager any corporate leader you know and certainly any investor needs to think very seriously about this you know I also have the enormous honor of serving with Mary on the board of the SASB and to give you just one data point right the SASB found that something something like only 93% of US equity markets are exposed to climate risk in a way that is not currently really priced in right and if you if that's not you know just one data point that you make every investor's think what am I not understanding about the full picture of risk and opportunity if I look at financials that don't have climate risk so I think we are going to we are already seeing the incredible acceleration of market and investor momentum and and the whole risk establishment across industry and finance and regarding climate risk is probably one of the single most important things we need to look at that end to end right now and that's thank you Audrey it's a pretty impressive figure 93% Mary let's maybe address you know the Biden administration and what kind of difference you think the Biden administration will do in terms of financial disclosure and reporting well I think the differences will be extraordinary obviously and the president elect has really set out a very aggressive science-based climate policy including a commitment to net zero for the United States by 2050 and and a series of executive orders to really drive progress across every sector of our economy as well as a very robust legislative agenda whether or not a robust legislative agenda can make it through a divided congress is of course not clear one would hope that members of congress will rally around this issue just as Audrey has said and recognize it as a material risk to financial stability and to to our economy more broadly and be able to support a legislative program but even if they don't there's so much that can be done and will be done under a Biden administration I think we'll have you know Mark Carney talks about a whole economy transition I think we'll have a whole economy a whole government transition or a whole government strategy around climate change that will really call on every agency and department to account for the impacts of climate change in all their actions some of this will help to reverse the damage that has been done over the last four years but some of it will surely break very new territory for us and and I think it's really important for people to remember how much can be done without congress having to pass laws so for example the securities and exchange commission the agency I used to chair can write rules that require consistent and rigorous disclosure of climate risk by public companies the banking agencies can consider climate risk in their micro and macro prudential supervision which would following in the footsteps of the ngfs and the bank of england and a number of other really leading central banks the department of labor can reverse rules that it recently passed that prohibit or discourage at best climate considerations in pension fund investing or by pension funds voting proxies and and just government procurement can be a huge lever here the government spends billions of dollars every year it can do so in in a more sustainable way so I think there's a lot that can be done and in fact the ftc put out a report a couple of months ago that outlines really creates a roadmap for financial regulators of all the ways in which they can weigh into the climate debate and have a very positive impact president elect biden has made a clear will rejoin paris and that he will work very aggressively on the energy transition he's put up a budget roughly of about 40 billion dollar 400 billion dollars of investment in clean energy over 10 years which also has the benefit of creating millions of jobs you know that's maybe that's harder to get done but as I said there's so much that can be done by departments and agencies without legislation I think we can catch up and and if the rest of the world will have us we can lean again and Mary you're confident that all of this can be done without disclosure having to be mandatory how important is mandatory no I think I think the sdc should and will move to mandatory disclosure to Audrey's point earlier if climate risk if 93 of us market capitalization is exposed to climate risk in a material way companies need to be disclosing that risk already what the sdc can do is provide specificity and guidance and a mandate for that disclosure that will help ensure that it's comparable and therefore more valuable to investors who are trying to make choices about how to invest Audrey do you agree with that does it have to be mandatory for for it to you know we've done so much already is the next step mandatory well look I would say you know I think that policy is incredibly important and that policy can certainly have an incredible effect to accelerate or decelerate trends and so I think if it is mandatory as Mary has suggested that would certainly accelerate it but I think that you know what we're really already seeing is that that investors are realizing that you know that they don't want to be ignorant of material risks to their portfolio and I think that you know we are already seeing you know very dramatic momentum right just to give you kind of a few other kind of you know highlights you know we see you know at Morgan Stanley we actually started our commitment to sustainable finance actually 12 years ago in 2009 because we were convinced that the impacts on the environment and society whether that be health like we're seeing with the COVID pandemic or on the labor force are all intertwined and really material to to an investment and to an understanding of of risk in return and so we've already seen more than 12 trillion dollars in the United States focusing on standalone investing 30 trillion dollars globally and you know when we do polls of investors for the last several years we've consistently seen climate change as the top theme that investors are interested in the lining with I think the other thing that's important though we've seen or will change and why and how investors want to focus on climate change through their investments right I think you know if you go back to ancient history of maybe five or ten years ago there may have been more of a mission alignment focus on climate change but what you're seeing now is a really broadening of understanding about why this is material to both risk and return you know and again we we recently out of the institute for sustainable investing we recently did a study of sustainability focused strategy so strategy that really align investments with things like climate risk and when you compare those two traditional strategies what's fascinating is let's even just take you know 2019 and 2020 in 2019 in the sort of dramatic bull markets that you hide globally the sustainable strategies actually outperformed the traditional strategies and then in 2020 with all this extraordinarily volatility you again up through the end of September we've seen the sustainability strategies outperform as well they're actually in the black whereas the traditional strategies maybe not including the past few days this is up through the end of September we're actually in the red so we do think that we're actually seeing a tremendous alignment right now of coming together of increased investor interest in it but also increased proof of performance from an investor perspective you know combined with I think what's the most important thing about the reporting and the disclosure is increased data right and at the end of the day if we can have a science-based data driven basis for information that is going to be one of the most powerful forces to excel with movement or private sector capital and to the extent that policy can be a supportive rather than of a supportive factor rather than a deterrent to that is going to be