Märt Kivine has been appointed as the new Secretary of the Coalition of Finance Ministers for Climate Action. Mr. Kivine joins the Coalition Secretariat from the European Bank of Reconstruction and Development, where he served as a Board member. Prior to this assignment, Mr. Kivine worked in the Development Economics Vice Presidency and in the Nordic and Baltic Executive Director’s office at the World Bank. He also served as a Deputy Finance Minister in Estonia and acted as the EU Presidency’s Chief Negotiator for the EU's 2018 Budget.

The Coalition of Finance Ministers for Climate Action hosted a roundtable discussion on June 16 around the recently published Helsinki Principle 4 report, “Driving Climate Action through Economic and Fiscal Policy and Practice”, prepared under the leadership of U.S.A. and Denmark. The event highlighted the importance of robust action towards mainstreaming climate into economic and financial policies —and the potential consequences of inaction—by ministries of finance. The peer discussions centered around integrating climate change into fiscal sustainability analysis and mainstreaming climate change across public investment and asset management processes.

The event also showcased the importance of the Coalition to enhance the role of ministries of finance and why these ministries have a central role to play in unlocking the required investment and innovation to combat climate change. Country experiences were shared by Costa Rica, Denmark, Ethiopia, and Switzerland. The World Bank, International Monetary Fund, and Grantham Institute also provided key interventions throughout the event. The discussion highlighted the importance of developing a step-by-step approach to ensure steady progress and the need to raise awareness across ministries of finance about issues discussed in the report.

As immediate next steps, the work will continue under Helsinki Principle 4 on modeling and adaptation as well as Helsinki Principle 2 on guidance to support mainstreaming efforts.

On June 7, the Helsinki Principle 5 (HP5) workstream hosted a workshop to discuss the findings from the recently published Coalition report, An Overview of Nature-Related Risks and Potential Policy Actions for Ministries of Finance: Bending The Curve of Nature Loss.

One of the priorities for the Coalition is to improve Members’ understanding of climate- and nature-related risks, as well as opportunities that will arise with the transition to net-zero, nature-positive economies. Nature loss and climate change are interrelated and neither crisis can be successfully resolved unless both are tackled together. As the understanding of the impacts of climate change become clearer, concern about nature loss among Ministries of Finance (MoFs) is growing. Hence, following the publication of the 2021 Coalition report on climate-related risks, the Coalition deemed it crucial to produce a report on nature-related risks. This report was prepared by the HP5 workstream, however it covers considerations relevant to all Helsinki Principles.

In the workshop, one of the report’s authors and the HP5 Workstream Coordinator, Samantha Power, presented some of the key findings. She discussed the report’s focus on the economic and financial risks of nature loss, particularly those with fiscal implications. She presented a framework that maps the potential transmission channels of nature-related risks. Finally, she discussed a range of potential policy actions MoFs can take to bend the curve of nature loss. She explained that while the roles and responsibilities of MoFs differ across countries, they all control levers that can make a significant contribution to reducing nature loss and the resulting risks. She noted that at the same time, many of the policy recommendations in the report can be most effectively implemented through a coordinated approach with other relevant ministries and possibly with supervisor, regulator, or central bank counterparts.

Next, two Coalition Members provided feedback on the report and shared how they are managing nature-related risk in their countries. Serina Ng (Deputy Director, Global Issues and Governance at HM Treasury, UK and Lead of HP5) discussed the UK’s strategy to manage nature-related risk and ways the Coalition can continue to advance the nature agenda for the benefit of all its Members. Afterwards, Masyita Crystallin (Special Advisor to the Minister of Finance, Coalition Sherpa Co-chair, Indonesia) spoke about how Indonesia has developed Natural Capital Accounts and how this information is used in decision-making and planning, including for the MoF. She talked about the importance of understanding and managing nature-related risks in Indonesia.

Following these interventions, Erlan Le Calvar (Nature-related Risk Taskforce support, the Central Banks and Supervisors’ Network for Greening the Financial System (NGFS) Secretariat) spoke about how MoFs, supervisors, and central banks can coordinate to manage nature-related risks. He discussed NGFS work on this topic, including its most recent report, statement, and plans for next steps – including the development of nature loss scenarios. He discussed where NGFS sees a role for governments to act and where there is a role for central banks and supervisors to mitigate and manage these risks.

