Yesterday (October 27) AXA received the top award in the “Best Investor Climate-Related Disclosures” contest organised by the French Minister of the Environment. This award confirms the relevance of initiatives in the area of climate finance.
Can climate change have material impacts on our investments? How do we identify and manage them ? These are the questions that the French government is asking AXA to report on, as well as all other investors based in France, starting this year. How did we answer this call?
The COP21 “Paris agreement” put investors at the forefront by striving to align financial flows with a “low-carbon” future. It is against this backdrop that France chose to develop this new piece of regulation, named “article 173”, which is an investor-focused subset of a broader “Energy Transition” law. In doing so, France became the first country to request that investors disclose advanced climate risks analyses, in an effort to encourage financial markets to fully integrate climate risks into financing.
AXA had already taken strong initiatives such as divesting from coal-related assets and measuring the “carbon intensity” of its investments. However, article 173 takes the debate to a more complex space by requiring investors (both asset owners and asset managers) to initiate a deeper analysis of “carbon-related” risks. These include reporting on how we integrate sustainability and climate-related considerations into our investment analyses, how we may be exposed to “carbon” risks (eg. as portfolio companies adjust or fail to adjust to a low-carbon economy), whether we conduct “carbon stress tests” on our assets (eg. in case of a high price on carbon), or even if and how we measure our investments’ contribution to energy transition scenarios. This information must be included in our main annual financial reporting.
To test answers to these questions ahead of the “article 173” regulatory deadline at year-end, we have decided to take part in an international “award” organized by the French government and designed to foster innovative reports. What have we found out?
We have engaged substantial work in order to develop a rigorous analysis. This has involved tapping into the expertise of different teams – Group Investments, Group Risk Management, AXA IM and Group Corporate Responsibility. We are treading new transversal and shifting grounds, with more open questions than answers. What we have started to learn is that there is no magic “climate KPI”, no silver bullets to understanding and measuring the nature of climate-related financial risks. Rather, a patient and tailored analysis of our investments, by asset class, by region, by industry, is what is needed. The full report can be accessed here: https://www.axa.com/en/about-us/low-carbon-investment
AXA’s submission received the top award. The international jury, which featured representatives from French and EU Public Administration, Members of Parliament, Investor Groups and NGOs, particularly praised AXA’s work on risk analysis as well as the overall consistency of our award submission.
This achievement is consistent with our vice-chairmanship of the FSB Task Force on Climate-related Disclosures (TCFD), also initiated during COP21 by the G20.This task force aims at making the principles of Article 173 implemented by all companies across G20 countries in order to help investors better understand how the strategy of the companies they invest in take into account climate-related risks. Both the TCFD and the Award on Investor Climate-related Disclosures embody this approach, which ultimately can drive us towards a green, inclusive and sustainable global economy.
Green Tech Start-Ups: Are they the Future?
Endless innovations are occurring in green companies, reinventing the industries they belong to. Gradually, they are beginning to amass more success and popularity. Consequently, these factors serve as a good indicator for green technology businesses, and their development must begin somewhere.
Green tech start-ups boast a wide array of opportunities for the economy and environment, while boosting recruitment openings with valuable services. While the technology industry is littered with high revenues and competition, the green tech start-ups are the clear sign of a cleaner future.
Fulfilling a Genuine Need
Many tech companies will market themselves as the ultimate tech giants to shift stock and make profit. As they all vie for attention through warped corporate rhetoric, there is only one ethical winner; the start-up green tech company.
Some argue that mainstream tech businesses have grown far too big, branching out into other industries and standing between the consumer and practically everything they do. However, green tech start-ups go beyond the shallow ambitions of a company, answering a call to sincerely help the customer and climate in any way they can. Of course, this is an attractive business model, putting customers at ease as they contribute to a humanitarian cause that is genuine through and through.
After all, empathy is a striking trait to have in business, and green tech start-ups maintain this composure by their very nature and purpose.
Despite the pursuits for clean energy still needing more awareness, green tech is an area that is ripe for contribution and expansion. There’s no need to copy another company or be a business of cheap knockoffs; green tech start-ups can add a new voice to the economy by being fresh, fearless and entrepreneurial.
