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How tech-enabled finance will accelerate the transition to net zero carbon emissions

On the path to global net zero carbon emissions, the finance industry is a key driver while technology is an enabler of sustainability. To make meaningful progress to mitigate climate change, the global finance industry needs technology to mobilize investments and quantify climate risk. Financiers also must adopt collaborative, secure and trusted data and skills platforms. Together, the public and private sectors can accelerate investments in climate resilience and sustainable infrastructure through technology-enabled platforms.

Investment in infrastructure of USD $6.9 trillion per year is needed to meet global development needs through to 2030 (OECD[i]) with developing countries accounting for the majority of these investments. This infrastructure needs to be designed, built and operated in sustainable ways to secure a net zero future for the world and resilience to climate change. To achieve this goal, there must be an open and collaborative approach to data sharing and innovation from trusted sources enabled by secure, yet open technology platforms. 

Exponential and innovative technologies are essential to accelerate climate finance investment and to enable new digital marketplaces connecting global participants in the financing value chain. Digital platforms will enhance process efficiencies and data insights, reducing risks and complexities in the value chain, whilst creating equitable benefits and value add for all participants. Technology specifically is an enabler of measuring and analysis impact of climate and values of assets. Key benefits of digital finance platform solutions include intelligent processes, standardisation, increased trust and transparency, reduced duplication, and advanced analytics, security and auditability and enhanced reporting. The pathways to enabling technology to mobilize investment and achieve net zero also involves improving the quantification, qualitative analysis and comparability of climate-related financial risk and the transparent disclosures of those risks and the opportunities.

Climate risk analytics, due diligence and climate resilience  

The role of technology platforms in making climate impact is intrinsic to global investment decisions driving positive change for communities, investors and business. Financiers are responsible for safeguarding business interests and minimizing climate-related financial risk, improving decision-making, defining and delivering financial strategy to reduce carbon emissions. Assessing climate risk and financial impacts is complex and requires the right data, tools, and skills to derive actionable insights. Finance practitioners encounter challenges with translating data into meaningful insights and are unable to provide the analysis needed to support near real-time decision making.

In most cases, existing finance and business decision processes are manual and laborious, relying on disparate systems or incomplete datasets. Technology enhances climate risk analytics through dynamic data capture and automated, intelligent, faster processes. Thereby improving climate and ESG impact assessments aligned to standardized KPIs, benchmarks and performance monitoring allowing consistent climate-related financial risk disclosures.

For example, The Climate Service alliance supports financial institutions and corporations to better measure and quantify climate-related risks. As part of the alliance, the companies have developed the TCS Climanomics® platform. By monetizing climate risks, the platform allows organizations to express the impact of climate change in terms that can form the foundation for investment decisions.

Financing renewable energy and sustainable infrastructure with digital marketplaces

For projects as small as community rooftop solar panels and as big as large-scale international infrastructure projects, sustainable finance is a challenge that secure and scalable end-to-end digital technology platforms can help address. Digital platforms that serve as online marketplaces can connect climate entrepreneurs and funding, institutional investment with well-structured projects, and facilitate public and private financing for sustainable infrastructure. These types of end-to-end digital platforms can speed up highly manual and inefficient documentation processes, deal flows, and collaboration across ecosystems partners with added transparency.

A recent example of this type of digital platform is Raise Green’s Originator Engine. The software solution is designed to empower entrepreneurs, regardless of experience or income, to start their own solar energy businesses. The new digital platform connects customers, investors, and ecosystem partners to help navigate the process of securing financial investment for new businesses in the solar energy sector.

Shaping sustainable finance policy and skills development

The lack of global consistency, incomparable and differences in sustainability standards due to numerous existing frameworks is challenging for finance practitioners as preparers of climate related financial disclosures and reviewers (e.g., investors, regulators). The latest global financial regulatory updates on climate reporting and role of technology call for the need for financiers to constantly grow skills and training programs to deliver long term industry change to build cleaner and resilient green economies. Technology can help provide transparency in sharing real-time changes in the latest global policy and regulatory developments in sustainable finance, as well as relevant climate technology and analytics. By upskilling finance professionals to better understand technology tools, information analysis, ESG impacts and sustainability standards, the finance industry builds capacity at large to improve consistency in decision-making and disclosures that could align with the Green Finance Education Charter, backed by BEIS.[ii]

Overall, technology can be a catalyst in the toolbox of global financiers to accelerate action and progress on sustainability goals by mobilizing investments, quantifying climate change risk, digitizing the marketplace for financing sustainable infrastructure, and equipping finance professionals with the skills and digital tools of a sustainable future.

[i] http://www.oecd.org/finance/Sustainable-Infrastructure-Policy-Initiative.pdf

[ii] https://www.youtube.com/watch?v=wYdqsRt5heI

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Murray Simpson

Murray Simpson

Global Lead, Sustainability, Climate & Transition

IBM

Member since

30 Apr

Location

London

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This post is from a series of posts in the group:

Going green

Assessing the carbon footprint of fintech and looking to the future.


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