A seat for everyone is necessary at the climate action table. Sustainable Finance will fail in its mission if it continues to confine high-emitting industries to the sidelines.
This research project investigating the topic of transition in detail, more specifically that of brown industries, with the aim of providing definition, assessment methods as well as exploring relevant financing tools.
Our methodology frames a change management model that differentiates brown companies into groups depending on whether they need to transform, shrink or shut down. Using case studies, we examined how the 5 transition levers we identified were actioned by companies across the mining, cement, shipping, power or aviation sectors (e.g. Lafarge Holcim, Maersk, Ørsted Engie, Neste).
We also identified eligibility pre-requisites to be able to draw red-lines and provide structuring guidance for transition finance instruments. We believe that KPI-linked instruments are best suited for transition because of their “skin in the game”, material, holistic and forward-looking features.
NATURAL CAPITAL FINANCE ROLE IN THE TRANSITION
"Nature-based solutions are gathering momentum and appear to be at a similar stage as renewable energies were 15 years ago.
Capital markets start to discover its unraveling potential and benefits."
LOW-CARBON TRANSITION AGENDA:
AVOIDING SOCIAL QUICKSAND
"To mitigate the social effects of a CO2 tax, the most efficient solution is to redistribute explicitly the proceeds of the tax to the population, specially to the low-income people [...] in a way which is completely decorrelated from their energy consumption"
UK GREENER JOBS ALLIANCE AND A JUST TRANSITION
“Workers and communities should not pay the price of transition and ensure that they are protected in terms of their livelihoods and future job prospects."
INTENSITY TARGETS ARE FLAWED ON A PLANET THAT WORKS ON ABSOLUTES
"CCS and/or other means of mitigating and offsetting emissions will most likely need to be part of the solution. But there is no getting away from the need to lower fossil fuel use which will inevitably entail big changes in business models."
WALKING THE TALK: TRANSITIONING BROWN INDUSTRIES TO GREEN
"Past green bonds issuances have been heavily biased toward energy and buildings sectors [...] We need to activate those segments of the market that have remained absent but offer huge emissions reductions potential as well as nice yield. It’s easy to do some mapping: we’re talking cement and concrete, metals and mining, and private transport."
THE INSTRUMENTAL ROLE OF INDUSTRY DECARBONIZATION IN IEA'S SUSTAINABLE DEVELOPMENT SCENARIO
"The majority of the overall emissions savings (i.e. process and energy-related) are from the production of cement, iron and steel and petrochemicals; energy-intensive industries that together account for around two-thirds of total industry sector CO2 emissions today."
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Head of Center of Expertise & Innovation,
Green & Sustainable Hub, Natixis
Global Head of Green & Sustainable Finance