enormous Audrey I'll ask you in a second how we avoid greenwashing those types of scenarios but Lucretia can you talk us first whether you think a common framework is enough or whether we need to go into you know mandatory disclosure well as I said at the beginning I really believe that we should go from you know from voluntary disclosure to mandatory disclosure and to standards and this is actually why the IFRS has stepped in and opened a consultation asking exactly to our stakeholders that question does the world need global mandatory standards and the reason why we we move towards this consultation is because you know the message that we got from stakeholders and from investors is that there has been great work done but actually the landscape is relatively chaotic in the sense that there are you know different recommendation and standards there are up to 1700 different metrics now available for companies to to consider there is a danger of greenwashing as you have suggested so we need to you know move in the first step and somebody has to take responsibilities now there is the work of the TCFD there are there there is important work by done by the standard the standard setters sustainability standard setter organizations the big five organizations including standards but we need to you know go you know kind of and then actually not only that but there is also work done by important jurisdiction now I'm thinking for example of the European Union which has started the very ambitious program on taxonomy and and also is developing reporting standards which are coherent with the more ambitious green agenda which involves all kind of after different policy tools so then the question is okay if we want to go towards mandatory standards if we want to go to a ceremonization then what is the governance for that process and that's actually a difficult question to ask too because there are different legal frameworks there are different policies and you know so we cannot step in immediately into something that would fit them fit every countries and every companies so this will have to be a process so the question that we are asking in our consultation is how can we move towards global standards in a way that will provide the core of acceptable you know global standards but it will not contrast the the speed that certain jurisdictions want to have maybe the ambitions a high level of ambition that certain jurisdictions want to have so the way in which this kind of global and regional process will play together and will interact is very important to design and I think it will be a requirement for success okay whatever whoever is going to end up being the consolidator and you know maybe the FRS would be in collaboration with existing organizations maybe somebody else whoever will do it you know it's important that these regional global questions will be you know properly defined. Mary and before we go to Mary actually I'm getting some great questions so just keep on sending your questions in and we'll get to them in a second Mary. I just want to echo something Lucretia said because I think it's so important you know in most of most countries in the world certainly across the G20 material risks including climate risk already have to be disclosed by companies for their investors benefit. What I think mandatory does if is if it's globally coordinated is allows us to avoid very different approaches and different jurisdictions with different standards that renders the disclosure less useful to investors because it's non comparable and that's where I think organizations like IFRS in particular become really important to helping us create something that's coherent and comparable the most useful process. If companies already have to disclose because of materiality considerations we ought to have them disclosing in roughly the same way using the TCFD as the foundation. I have this good question coming in and it's one to you although Mary I think you addressed it right now but the question is how will we know what good disclosure looks like and who will make the decision of good or bad. Lucretia I don't know if you want to kick us off on that one. Well okay so here this is one of the questions so we are asking in our consultation is should we have a standard setting board for climate related disclosure and should such board be under the umbrella of the IFRS. Okay so there are some advantages in that kind of governance because our governance is a three tier structure so the regulators the public policy authorities are in a monitoring board which oversees the work of independent trustees of which I am one of them and we are independent individuals and ourselves we oversee the work of the technical board the ISB which set the standards for financial accounting. So we are proposing such a structure also for climate related standards that would be an independent board a second board under our umbrella the advantage will be to have the input of the regulators but at the same time to have the input of the private sector so if you want is a hybrid structure which is not totally public and is not totally private so it's kind of joined that you know the different you know stakeholders and you know and we'll also have the advantage of so we will be independent and will be connected to the board that set the standard for financial accounts which of course is something that it's important because you know climate risk are material also for financial accounts. So this is a structure which has advantages and will have you know the legitimacy you know to decide what is good and what is bad because there will be the oversight and so on and but you know to get to such construction that would be a new piece of the financial architecture of course this you know requires wide consultations and this is what we are doing now. Audrey I wanted to go back to to greenwashing what's the one step that you would put in place to avoid greenwashing without you know going into mandatory disclosure? Well I think that you know it really does go back to just the baseline of you know what has been sort of the the word magic word of the session which is our materiality right I think that we we see how material climate change and sustainability measures are to performance and as we are able to get more and more data around what are the factors that you measure to really tell how you can compare company A to company B you know within their sector and really who is you know reverting you know who is at the mean who is above mean who's below the mean that's how you start to get away from greenwashing right green I mean talking about your companies or your investment portfolios sustainability cannot be an interpretive dance right it has to actually be something that is based on science based on data and just as with every other thing that a company would disclose or that you know an investment manager would disclose it's also about benchmarks and so we have to get to the point where we have you know exactly as Maryam Koushik had been saying globally accepted parameters for industry by industry what are the factors environmental social and governance that are material where do companies rate on that and then where does your company rate relative to to that to that benchmark and so until we can get that data you know it does become a bit more of a you know of a hand waving exercise and that's not what markets and what investors need or want so I do think that you know it's really is built you know putting together all these building blocks of you know of the FSB having said you know it's having established TCFD to say climate change is actually a financial risk issue and then layering on top the incredible work of the SARS-B or an IFRS you know and the PRA and really the NGFS I think is one of the you know most amazing developments to see how extraordinarily quickly the NGFS has grown where it now has