Next, Basile Van Havre (Co-chair Open Ended Working Group for post-2020 Global Biodiversity Framework, CBD, Ministry of Environment and Climate Change, Canada) spoke about the state of finance in the Convention on Biological Diversity (CBD) COP15 negotiations. He shared details related to draft text of the agreement on the alignment of public and private financial flows with the goals of the Global Biodiversity Framework. He also pointed to the important role for MoFs in ensuring an ambitious agreement and supporting effective implementation.

Finally, Sonya Likthman (Manager, Federated Hermes Limited and co-chair of the Public Policy Advocacy working group of the Finance for Biodiversity Pledge) spoke about financial sector action to manage nature-related risk. She gave an update on the work of the Finance for Biodiversity Pledge and their various working groups. She discussed the group’s engagement with the CBD process and its position paper on alignment of financial flows with the goals of the Global Biodiversity Framework.

Fiona Stewart (Coalition Secretary) moderated an engaging Q&A session. Finally, the Sherpa Co-chairs noted that the publication of this report is an important step to help Coalition Members better understand nature-related risks and possible fiscal implications, as well as to initiate a discussion about policy challenges and how to best address them.

View/download the report

One of the Coalition's priorities is to improve Members’ understanding of climate- and nature-related risks, as well as opportunities that will arise with the transition to net-zero, nature-positive economies. Nature loss and climate change are interrelated and neither crisis can be successfully resolved unless both are tackled together. As the understanding of the impacts of climate change become clearer, concern about nature loss among Ministries of Finance (MoFs) is growing. Hence, following the publication of the 2021 Coalition report on climate-related risks, the Coalition deemed it crucial to produce a report on nature-related risks. This report has been prepared by the Helsinki Principle 5 workstream, yet covers considerations relevant to all Helsinki Principles.

The gap between humanity’s demands on nature and nature's ability to supply is widening and threatens continued provision of the critical ecosystem services that underpin key economic sectors. Awareness of the resulting nature-related risks among policymakers, real sector companies, financial institutions, and citizens has increased precipitously over the past several years. Simultaneously, the Parties to the Convention on Biological Diversity (CBD) are taking steps to reach an agreement on a post-2020 global biodiversity framework (to be decided at COP15). Finance is central to the negotiations and will be critical to ensuring effective implementation of the framework. For the first time, a range of financial institutions are highly engaged in supporting Parties to reach an ambitious framework. Nature is also playing a more prominent role than ever in the United Nations Framework Convention on Climate Change (UNFCCC) negotiations. For all these reasons, it is a critical time for Coalition Members to deepen their understanding of nature-related risks, how these risks are likely to transmit, and steps they can take to manage them.

This report focuses on economic and financial risks of nature loss, particularly those with fiscal implications. A range of potential policy options is presented, which could help MoFs manage nature-related risks. While the roles and responsibilities of MoFs differ across countries, they all control levers that can make a significant contribution to reducing nature loss and the resulting risks. At the same time, many of the policy recommendations in the report can be most effectively implemented through a coordinated approach with other relevant ministries and possibly with supervisor, regulator, or central bank counterparts. This report is an important step to help Coalition Members better understand nature-related risks and possible fiscal implications, as well as to initiate a discussion about policy challenges and how to best address them.

View/download the report

More than 140 countries, representing 90% of global carbon emissions, have announced or are considering net-zero targets. With the transition to net-zero, the structure of the global economy is expected to change significantly—clean sectors, such as renewable energy, are likely to grow, and emissions-intensive activities, such as oil or coal production, to shrink.

Scoping the fiscal impacts of this transition is a critical task for finance ministries, as it can help them promote sustainable economic policies, prepare and adjust for possible major changes, and maintain budget sustainability in a changing environment. Yet much of the decision-making environment exists in conditions of deep uncertainty—many potential changes are difficult to forecast with a high level of accuracy, and the transition will likely be nonlinear, at some points gradual and at other points sudden. How, then, should finance ministries prepare for this transformation? What does it mean for economic forecasting and budgetary planning?