Technology is at its most useful when it breaks new ground, an awe that eco-friendly innovations have by default in their operations. Of course, green tech start-ups have the chance to build on this foundation and create harmony instead of climate crisis. Ultimately, the tech advancements are what revolutionise clean energy as more than an activist niche, putting theory into practice.
Despite the US gradually becoming more disengaged with green technology, others such as China and Canada recognise the potential in green technology for creating jobs and growth in their respective economies. The slack of others spurs them on, which creates a constant influx of prospects for the green tech sector. Put simply, their services are always required, able to thrive from country to country.
A Fundamental Foresight
Mainstream technology can seem repetitive and dull, tinkering with what has come before rather than turning tech on its head. Since 2011, technology has been accused of stagnation, something which the internet and petty app services seem to disguise in short reaching ideas of creativity.
However, green tech start-ups aren’t just winging it, and operate with a roadmap of climate change in the years ahead to strategize accordingly. In other words, they aren’t simply looking to make a quick profit by sticking to a trend, but have the long-term future in mind. Consequently, the green tech start-up will be there from the very start, building up from the foundational level to only grow as more and more people inevitably go green.
They can additionally forecast their finances too, with the ability to access online platforms despite the differing levels of experience, keeping them in the loop. Consequently, with an eye for the future, green tech startups are the ones who will eventually usher in the new era.
Green Companies Find Innovative Ways to Generate Capital to Expand
Green business is a booming opportunity for shrewd, environmentally conscious entrepreneurs. According to a white paper by the Association for Enterprise Opportunity, green businesses in the food service industry and other verticals are growing up to seven times faster than their conventional competitors.
“Green market segments in the United States are growing fast. Growth rates of “green” segments are outpacing conventional segments in every industry where we collected data – for example, over the decade ending in 2011, the U.S. organic food category grew at a rate of 238% compared to 33% growth for the overall food market, and most forecasts indicate that the shift to green will only accelerate across industries. Green business opportunities will be even more prolific over the next few years, because millennials are placing greater emphasis on environmentally friendly solutions.”
Unfortunately, many promising green companies are struggling to generate revenue. They need to be more creative to find funding opportunities in 2017.
Funding challenges green businesses face
After the financial crisis struck in 2008, banks and other traditional lending institutions became much more conservative about lending money. Many green businesses turned to grants provided by the Obama administration for funding. However, most of those grants have since been suspended under the Trump administration. Congress had difficulty resuming them, because most of the green businesses that were funded had a lower survival rate than the national average.
Without funding from either traditional banks or government grants, green businesses were forced to look for other financing options. Here are some options they have available.
Other lending institutions
While corporate banks are less likely to finance new businesses these days, many smaller financial institutions are more likely to assume the risk. Specialty lending institutions and credit unions with a strong social mission are often willing to invest in promising green businesses.
However, these lenders still require perspective borrowers to submit formal business plans and proposals on how they will use their funding. Too many of them have been burned by poorly managed green companies, so they must be cautious with lending to them.
Many other countries are more invested in green development than the United States. Companies with a presence in Norway or other European countries should consider seeking loans from lenders in those jurisdictions, such as Lånemegleren.
Green bonds are new financial instruments that have been developed specifically for financing green businesses. The Climate Bond Standard introduced a number of policies to ensure green bonds would be safe for investors and a reliable funding opportunity for green businesses around the world. By balancing the needs of both stakeholders, they have helped facilitate green financing.
The market for green bonds nearly quadrupled between 2013 and 2014. It rose to over $100 billion in 2015.
Green entrepreneur should find out if their business model is compliant with the climate Bond standard. They may be able to tap a growing source of funding.
Crowdfunding is another very popular way for all types of businesses to generate capital. Green businesses tend to benefit more than most other organizations, because crowdfunding investors tend to be more socially conscious. They are more eager to invest in companies that align with their outlooks on social causes. Since consumers are becoming more concerned about climate change and environmental preservation, they are more willing to invest in green businesses.
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