My 2022 highlights

2022 has been a year full of challenges, which in many ways surpassed those of 2021. In spite of these challenges, no year is without its highlights.

Climate. The intersection between physical and transition risks has been long ignored, so we started the year by publishing some principles for how physical and transition sources of risk could be integrated within climate risk assessments. Keeping with the risk theme, April saw the publication of The Coming Deluge, a rather aptly named analysis of the implications of scenario analysis for underwriting with UK flood example. In our industry survey on the net zero transitions in the five ‘hard to abate’ sectors we tried to understand the progress and challenges of corporates’ transitions at a sectoral scale in order to use finance as a lever for transitioning these sectors. This autumn with very mixed feelings I have also taken my first flights since the start of the COVID pandemic. On the one hand, my carbon budget clearly took a hit, on the other, it was wonderful to be back in Asia for the launch of the inaugural Sustainable Finance Advisory Panel for the Monetary Authority of Singapore. COP27 was an absolutely key moment in for the first time putting loss and damage on the agenda and agreeing an establishment of loss and damage financing facility, the importance on which I discussed at Newsnight, while not managing to drive mitigation forward (a slightly longer conversation on what went wrong and right at COP with the wonderful Matt Mace is here).

Nature. We have crowned almost three years’ worth of a work programme on understanding nature-related financial risks by publishing 5 use cases on how nature is material in financial portfolios (looking at land degradation in Brazil and the UK, water curtailment risk in East Asia, introduction of a farm to fork policy in EU, and dependencies on nature in financial indices) as well as lessons we have learned on this journey. We have also started looking at nature-related risks and opportunities for insurance underwriting. We know that climate change and nature loss cannot be addressed in a sequential or segregated manner for many reasons. One is that it would underestimate materiality of nature-related risks, over and above climate-related financial risks. Another is that it would ignore compounding effects from interactions between climate change and nature loss as well as potential synergies and cost efficiencies when addressing climate change and nature together. And that is exactly what our work on integrating climate and nature argued. Of course, no highlight of 2022 can omit COP15, which on the one hand agreed a seminal framework for conserving biodiversity and aligning financial flows towards nature protection and restoration and on the other hand failed to agree key targets for setting the scale and pace of change.

People. Kicking off a stream of work on the social aspects, we have published two reports exploring the key concepts, initiatives, and investment impacts on decent work. This paves the way for the development of a simple, robust, and transparent metric for investors to measure and report both the quantitative and qualitative information about their investment impacts on decent work.

Inevitably we will continue to work hard on bringing sustainability into economic and financial decision making so I thank you for all your support on this journey!