I believe 75 members and another 13 observers so you really do have you know the vast majority of the regulatory structure of the world saying from an oversight perspective you cannot have more climate change it's just fiscally irresponsible and material to investors and so I think that the more we just have you know more and more acknowledgement of that and frankly the investors I think are already there it becomes you know much much more difficult to be able to greenwash and much more comforting that you really can actually compare sort of apples to apples. Mary do you want to go back to the question which is who will make the decision on good and bad disclosures? Sure I do and I but I want to agree with Audrey I think the the solution to greenwashing is is really transparency and it's about good data full disclosure and some consistency of definitions or taxonomy when we're defining what what is green and what isn't. But I think investors will tell us what is good disclosure and what is good enough disclosure and and they haven't been shy in telling us at least at the TCFD what it is they need in order to have the best informed capital allocation decisions and I think when the disclosure becomes a component as Mark Carney would say of every financial decision made by an investment professional then we'll know we've gotten it right and we've put the right elements of disclosure on the table. Mary have another question which maybe you can get us started with which is how do we avoid a disclosure disclosure overload and the risk of companies paying undue focus on what their disclosure is over actually becoming greener and cleaner. So it's interesting one of the things we've heard from companies consistently is that as they've started the process of developing their disclosure under TCFD they've learned a lot about their business's resiliency to climate risk and they've learned a lot about opportunities that they hadn't really thought through before. So we actually see a side benefit of the disclosure which benefits of course investors and stakeholders generally insurers and lenders but the internal look has really benefited companies and how they run their business and how they think about the future and how they plan for resiliency. So I think look we we hear all the time as a lifelong regulator of securities markets and disclosure systems I've heard forever that there's disclosure overload and there's too much and nobody pays attention to it and it's boilerplate and it's not meaningful and and some of that is certainly true but this is an area where particularly using the TCFD framework you can have a discussion with your investors and with your audience about your governance about risk management about the business strategies resilience to climate change without it being overload it just it's not a given that because there's new information to disclose that somehow it will be overdone or we'll get immaterial information clogging up disclosure documents. So I think the beauty of this TCFD framework really is it's principle-based and it leaves it to the company to decide how to make the disclosure hopefully with guidance and maybe even mandates from their national governments but I I I guess I don't really buy the disclosure overload concern I think these are real material risks companies have to disclose them. Thank you Marietta this one is for this questions for you how is IFRS aligning with the work being done by the EU? Well we are very much you know in touch with the EU and we are following with great interest their work and we're actually also giving an input to the working group of the IFRAG which you know have asked us they have asked us to comment on on the connectivity with financial reporting with non-financial financial reporting and the EU in our view will have to be you know an input to this kind of global effort and you know when I think of the sustainability board that I described earlier of course I think has the EU as one component of the monitoring board in such framework and you know given the fact that the EU has been kind of very ambitious you know to indeed in this in this agenda I think that their input will be very valuable but as I said earlier you know the EU may want to be even more ambitious than you know what we can inspire as global standard setters and this is why it's very important to have a framework which would be nested so to have a core of global standards which would be nested in you know in in other standards possibly more ambitious and also broader in terms of scope people talk not only the EU talks for example not only in terms of climate but also other aspects of sustainability so these synergies I think this has a dynamic process in which we start with the core and then you know we we learn from you know different from jurisdictions which do things at different level of ambitious this heterogeneity is inevitable because the legal frameworks and the public policies are different across jurisdictions so I think that this is why we require this flexibility is very important it's a key element I think in this. Audre how do you think I mean do you think there's a danger that we overburden certain companies and I'm thinking maybe specifically a small and medium-sized companies at some size say you know this is an expensive a kind of process? You know I think one of the things so look I mean to Mary's point right regulations and disclosures always require a bit of work and that is sort of part of you know the that's a little bit of the cost of doing business I think you know one of the things that I would focus on is that I think really as Mary said what what corporate leaders including small businesses find is that when they look more closely at sustainability issues they actually see that this is not just about sort of you know I feel like we've been talking about this very much like eating your least favorite vegetable you know I happen to actually love spinach but you know it's often talked about as sustainability and disclosures and all these acronyms and certainly that's going to mean less business right and I think that the the part that we overlook too often is the fact about the opportunity and what you've seen when we've worked with you know corporations both large and small you know whether it's entrepreneurial or you know or really some large corporations the world even if they initially approach sustainability as a cost of doing business or an a burden or you know some some kind of duty when they actually engage you know in a real way with the topic they find that it can actually lead them ultimately to cost savings right so if you're thinking about more about recycling and more about efficient use of energy and efficient use of water you can actually you know reduce your cogs right if you actually start thinking more you know holistically about your your social compact with your workers in your community you can actually start seeing lower potential liabilities or regulations or other things but I think most importantly you start seeing innovation right and we've actually seen tremendous opportunities for outsize growth when you have innovation that is based on you know something really not radical at all which is what are the biggest mega trends informing the future cost and availability of natural resources right so most are built today on assuming the low I mean the free or near free costs of clean water clean air disposing of you know dirty water or dirty air and once you realize that may not always be the case and you look to not just avoid or minimize the impact of the regulation on your business but you actually say what is the opportunity there you actually start having tremendous amounts of new product creations and so I really think that you know frankly for all of us as you know in the sustainability community we need to kind of be constantly reminding people about both