Welcome back to the Climate Nexus finance newsletter – a regular update that looks at the big stories and players at the intersection of climate change, finance, regulation, and energy, with tips for the week ahead.
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Hilary Clinton talks insurance
Creative insurance solutions are drawing the attention of Hillary Clinton, who called for insurance industry reforms at a COP28 panel on Sunday. Clinton serves as an ambassador for a foundation pioneering parametric insurance, a form of coverage that pays out automatically when a disaster meets a predetermined threshold rather than trying to calculate claims post-disaster. While parametric insurance systems mainly play out in developingcountries, insurers and policymakers need to look towards innovative solutions like these to solve our growing insurance crisis.
As billion-dollar weather disasters become more frequent, Americans are struggling to afford skyrocketing insurance premiums, with homeowners in Texas seeing a 22% increase in rates since the start of 2023. Sometimes the economic hardship is too much to handle, forcing policyholders to fall behind on loan payments or default on mortgages altogether. Defaults could spell trouble for the banks, as could the holding of uninsured or underinsured mortgage assets.
Also at COP
Barbados Prime Minister Mia Mottley advocated for global financial reforms to aid developing countries, resulting in key commitments by major nations and lenders to expand the use of climate-resilient debt clauses, allowing pauses in debt repayments after extreme weather events. Additionally, Japan and France supported the African Development Bank’s access to the International Monetary Fund's "special drawing rights" to boost climate-related investments in Africa. Several multilateral development banks also announced plans to more aggressively leverage their balance sheets for climate-related investments.
Major banks and corporations backed the US-led Energy Transition Accelerator for cleaner energy in developing countries, and the top three carbon credit certification bodies announced a collaboration to improve market standards.
A joint declaration by multilateral development banks and development finance institutions was launched, involving the creation of a global task force to boost sustainability-linked sovereign financing for nature and climate.
There was a strong push for mobilizing private finance towards adaptation and mitigation in emerging markets, highlighted by a collaborative effort between Nordic countries and the US.
Mark Carney’s dirty firm
A new report reveals that Brookfield, a major private equity firm, greatly understates its carbon footprint, with its fossil fuel investments alone generating a staggering 159 million metric tons of CO2e annually—nearly 14 times higher than their disclosed emissions.
Despite Brookfield's ownership of Oaktree Capital, a significant contributor to these emissions, Oaktree's emissions data is conspicuously absent from Brookfield's 2021 and 2022 sustainability reports. This casts doubt on Brookfield's net-zero commitment and the credibility of Mark Carney, who champions financial sector climate commitments through his role leading the net-zero association GFANZ while simultaneously serving as Chair of Brookfield Asset Management. It underscores the pressing need for regulatory action to ensure transparency and accountability in climate disclosure within the finance industry.
Fed under pressure
Climate activists are increasingly targeting the Federal Reserve, which is lagging its European counterparts in hardening the economy against the impacts of climate change. Once-staid Fed meetings and member appearances are now regularly disrupted by climate protesters, notably Climate Defiance. Advocates have long called on the Fed to use things like stress tests and raising capital requirements to guard against climate-induced bank failures, which they believe haven’t materialized at the pace necessary to address accelerating climate risks. Now, high interest rates hobbling clean energy growth are reviving calls for central banks worldwide to help engineer low-interest loans for the renewables industry.