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Illustration: Aïda Amer/Axios

The world's growing efforts to limit climate change will have far-reaching impacts for financial markets, and the groundwork for that push is being laid right now.

Why it matters: As more governments implement climate change regulations, trillions of dollars are going to flow towards clean energy and climate-friendly technologies, affecting significant portions of the global financial industry.

Related trend: Governments and the private sector are increasingly crafting policies to force better disclosure of how climate change creates risks for the financial sector.

What's happening: A White House executive order issued last week is aimed at launching or expanding efforts to stitch climate-related financial risks into regulation and supervision.

  • That was followed by an announcement from the Bank of England signaling that it would shift purchases it makes in financial markets toward companies doing the most to fight climate change.
  • The BOE's move is expected to be the start of a global effort by central banks to influence the financial services industry.

By the numbers: Major banks and asset managers are stepping up climate finance in response to both investor pressure and expanding market opportunities to commercialize increasingly competitive low-carbon products.

  • For instance last month JPMorgan Chase pledged to "finance and facilitate" $1 trillion worth of climate efforts over the next decade and Bank of America similarly set a target of $1 trillion in climate finance through 2030.
  • An International Energy Agency analysis last week suggests that to radically re-orient global energy systems on a pathway to net-zero emissions by 2050 annual energy sector investment would have to "surge" to $5 trillion annually by 2030.

What we're hearing: "One of the things that we’re seeing is that the financial industry is organizing itself for net-zero [carbon emissions by 2050]," former Bank of England and Bank of Canada leader Mark Carney told Axios.

The big picture: Carney is a leading figure overseeing the transition from the financial industry's largely agnostic-about-climate past to its climate-priority future.

  • He's a United Nations special envoy on climate finance and an adviser on these topics to the government of the United Kingdom, which hosts a critical UN climate summit late this year in Glasgow, Scotland.
  • Carney's a key organizer of the recently launched Glasgow Financial Alliance for Net Zero, a wide-ranging network of banks, asset managers, investors and insurers with 160-plus members that organizers say are responsible for over $70 trillion in assets.
  • And Carney told Axios there remain "a number of major institutions and geographies" he's hoping sign on ahead of the UN summit.

What it means: "What we are looking to do is make sure that the plumbing of the financial system is ready and supportive of this transition," said Carney, who is also head of ESG at Brookfield Asset Management.

  • That means both growing investment in clean technology, but also financial sector policies that urge polluting companies they finance and invest in to take tangible steps to get cleaner.
  • "We want a system where it makes sense to invest in or lend to a company that has high emissions today but is investing in order to get those emissions down," Carney added.
  • "We don’t want binary system where it’s pure green or nothing."

The bottom line: "When society values a certain outcome — in this case addressing climate change, getting to net-zero, focusing on that, public policy is oriented in that way, consumers start to consume in a certain direction — that flips a risk into a huge opportunity," Carney said.

Go deeper

Updated May 21, 2021 - Axios Events

Watch: A conversation on investment in renewable energy

On Friday, May 21, Axios climate & energy reporter Andrew Freedman and energy reporter Ben Geman unpacked the shift to wind and solar jobs, the recent spike in private equity investment, and the impact on local communities, featuring Sen. Chris Coons (D-Del.) and WeSolar founder Kristal Hansley.

Sen. Chris Coons discussed how policymakers are supporting the transition to clean energy and creating new initiatives around meeting climate goals.

  • On bipartisan support for the Financing Our Energy Future Act: "It takes an obscure capital formation tool...and makes it available to renewables. It actually would be one of the biggest new capital access opportunities for renewables in our tax code in a long time because it would be permanent."
  • On the proposed Civilian Climate Corps as a new channel for the future of green jobs: "It will create great jobs for young Americans serving our country, doing some of the hard work...all over our nation that we need to be prepared for climate resiliency and to give a new generation of Americans an opportunity."

Kristal Hansley unpacked the community solar industry, its potential to open up the solar energy market, and solutions it presents around accessibility.

  • "Only about 20% of American households have access. You have to own the roof. You have to be able to tap into a loan and have the credit score to have the approval for a loan...[Community solar] means that underrepresented communities, minorities, Black populations, front line communities that deal with the threat of climate change can now also be a part of this just transition."
  • "I think it's very friendly as it relates to renewables...Until we can really say that we're allies, I think we want to see the legislation. It's not just one house or one party...It really would take the entire country to champion the solar industry as well as the community solar sector within that space."

Axios Senior Director of Strategy Jordan Zaslav hosted a View from the Top segment with Facebook's Head of Renewable Energy Urvi Parekh discussed expanding the clean energy job market and Facebook's environmental impact report.

  • "It provides a template for states to think about what could be the impact of attracting companies who have 100% renewable energy commitments and seeing pathways that other states have taken to bring these jobs into their backyards...It should remind cities and in different states is that customers really do want renewable energy."

Thank you Facebook for sponsoring this event.

Ben Geman, author of Generate
May 24, 2021 - Energy & Environment

How Gina McCarthy reads the climate landscape

Gina McCarthy. Screenshot "Axios on HBO"

Gina McCarthy, President Biden's top domestic climate official, hasn't forgotten Big Oil's past funding of climate denial groups, but she now sees an evolving industry.

Driving the news: Axios' Mike Allen, interviewing McCarthy for "Axios on HBO," asked if Big Oil is an ally or an enemy in the fight against climate change.

Ben Geman, author of Generate
May 24, 2021 - Energy & Environment

The key takeaways from G7 nations' pledge to end state funding for coal

Photo: Julian Stratenschulte/picture alliance via Getty Images

G7 environment ministers have pledged to move toward the "absolute end" to financing international development of coal-fired power plants by the end of this year.

Why it matters: Their joint communique Friday is a stark statement about how they view the future of the world's most carbon-intensive fuel.

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