sides of those things and again I think what has been very encouraging and why we're seeing so much momentum from capital markets and corporate leaders is we actually have seen reduced volatility for those companies who do a good job on managing themselves from a sustainability perspective as well as increased upside and I really have you know I don't think I've ever met a trader or an investor who doesn't want alpha generation and beta reduction at the same time I have a great question actually for I think let's maybe start with either Mario Lucretia saying given the need for a whole economy transition how do we ensure financial firms are disclosing their approach to stewardship and impact on system-wide transition as well as financial risks Lucretia do you want to kick it off well I mean that's a matter of what kind of standards that you're going to design right so I think that you know maybe marry with the experience of the TCFD you you have to you had addressed these these issues but if I understand well the question I mean is I mean the question is also the I think it's a more holistic approach to the transition risk yeah I think it's more a holistic approach to basically how do you you know do a whites you know a more system-wide transition without only focusing on climate change oh okay sorry I miss I misunderstood the question so beyond climate we know that there are other aspects of sustainability and for example labor relationships governance and so on so the three aspects of these is ESG we think actually that these aspects are related I mean if you ask me personally I think that these aspects are related there is maybe a higher level of urgency when we are talking about climate change so I think that from a you know pragmatic perspective if I think of you know a possible you know new global standard setter board it would be you know it would be maybe better to start with with climate which is the most urgent thing but you know being open to to other aspects of sustainability as mentioned before the EU is going towards that kind of idea okay to to have broader to have a broader scope there are other issues which is are we going to look at standards in relationship to risk for companies so you know with an investment focus or we should we need standards which also are going to look at the material impact of what companies do on the environment okay so this is another aspect of how broad the scope of this future standard setter body should be again here I think that it would be better to start from the TCFD philosophy which you know looks at the impact on the company as a first step in my view it will be difficult that to clearly separated to to separate the two aspects so that maybe we should think again in a dynamic way that you know there is a little bit there also learning in this process we know from the financial crisis that you know you can focus in a company but then everything is related and then what looks like micro becomes macro so that is not the obvious how to separate these different aspects and I think we'd probably with this kind of risk would be the same but as I said our our view as I mean at least of the AFRS trustees are proposing in the consultation to start from a narrow focus but keeping an eye to further development um thank you so much we're almost running out of time but this is too important not to ask what is the one thing Mary that needs to be done the next six months to make sure we move forward on this I think it's it's really critically important that companies get started on this journey of disclosure and um and it's you know the framework is scalable it's possible to start you know very uh qualitative discussion like way and talk about governance and risk management and strategy and then gain expertise and capacity to become more quantitative and more sophisticated analysis but until the disclosure is out there and available to investors and lenders and insurers we're not going to have future proofed in a sense the financial system from climate change and and so companies just need to get started Lucrezia in in 20 seconds the the priority for the next six months I think that companies have given us the message now is the moment of the global regulators to say let let's go for it Audrey um you know I I would just echo uh uh that all companies need to just focus on the fact that uh this is this is a here and now issue I mean if there was ever a year to make everyone realize that sustainability is a clear and present danger that we cannot wait this is not an issue for your kids this is not an issue if you're if you're a grandkids this is a right now issue that is going to materially affect your employees your clients and your stock price so focus on this now in a material way that involves the CEO the CFO the CRO and like the whole C-suite well thank you so much for a very interesting panel Mary Shapiro Lucrezia Reichling and Audrey Troy and have a great day everyone thank you this hugely important conference is focused on the risks and the opportunities of climate change and in particular the instrumental role that the financial system can play in supporting an orderly transition to a net zero carbon economy many in the financial system have already recognized that role the encouragement and support of the conference today is testament to that commitment but as COP26 private finance initiative has laid out so very clearly we need to turn promises into practice and aspiration into action starting now not least since the eyes of the world will be upon us in Glasgow next year as many of you know this is easier said than done the risks and the opportunities from climate change are unprecedented they will affect the value of every real and every financial asset on this planet and so to identify the risks and to seize those opportunities we need to look forwards not backwards with a horizon of decades not years and without certainty about what will actually happen to our planet that's not straightforward but scenario analysis provides us with the toolkit for doing so and so today I'd like to talk to you about the climate scenarios that were published in June by the central banks and supervisors network for greening of the financial system and why those scenarios matter to you as financial institutions as well as to us in the NGFS I hope that you will agree that there are critical input into the COP private finance initiatives ambition both to transform climate risk management and to improve the quantity and the quality of climate related disclosures but let me first provide a bit of brief background on the NGFS and why it's chosen to develop these scenarios the NGFS was set up in December 2017 with eight founder members including the Bank of England as a coalition of the willing designed to share best practice on the field of climate risk management and green finance in less than three years we've grown to over 70 central banks and supervisors underlining the increasing importance of climate change to my community and together we represent a lot of intellectual firepower within the NGFS I chair the macro financial work stream where our aim is to size the economic and financial risks from climate change this slide shows how the physical and transition risks from climate change lead to economic and financial risks it highlights that the channels from climate to financial risk enumerous with significant interdependencies and as many of you will know from experience the data and the methodologies to translate climate outcomes into macroeconomic and financial risks are incomplete and inadequate even the future path of the climate risks themselves is subject to huge uncertainty as central banks and supervisors we are clear that these uncertainties and complexities cannot lead to inertia and inaction and that's why we have developed the NGFS reference scenarios to allow us all to explore economic and