The ecological education platform GuerrillaVerde.ro is a partner of the Climate Change Summit, the first and largest event in Central and Eastern Europe dedicated to climate change, and brings to the public's attention a series of interviews with key guests of the Climate Change Summit, an editorial extension called Climate Change Champions Spotlight.
In the Spotlight: interview with David Carlin - Head of Risk at UNEP-FI
As the Head of Risk at UNEP-FI, you've worked extensively on climate scenarios and risk assessments for financial institutions. Could you share some insights into the key climate-related risks that the financial sector faces today, and how can these risks be transformed into opportunities for sustainable financing?
Climate change and the net-zero transition present a variety of risks to financial institutions. These can manifest in the traditional financial risks of credit, market, and operational risks. Here are a couple examples: An oil company may see revenues decline and compliance costs increase, making it less likely to repay its loan (transition credit risk). A coastal property may lose value due to higher insurance costs and expectations of worsening storms (physical market risk). However, opportunities also abound. There are huge needs for climate resilience funding and new low-carbon markets that are growing rapidly such as electric vehicles and solar power.
Can you elaborate on the significance of incorporating nature-related factors into financial decision-making and how this can drive sustainability?
Since the publication of the Taskforce on Climate-related Financial Disclosures (TCFD) in 2017, financial institutions have become increasingly aware of the financial relevance of climate change. However, only recently has the financial sector come to appreciate the tremendously important role that nature plays in our global economy. This insight has been the driver behind the disclosure guidance of the Taskforce for Nature-related Financial Disclosures (TNFD), published in September 2023. Ecosystem services provide trillions of dollars in value every year. However, these contributions from nature cannot be taken for granted. Too many nature systems are approaching dangerous tipping points. Understanding the financial scale and implications of biodiversity and ecosystem collapses is an important step in ensuring those impacts are appropriately valued by financial markets, consumers, and policymakers.
What role do you see financial institutions playing in achieving global net-zero emissions goals, and how can they align their financing strategies accordingly?
The Paris Agreement speaks about the need to make financial flows consistent with net-zero, demonstrating the central role finance plays in the global economy. It has been heartening to see net-zero commitments go mainstream within the financial sector in the past couple years. However, those commitments must be backed by ambitious and concerted actions. Financial actors need to fund scalable and affordable climate solutions that enable decarbonization. Financial actors also need to provide the capital needed to adapt to a world facing intensifying climate change.
You founded Cambium Global Solutions, which addresses pressing environmental challenges for governments, corporations, and financial institutions. Can you provide examples of successful solutions or initiatives that have effectively balanced environmental challenges with economic opportunities?
We have been fortunate to work on many initiatives that bring both economic and environmental benefits. A couple examples have included the development of a sustainable finance strategy for an investor looking to gain knowledge and exposure to green assets. The framework developed for this investor provided them with confidence that they were aligning not only to emergent regulation, but to shifting economic conditions. In addition, by funding the deployment of low-carbon energy, they were helping to decarbonize the grid and advance sustainability. In a governmental project, we helped a central bank to develop a climate stress test. Not only did the development of this climate stress test help them to identify climate-related risks in the financial system, but it also allowed them to consider transition scenarios and the opportunities they presented across different sectors.
In your opinion, what leadership qualities and strategies are essential for financial institutions and businesses to navigate climate-related challenges and seize sustainable financing opportunities effectively?
Climate change is not a trend and net-zero is not a passing fad. Climate change and the transition are fundamental changes to the operating model of the global economy. Leaders that recognize this will steer their organizations to capitalize on green policies, shifts in consumer preferences, and technological advancements. Firms that cannot upgrade to this new operating system will lose out. In this way, a climate smart strategy really means having a better model of the future than your competitors.
About David Carlin
David Carlin leads risk programming for UNEP- Finance Initiative (UNEP FI).
He has worked with over 100 financial institutions on topics of climate scenarios, climate risk assessments, and sustainability regulation. He and his team support financial actors across the world to develop best practices for managing environmental risks and identifying environmental opportunities.
He currently advises UNEP FI’s Task Force on Nature-related Financial Disclosures (TNFD) and the Net-Zero Banking Alliance (NZBA). He has also been a technical advisor to the Glasgow Financial Alliances for Net Zero (GFANZ).
He is the founder of Cambium Global Solutions, which helps governments, corporations, and financial institutions address the most pressing environmental challenges and thrive in a changing world.
He is also a contributor to Forbes, where he writes about climate change and leadership and a senior associate at Cambridge’s Institute for Sustainability Leadership (CISL)
David has worked as a Principal in Finance, Risk, and Public Policy for Oliver Wyman and in Model Risk Management for PNC Bank. His background is in quantitative modeling and decision science. He conducted research in financial decision-making at Carnegie Mellon University and graduated Phi Beta Kappa from Williams College.
The ecological education platform GuerrillaVerde.ro is a partner of this initiative and brings to the public's attention a series of interviews with key guests of the Climate Change Summit, an editorial extension called Climate Change Champions Spotlight. Interview conducted by Nicoleta Talpeș, Guerrilla Verde.