Climate change, the Paris Agreement and the future of banking and financial services

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JLL’s Dan Probst and Sarah Nicholls joined world leaders and experts from the private and public sectors at the United Nations climate conference – known as COP21 – in Paris in December, and blogged about their experiences here. Below, Sarah discusses the COP21 outcome – known as the Paris Agreement – and what it means for the banking and financial services industries.

It’s easy to understand the basic premise of the Paris Agreement: 195 nations have committed to limit global temperatures from rising above 2 degrees Celsius relative to pre-industrial levels. But determining what the Paris Agreement means for your business is more complex – especially in the banking and financial services industries.

Luckily, we’ve broken down the key points for you:

Why is climate change a concern for the banking and financial services industries?

Climate change isn’t just a problem for the environment – it’s also disrupting the world of investment. Physical assets – particularly real estate assets – are more susceptible than ever to the ravages of extreme weather.

However, it’s not just your real estate portfolio that’s at increased risk – it’s also important to consider the impact of climate change (and environmental policy) when you’re investing your capital. Investing in fossil fuels, for example, is now riskier than ever before – especially in light of the Paris Agreement’s commitment to reduce greenhouse gas emissions worldwide by 2020.

What impact will the Paris Agreement have on the banking and financial services industries? 

While the Paris Agreement has many implications for the business community, for banking and financial services it’s useful to focus on the role that the sector will play in achieving the Agreement’s core objectives. For example, demand for capital – especially in the clean-energy sector – is expected to increase significantly as part of the transition to a low-carbon economy.

Public-private partnerships will also become more important than ever before, as the private sector will be called upon to finance a wide range of post-Paris Agreement innovations. Banking and financial services firms therefore have an important opportunity to contribute to the success of the Paris Agreement – by funding clean-energy solutions and driving innovations in the marketplace.

What can I do to help my business navigate this post-Paris Agreement world? 

For those in the banking and financial services industries, there are two crucial calls-to-action:

  • First, start thinking about your assets – both physical and financial – in terms of resilience. Are your investments prepared to weather a major catastrophe? Do you have processes and procedures in place to help you manage your investments in a time of crisis? In the event that an emergency occurs, what is your plan for recovery? Taking the time to think through these questions and create a plan of action is the first step.
  • Secondly, be on the lookout for opportunities to invest in clean-energy technologies and innovations. The potential payoff is significant – for both the bottom line and your brand. Even better? The benefits that clean-energy investment bring to the environment.

Interested in learning more about what the Paris Agreement means for you and your business? Contact Sarah Nicholls.

Nicholls, SarahSarah Nicholls leads JLL’s Global Sustainability (GS) team. Sarah holds responsibility for JLL’s sustainability and integrated reporting, greenhouse gas emissions measurement, corporate sustainability governance, strategy and stakeholder engagement. As the inaugural GS team member, she serves on the firm’s Global Operating Board alongside other corporate function leaders. She is currently pursuing a master’s degree with the University of Cambridge’s Institute for Sustainability Leadership.

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