financial risks under a range of potential climate pathways there are of course a myriad of possible climate pathways and so a myriad of climate scenarios out there which one should you choose this slide sets out the NGFS scenario framework the scenarios are organized on the horizontal axis by climate outcome on the left we assume the Paris goals are met and physical risks are contained on the right they're not met and physical risks are substantial and the scenarios are also grouped on the vertical access by the type of transition in the bottom row we begin to bend the carbon curve now and our transition is early and orderly however in the top row our actions are delayed so the transition is disorderly and transition risks are high and what this highlights is that a simple two by two matrix does a pretty good job of exploring these different risks the NGFS published in June its own reference scenarios in line with this framework in addition to the macroeconomic and financial variables you usually associate with central banks the scenarios include temperature pathways the frequency and severity of weather events emissions pathways energy mix and implied carbon prices by using a range of different models and for the first time ever our scenarios contain both transition risks and physical risks in a coherent way they are therefore decision useful reflecting the totality of the risks we might face and unlike in all other scenarios we have not assumed away huge waves of risk in the design of the scenarios importantly we've worked closely with a consortium that represents the best climate scientists in the field and of course we're bringing to the table our central bank macroeconomic and financial modeling expertise so that the scenarios further develop our shared understanding of these unprecedented changes I should though note that modeling the economic and financial impacts is subject to significant uncertainty and extensive debate so we need expertise and challenge from you too I'll return to that later consistent with our two by two framework the NGFS has produced three representative scenarios that are summarized in these two charts our three scenarios cover orderly disorderly and hot house pathways the orderly and disorderly scenarios both limit climate change but in the disorderly scenario the start of the transition is delayed from today to 2030 the left hand chart shows emissions because of the delay in policy action emissions reduction in this scenario have to be much steeper than in the orderly scenario in the hot house scenario emissions continue to steadily increase and mean temperatures increase by more than three degrees the economic impacts and the financial risks that this brings are significant on the right hand side we see what these emissions trajectories imply in terms of shadow emissions prices and so transition risks what jumps out is that in a disorderly scenario the emissions price increases sharply reaching seven hundred dollars per ton of co2 by 2050 as the blue line highlights if we want to reduce these risks we need to start now not in another decade at the bank of england like many other central banks and supervisors we will use the ngfs scenarios for our own analysis specifically the scenarios will serve as the basis for our upcoming climate stress test the 2021 biennial exploratory scenario or bez this exercise due to launch in the middle of next year will cover three scenarios consistent with the ngfs scenarios and will explore both physical and transition risks in addition to being our first stress test to include climate outcomes in not one but three scenarios and looking ahead decades rather than three to five years the climate bears will also break ground in other ways both banks and insurers will participate in the stress test so that we can capture the interactions between them the firms will be expected to conduct counterparty level analysis for their largest counterparties to capture the fact that this risk needs to be understood bottom up asset by asset across the entire balance sheet consistent with the economy wide risks that climate change brings and we will look to identify common responses and feedback effects that have got the potential to increase the risks that we face through this exercise we hope to deliver three things first to shine a light on risks that are currently opaque secondly to highlight where the opportunities are to reduce those risks and thirdly to build capabilities and prompt customer engagement all of which will support cop private finance initiative aims let me finally turn to how these scenarios can be useful to you as well as to us and to outline our next steps the scenarios are available for use now in a publicly available database they can be used therefore in any financial firms risk analysis and they can be used by any of your real economy customers too indeed these scenarios might be especially useful in supporting TCFD disclosure we all know that for disclosures to be decision useful they need to be forward looking not static and based on scenarios that are consistent and comparable and the ngfs scenarios can be those reference scenarios let me end by noting that we have so far taken only the first step in our journey I said at the start that our task was a complex one creating climate scenarios for the financial sector is a difficult task and our scenarios will not be perfect but since the time for action is now we need progress today not perfection later right now we are doing further work to enrich these scenarios adding more macroeconomic variables providing greater geographical and sectoral detail and adding more physical effects from climate change we'll publish these new expanded scenarios early next year to that end we welcome comments from all of you on them and we will report ahead of COP on how central banks have used the scenarios and the climate risk management lessons we have learned in the meantime can I encourage you all to use the scenarios too by shining a light on the future risks and opportunities we face these scenarios can help drive the action we need now and if we all do that we can make Glasgow proud David Blood generation investment management thank you for coming into mansion house and which is which is already a major major accomplishment to physically be here but you know sort of more substantively thank you for your leadership of the portfolio alignment task force as part of the TCFD efforts and we're going to spend 20 minutes or so talking about that and I guess really the first question is you know just general why is this important what does it seek to accomplish if you can just unpackage this for us well the first thing I need to do is thank the team Iran Levina and the entire team have done a tremendous amount of work we hope that the document that we produced will be a tool to help financial institutions better assess their transition to net zero brand that the whole notion of what we want to talk about today is is really the tools to help people think about that I think there are our four points that that we need to establish the first very importantly is net zero will be the law of the land and it's critical that asset managers asset owners banks insurance companies recognize that and are aligning their portfolios to reflect that so you could think of this as a risk management question is how do you or a compliance question how do we ensure that we are aligned to net zero but actually I think the the second reason is is even more interesting which is the transition to net zero will be the most significant transformation in economic history and so from my perspective what is really interesting about this is the capital allocation the opportunities to allocate capital to this transition over the course of the next five 10 15 years and so a CEO or a CIO absolutely needs to understand the compliance of the risk side of it but