INTERVIEW / As the G20 opens in Hamburg this week, Europe needs to reflect on how it can push the global green finance agenda without the United States on board, said Christian Thimann, head of sustainability at French insurance group AXA who chairs an EU high-level group on sustainable finance.
With the United States pulling out of the Paris Agreement, Thimann said Europeans will have to consider unilaterally implementing the recommendations of the global Task Force on Climate-Related Financial Disclosures (TCFD), chaired by US tycoon Michael Bloomberg.
“If we had a G20 consensus with the United States adopting the Paris Agreement, this would have made the level playing field much easier towards compulsory implementation [of the TCFD recommendations] across the G20,” Thimann told EURACTIV in an exclusive interview.
“Now, we have to see what happens at the G20 and whether it endorses the recommendations or not,” Thimann said.
But assuming the US confirms its opposition to climate action at the G20, Europeans “have to see how to best to transpose [the TCFD recommendations] in a way that doesn’t disadvantage European companies in terms of commercial risk, reporting burden and legal risk vis-à-vis US competitors,” he said.
The TCFD published its final recommendations last week, urging companies to report on how they manage the risks to their business from climate change and greenhouse gas emission cuts.
If the task force recommendations were followed through, it would divert trillions of dollars away from fossil fuels, as investors pull their money out of risky polluting industries and flee for the long-term safety of clean technology assets like renewables energies.
Of course, some industrial sectors will be impacted more directly than others if the TCFD recommendations are applied, Thimann said, citing investments in coal, oil and gas, and the energy sector – but also in transportation, chemicals, and heavy industry.
But policymakers have a strong interest in pushing climate-related disclosure for companies because it provides investors with better information about risk and allows a better steering of the economy, he argued.
At EU level, the European Commission’s high-level group on sustainable finance is currently looking at the pros and cons of slapping “penalties” on fossil fuel assets that may end up stranded as investors shift to low-carbon portfolios, Thimann told EURACTIV.
“We call it the ‘brown penalising factor’, as opposed to the ‘green supportive factor’. And indeed it merits consideration when the risks are higher, not just for the financial sector,” said Thimman who chairs the EU high-level group.
“Think of stranded assets: maybe we are valuing oil reserves today that the world will never exploit and will therefore lose value. So we may be overestimating their financial value, and ignoring a risk which could be taken into account.”
The group will present its interim report at a public hearing on 18 July, where it will be open to comments from interested parties. The final report, complete with policy recommendations, is expected in December.