IKEA Foundation backs sustainable finance action
Providing a north star for sustainable finance
Dr Ben Caldecott, Director of Oxford Sustainable Finance Group, and Lombard Odier Associate Professor of Sustainable Finance, University of Oxford: To tackle the great environmental challenges facing humanity we need to make sure that every single financial decision takes account of the environment.
Elizabeth McKeon, Head of Portfolio, Climate Action, IKEA Foundation: We have less than 10 years to reduce greenhouse gas emissions and temperature growth to 1.5 degrees, and we cannot make it without the intervention and change within the finance sector.
Dr Ben Caldecott: This is incredibly important so important and this needs to happen very, very quickly.
Elizabeth McKeon: To influence decision-making we need higher quality reliable data. The IKEA Foundation is proud to partner with the Oxford Sustainable Finance Group on four interrelated projects
Dr Ben Caldecott: The spatial finance initiative is using satellite imagery, machine learning, to derive insights into what's going on in some of the most polluting and environmentally unsustainable sectors.
Elizabeth McKeon: This is going to make it possible for companies and portfolios to understand and address risk where it occurs.
Dr Ben Caldecott: To get capital to flow into solutions to climate change interest rates will need to be higher for things that are polluting and they need to be much lower for things that are sustainable.
Elizabeth McKeon: The project is going to track changes in the cost of capital and use these insights to influence policy, campaigns and decision-making so that we can get to our goals.
We all recognise that while financial institutions have been attempting to increase their climate action through engagement, the current strategies are not achieving what we need at the pace or scale that is required.
Dr Ben Caldecott: What we're doing through the future of engagement project is really trial or test scale new forms of really transformational engagement and stewardship across the financial system. Part of that is what we call place-based engagement, so really focusing on the changes that we want to see in specific parts of the world on specific environmental challenges.
Elizabeth McKeon: We believe it takes unprecedented collaboration to reach our climate ambitions and that means that we need public sector officials to be adequately informed and have the capacity to know how to make good regulations.
Dr Ben Caldecott: What we're doing with the Academy is targeting those groups, particularly in developing and emerging economies, and providing that training, those courses with free and heavily subsidised places. What we will hope to become is a very significant agile resource for those communities around the world.
This partnership and funding will enable us to significantly scale-up world -eading research on data and transparency in the global financial system, as well as to significantly grow our capacity building and training capabilities to support government officials, supervisors, regulators and civil society organisations around the world.
Elizabeth McKeon: We need private sector and corporate leaders, we need civil society, we need government officials to recognise and rise to the challenge of ambition, and we also need academic institutions to provide the north star, the compass so that we're sure we're getting the best information possible to help benefit the people on this planet.
Dr Ben Caldecott: This is not about slightly improving things it's about really going after the big things that can really make a difference.
Grant will support four projects
The IKEA Foundation is supporting, with a grant of £4.5 million over three years, four key University of Oxford Sustainable Finance Group projects, aimed at making a significant contribution to aligning finance and the financial system with the goals of the Paris Agreement.
To ensure finance flows into sustainable projects and industries – and deliver on the Paris goal of keeping global temperature rises to 1.5°C – financial institutions need to understand the risks and impacts of their investments and the implications for the bottom line.
Dr Ben Caldecott, director of the Oxford Sustainable Finance Group, insists action is urgently needed. He says, ‘We need to transform financial decision-making so that the capital and financial services needed to deliver global net-zero by 2050 are actually provided. We have very little time left and that’s why we’re working on what we think could be transformative interventions.’
Liz McKeon, IKEA Foundation’s head of climate action, says, ‘We have less than 10 years to reduce greenhouse gas emissions and temperature growth to 1.5°C and we cannot make it without interventions from and change within the finance sector.’
The funding will allow the Group to undertake four major projects which, combined, will help unlock non-linear change:
- The Spatial Finance Initiative: Poor data availability and quality makes it difficult for the financial sector to measure and manage climate and environmental risks and externalities. SFI will publish consistent, comprehensive and accurate asset-level data for the most polluting sectors. This will make climate and environmental factors facing assets, companies and portfolios completely transparent.
- The Public and Third Sector Academy for Sustainable Finance: Public sector and civil society organisations lack expertise and capacity in sustainable finance, which prevents them from designing effective policies, regulations and campaigns. The Academy will give governments, regulators, central banks, charities and philanthropy the knowledge, networks and skills to shift tens of trillions of dollars of capital away from unsustainable activities to those aligned with the Paris Agreement.
- Energy Transition Risk and Cost of Capital Project: To support the transition to net zero, the cost of capital for clean investments must come down while the cost of capital for polluting investments must increase. This project will track changes in the cost of capital for polluting companies and the factors which influence these changes. Its insights will inform policies, regulations and campaigns that could transform the energy sector.
- The Future of Engagement Project: While financial institutions are using engagement to attempt to deliver climate action, current strategies are not achieving the scale and pace of change needed. This project will develop, pilot and scale new and more impactful forms of financial institution engagement and stewardship.
‘We need the private and corporate sectors, civil society, and government officials to recognise and rise to the challenge of the climate crisis. And we also need academic institutions, like the University of Oxford, to provide the north star – the compass, so that we’re getting the best information possible to ensure our actions benefit people and the planet,’ states Liz McKeon.
Dr Caldecott concludes, ‘This partnership and funding will enable us significantly to scale-up our world leading research and teaching. This is about going after the big wins, not slight improvements and incremental change.’
About the Sustainable Finance Group
Established in 2012, the Oxford Sustainable Finance Group works to align finance with sustainability. The Group, based at the University’s Smith School of Enterprise and the Environment, is multidisciplinary and works globally across asset classes, finance professions, and with different parts of the financial system.
It is uniquely placed by virtue of its scale, scope, networks, and leadership to understand the key challenges and opportunities in different contexts, and to work with partners to ambitiously shape the future of sustainable finance.
Led by Dr Ben Caldecott, the centre has pioneered research on, among other things, stranded assets and spatial finance, and works across many of the key areas of sustainable finance, including risk and impact measurement, supervisory and policy development, and innovative financing mechanisms.
About the IKEA foundation
The IKEA Foundation improves the lives of children living in poverty by supporting programmes that help families afford a better everyday life and protect the planet.
More than 50% of the total grants each year focus on climate, building an ecosystem of
partners to reduce greenhouse gas emissions and make sure everyone benefits from the transition to a zero-carbon economy. They focus on influencing governments, businesses, finance and people to change behaviours and ways of working that accelerate global warming.
The IKEA Foundation is funded by INGKA Foundation, owner of the Ingka Group of companies. The IKEA Foundation is independent from the retail business with a sole focus on creating brighter lives on a liveable planet through philanthropy and grant-making.