really what's interesting is the capital allocation side of this and I think with the United States rejoining Paris this will move very very quickly so the opportunities associated with the net the transition to net zero are real but there are two other reasons the first is the the engagement opportunities as investment managers this these types of tools will help us prioritize which organizations we're engaging with to transition them to to net zero and we'll give us tools to sort of figure out where we we are and and that prioritization but last but not least and I know this is something that's very important from your perspective as well is ultimately this is a stakeholder management tool we are going to have to talk to our stakeholders our customers our clients our broader community as to how we're aligned to the transition to net zero right okay so there's a lot in that and the tools can be used for many purposes maybe we'll start from the institutional side from the investor side from the portfolio manager manager side and just if we can go a bit more detail on some of the tools usually you describe it as a tool both for risk management but actually you know on the more exciting side if you will capital allocation taking advantage of this opportunity so give us a bit of a sense of the different ways the different tools in the toolbox that can be used for portfolio alignment and how you would use them or do use them when you think about capital allocation well there you're right there there is a there are an array of tools out there right now and some actually are are important but they're static and they I would argue there are more risk oriented tools like what is the carbon intensity of your portfolio of your loan book and that's that's important information but as you begin to think about the the offensive side of this question or the engagement side of this question it becomes important to understand what forward-looking matrices might be and so what we've done in our report is developed a a continuum of sophistication and that's a little bit grandiose in terms of a title probably but it gives you a sense that it basically goes on the notion that sometimes the more important differentiated insights that you can get as a fund manager or as a CEO or a risk manager are a bit more complicated and require a bit more information and that's ultimately what we're we're trying to show here so in the in the forward-looking matrices and what we're looking for are matrices that are forward-looking that are robust that are based on science and that we can action right ultimately right and so one question that one could ask or one portfolio metric is well what is what percentage of your portfolio is already aligned with Paris and you can just get a number and that's helpful information for sure but that only kind of tells you sort of where you are as opposed to where you're going and so a a next step on this road of sophistication or continuum is well what if if we look at companies and then portfolios relative to a carbon benchmark right and then well where are we on that and that's definitely much more information can I can I just ask you a question on on both of those items so and I'm going to play back something to you and you've correct me when you think about what proportion is Paris aligned it's is it companies that have transition plans or some element that you know they have an intention or they already are on the curve towards being Paris aligned is it that as opposed to say an ESG rating or something in that it was a great question and the answer is yes to all of those right and that's going to be one of the challenges we need to talk about is as we go forward here is that you don't actually know sometimes it's it could be one of uh or all of those those sorts of questions and so that's why this continuum sophistication becomes more important is that we're constantly looking for more commonality more uniformity around the answers to those questions and which the benchmarking of businesses and portfolios relative to a carbon budget is helpful in that regard but even that doesn't tell you enough okay so and I know you're going on this continuum of sophistication but on the carbon budget or what you said a moment ago a kind of carbon benchmark again is that a sense of a trajectory of carbon reduction is it does it vary by sector or country depending on the portfolio you're managing or have just again you've actually hit the nail on the head it's it's a trajectory and it's all of the above okay and that's important it gives you important insights but actually it isn't enough because it's very variable there isn't sort of a consistency and so what might be one company uh it may be both companies have the same uh benchmark or the same objective but they're on different trajectories and it's difficult to assess that and so what we've been looking for and uh you know you and I've been on this journey for five years is is really to begin to say worry well can we develop a a more sophisticated uh tool to give us a sense of what really what what is what is the carbon budget of this company where are they on the trajectory of paris or transition to net zero or where is the portfolio relative to paris or net zero and that's the the warming metric that we're we're talking about so can you just just describe the warming metric uh if if you could for people who haven't followed it as closely as you and i yes and it's probably a blessing if you have to call it a closely but so it comes in different terms it r and applied temperature rise or warming metric but basically what it's trying to do is assess uh a company or a portfolio on its journey to net zero and it gives a a basically a temperature score and that's the beauty of it it says um my portfolio if i if i look at all the companies in my portfolio and and i is forward looking and i'm giving credit for the journey but my portfolio would imply a 3.2 degree world and there are some major institutions that do this at present there are in fact the largest pension fund in the world Japanese pension fund is doing it and and they these tools have been developed over the course of the last couple of years to try to make it clear to all stakeholders of where they are in the journey the challenge is that the data that goes into that tool needs a lot of work and the assumptions that go into the tool vary right and so you can have and there are a number of different groups all of which are doing really good work but they are using different assumptions and so you could actually have the same portfolio and run it through seven different organizations and you'll get seven different temperature rises right and and the purpose of our report is to say that's terrific that's a good start but we really need to harmonize and come up with well what we think is what not we but collectively the financial community think is best practice so that we can move towards making these these tools easier and better and more robust to use okay well let's let's i'm going to hold that thought for a second but just re-emphasize it which is that the sector as a whole coming up on this as you say a journey towards finding the right metric or metrics to show this dynamic the shift towards net zero but i think we all know that we've got a timetable for that journey a timetable to Glasgow so we've got 12 months on that journey and so i'll just ask those watching to you know remember that yes and that part of the reason for the report is to provide some framing for those discussions but if i just take us back before we go into some of the kind of early findings but before that um let me just make sure again that we're all on the on the same page which is uh and i think maybe we need to acknowledge that net zero which for those who are have been in the thick of this and the transition to net zero is quite a familiar concept but really in mainstreaming sustainable finance it's relatively new right yes and so uh you've described along this continuum various ways to really classify the assets that you might have as an investment manager or an asset owner might have classify them um where they are on that journey and where they could get to right is that that's that's the essence of that's the essence okay and is one of the things before i ask you about the key findings is one of the things you're trying to test is how well these various metrics give credit or allow for judgment about a company that maybe was had hadn't taken this as seriously less for whatever reason but now was looking really to respond to the law of the land to stakeholder pressure and encouragement and get on that road to net zero and then the portfolio manager can maybe invest in something that's has a pretty big carbon footprint but it tends to reduce it quite significantly is that that is definitely part of it okay that is definitely part of it it's it's really to provide full information to the capital allocator the capital allocator may decide that um in fact we may want to encourage capital allocators to invest in the hard to obey sectors because that's how we'll get to net zero more quickly it may also be that a capital allocator is uncomfortable with that and needs to wants to allocate to two different sorts of of assets but it's the information that we're we're looking for it's a tool to help us make those those capital allocation decisions okay great so you've looked at this you've looked at these various ways including some tools that are used for other purposes like taxonomies which are used to define what is green as opposed to the transition to green if you will so what are some of the early findings that you've had that you're putting out for a consultation to help guide the well there's sort of two buckets um the the bucket that I prefer to talk about is sort of the high level buckets yeah and then there's some really I prefer the whole there really some very important technical conclusions which we clearly want to talk about yeah and certainly encourage folks to to read but there are probably uh five or six points that that we're trying to make the first is uh this is a journey there are a number of of matrices that we can be using and should be using some are better than others but no one is perfect yet and so uh one approach might be to recognize that you probably need a couple of them when you're thinking about right managing your risk or allocating capital the second is as much as uh there it it's attractive to look for simple that the truth is we need more sophistication because the journey to net zero is a sophisticated challenge for the reasons we were talking about the trajectory that that that is going on the a third observation is the the warming metric while it has significant challenges and it does have significant challenges it has data challenges it has methodology challenges and we talk about that in the in the report it does have two really big advantages one is it it allows you to to compare companies and portfolios in a way that you can recognize yeah in a in a more consistent way and secondly it's something that we can use to communicate more effectively this this whole challenge of of transition to net zero the whole conversation around climate can get very complicated for those of us who've been living in it but we need a we need to bring a lot of people with us in this journey and imply temperature rise is something that people can can get their arms around and so it's it's worth investing in some time and developing some tools to see if then if we can't address the challenges because it is does have some terrific strengths to it yeah I mean and you said something earlier with you use the example of I guess GPIF the Japan pension fund 1.6 trillion or dollars in counting and there and they're north of three degrees they they more or less not perfectly represent the market but they're more or less own the market a little overweight Japan but more or less the market and you know that tells you something now on the other hand um managing that portfolio towards one and a half degrees which is their intention which is kelper's intention is that right as well um axa alliance uh casted you know that's their intention and and so the judgment that either you as a portfolio manager or an institutional investor is making potentially with one of these metrics is to take a pool of assets and move them onto the road to Glasgow if I use my analogy or or aligned with Paris and then they can be judged and they have a tool again to track that's that's what we're looking for that's exactly right and it's and it's both again it it covers all of those four points it's it's a risk management tool that tells you from a risk management perspective what your transition risk it's a capital allocation decision although very large organizations are are the market and that is somewhat more challenging but it's still important information it's an engagement tool and then importantly our stakeholders our customers our our clients they're going to want to know that well it's interesting okay so let me uh the two stakeholders one uh it's it's ought to talk about stakeholders but through communities governments actually one thing it does do is it reflects back to governments how much progress still needs to be made exactly yeah um but let's talk about the clients it's uh you know people watching um ultimately it's uh everyone's savings uh up and down the country around the world it's their money whether it's in you know a big institution a pension fund the savings account etc and so how how do you look at it uh from a from you know person on the street uh perspective and a communication way uh what do you see is more attractive what are some of the lessons and what should the industry what should the industry strive for i guess it's a question well i think that the industry has to strive for transparency and and we started the conversation with reminding um our our audience that this is a stakeholder conversation and we're going to finish on that but this really is a a hard-nosed capital allocation discussion as well and and therefore we have to do it from a purely capital allocation uh perspective but we also know that our that there are multiple stakeholders that are going to increasingly be observing what the financial services industry is doing and i would say frankly the financial service industry is lagging the real economy and responding to the transition to to net zero tc fd um has it in their report that that we in the financial services industry have a lot more work to do and i think that's true and so this is an opportunity frankly to over the next 12 months to kind of get in front of the curve and be able to be uh more more clear about what our what our portfolios are our investment strategies are are aligning to as it relates to the transition yeah okay that's a great point okay we're we're coming towards the end there's two critical points here i think um and i'm going to come back to that last one first is you very carefully say capital allocation uh decision but also another way to look at that is an opportunity to make um to make alpha i mean outsize returns because this issue of transition to net zero um has not been mainstreamed it hasn't been the way most you have been doing it other institutions some other institutions but most institutions haven't been looking at value from this perspective all of a sudden you're developing these tools the industry is developing these tools to look at transition as a driver of value right yes yeah okay now um and the reason why that's such an important point is that i think i don't think we've really internalized how big of a deal this is right this is truly a terrific economic capital allocation opportunity yeah i mean i i totally agree you know society's decided here's where we're going to go we're going to get to net zero 126 countries in counting and and we are counting and and now the market's going to figure out how we get there and that's going to lock back so what happens so the last question the next 12 months where do we go from here how do we how do we get consensus well we hope the report will be part of of a series of initiatives tcfd is one of the initiatives a net zero asset owner alliance is another the iig cc is a another initiative and we need we need to come together with all of these different groups and start talking about well how do we harmonize this so that and learn by the way for the next six months there will be more work done by the methodology providers there'll be a number of users of this of this information and actually producers of this information and we'll learn a lot over the next six months but sometime this spring or summer we're going to have to come together and say right what have we learned how do we try to drive to as close to best practice as we can get as we go into to Glasgow because we really need this tool we really need to be able to tell all of our stakeholders what how our portfolios how our companies are aligned to the transition to net zero so it's really a quite an urgent initiative it's an urgent it's an important initiative we've got the framework in order to get there we've got the best in the industry now focused on it we want everybody to focus on it and there's tremendous momentum and now you don't have to take it from me that there's tremendous momentum because I think we our time is up and we have two last speakers today one of whom is the Chancellor of the Exchequer who will give us all a sense of what momentum looks like thanks David thank you sir good afternoon thank you for inviting me to speak at today's green horizon summit and I'm sorry we can't be together in person and thank you to the City of London for hosting such an important event early this afternoon I gave a statement to parliament outlining our vision for the future of financial services in the UK I believe this moment marks the start of a new chapter a new role for the sector in supporting the economic recovery from coronavirus a new relationship with the EU and a new ambition to make the united kingdom more open more technologically advanced and our focus today a world leader in green finance the challenge of climate change is clear and it is urgent we need to ensure a positive and fair transition to net zero and protect our environment and we have an opportunity ahead with the UK's co-presidency with Italy of COP26 and our G7 presidency next year we will provide leadership working closely with governments around the world but government cannot do this alone the City of London is one of the world's pre-eminent financial centres with a long history of financing private sector innovation and we're going to need your full weight all your expertise and capital to swing behind this critical global effort this sector has already done a lot and I'm pleased we're celebrating the progress already made over the next three days but as we reshape our economies for net zero we know we need to go further together I'm announcing three new steps today first we're announcing the UK's intention to mandate climate disclosures by large companies and financial services firms across the economy by 2025 going further than recommended by the task force on climate related financial disclosures the first G20 country to do so second we're implementing a new green taxonomy robustly classifying what we mean by green to help firms and investors better understand the impact of their investments on the environment and third to meet growing investor demand for projects that can achieve environmental and climate goals in the UK next year we will issue our first ever sovereign green bond the first in a green curve of new issuances these are important steps all designed to enable the public and private sectors to work together with common purpose to deliver the transition to a net zero world so thank you for everything you're doing on the road to COP26 good luck with your discussions over the summit and I look forward to hearing your thoughts and views about how we can go further together thank you well what a day it has been over the past eight hours we have heard from financial leaders on the crucial role of finance that finance will play in transitioning the global economy to a climate resilient future most importantly tangible actions and policies have been announced which will pave the way to net zero just a moment ago we heard from the Chancellor Rishi Sunak on the UK government's plans from the introduction of a new green taxonomy to help firms and investors understand the impact of their decisions on the environment to the very exciting announcement of the sovereign green bond in 2021 and of course the plan to set the UK on a path to mandatory TCFD for all listed corporates and financial firms by 2025 in doing this the UK will become the first G20 country to take this very important step earlier on in the day we also heard from Mark Carney on his work to build a framework for the financial services industry ensuring every financial decision takes climate change into account already much progress has been made in getting this framework off the ground with the focus set on the three Rs and one M reporting risk management returns and markets to mobilise and if anyone can turn the M into a fourth R we'd love to hear from you on a serious note I would strongly encourage you to read the private finance strategy for COP 26 that Mark launched this morning which you can find on the summit website there are clear actions in here for all players across the financial services value chain supporting this we heard from Christine Lagarde and the IMF who backed the need for financial firms to provide more complete climate disclosures and the governor of the Bank of England Andrew Bailey announced the much anticipated launch date of the climate stress for June 2021 the objective of these tests will be to predict the resilience of UK financial institutions over a 30 year period against three potential climate scenarios we very much look forward to seeing the results of these tests later next year and of course to other regulators around the world taking similar steps from the buildings panel it was wonderful to hear from Rianne Marie Thomas a minister Quarteng about how the practical realities of Pacific transactions are being worked through between financiers and governments and it was great to see asset owners setting clear targets for the transition with the United Nations asset owners alliance setting out their approach to thermal coal one of the biggest obstacles to our objective of one and a half degrees finally we have heard from David Blood and the portfolio alignment team who published their new report on measuring portfolio alignment this should be mandatory reading for all asset managers here in the city and around the world forward facing metrics are critical if we are going to proactively allocate capital to those driving the transition and to send signals to those lagging behind to say the least it has been a busy day the actions policies and reports announced our testament to the commitment of our sector to play its part in the green transition competitors have become allies proposals have become policies and we are proving to the rest of the world the strength of the financial system when we work together and the city of London is ready to lead the way but this is only day one there is much more work to be done so without wanting to keep you any longer may I say a huge thank you to all our speakers today and to all of you for joining us I very much look forward to seeing you again bright and early at 9 a.m. GMT for day two of the green horizon summit thank you