With that background, the Coalition of Finance Ministers for Climate Action has published a new report under the Helsinki Principle 1 workstream (aligning policies with the Paris Agreement), titled "How to Scope the Fiscal Impacts of Long-Term Climate Strategies? A Review of Current Methods and Processes". By reviewing the leading fiscal modeling methods, approaches, and processes, this report provides a comprehensive guide for policymakers on how to best identify and quantify the potential fiscal impacts of various policies designed to address climate change and reach net zero targets.

The report, based on a literature review and interviews with 36 global experts in academia, research institutes, and government, marks an important step in helping Coalition Member countries design tools to assess the likely economic and fiscal impacts of climate change policies. Moreover, since modeling is relevant across multiple Helsinki Principles, this report makes an important contribution to the Coalition’s work more broadly.

The Coalition is very grateful to Sitra, the Finnish Innovation Fund, for leading the development of this report.

On Thursday April 14, 2022, the Coalition hosted representatives from the International Financial Reporting Standards (IFRS) Foundation’s International Sustainability Standards Board (ISSB) and the Taskforce on Nature-related Financial Disclosures (TNFD) to get an update on the respective standards or framework each is developing. This session built on previous discussions the Principle 5 workstream has organized on the topic of corporate sustainability reporting.

Mardi McBrien (Managing Director, IFRS Foundation) provided a presentation on the ISSB’s recently launched consultation on the body’s first two proposed standards. One sets out general sustainability-related disclosure requirements and the other specifies climate-related disclosure requirements. Mardi discussed the ISSB’s engagement strategy on these exposure drafts and offered a forward look on the development of the ISSB’s agenda, including a consultation on what its upcoming standard-setting priorities should be.

Emily McKenzie (Technical Director, TNFD Secretariat) then presented the TNFD’s newly released Nature-Related Risk & Opportunity Management and Disclosure Framework Beta v0.1. She covered the definitions, disclosure recommendations and risk and opportunity assessment approach, which are key components of the first iteration of the framework, as well as how pilots are being conducted. The first beta release of the TNFD framework outlines a proposed assessment process including 4 phases (Locate, Evaluate, Assess and Prepare - LEAP).

Following their presentations, Humberto Ahuactzin, Economic Studies Coordinator, National Banking and Securities Commission (CNBV), Mexico, provided some feedback and shared the Mexican experience on advancing the domestic corporate sustainability agenda. CNBV has created a working group on information disclosure and ESG standards adoption. Among other things, this working group has facilitated specialized training to CNBV’s staff and the working group’s members and observers, created an e-learning platform on sustainable finance, and developed a self-diagnosis tool for issuers and financial institutions.

Next Dirk Kramer, Deputy Division Chief, Sustainable Finance Division, Ministry of Finance, Germany, provided the German perspective on the topic and noted importance of this agenda in Germany. He emphasized the criticality of corporate sustainability reporting in the overall German sustainable finance strategy.

There was an engaging Q&A session in which the presenters commented on how materiality is addressed in their respective standards and framework. Emily explained that the TNFD framework considers both corporate impacts and dependencies on nature as core to the range of risks and opportunities that affect enterprise value. She noted that TNFD is developing case studies that demonstrate the materiality of nature-related risks to corporations. Two hypothetical case examples for forests and water ('WoodNCo' and 'SocietyInvest') are already available in a recently launched TNFD discussion paper: A Landscape Assessment of Nature-related Data and Analytics Availability. The paper shows how data and analytics can be used in the LEAP assessment process.

Mardi addressed the question on double materiality, noting that the ISSB is looking at reporting on enterprise value and that materiality can be viewed via a two pillar approach – pillar 1: enterprise value of primary interest to investors and pillar 2: wider impacts material to a wider range of stakeholders using GRI standards for example. The 2 pillars are interoperable and interconnected. The ISSB refers to the building blocks approach to address specific jurisdictional reporting requirements such as those outlined in the current EU proposals.

Both representatives noted that the climate-nature nexus is important and an area for further work. Emily noted that the TNFD framework does already recognize some linkages between climate and nature. She also noted that targets will be critical in determining transition risks and the importance of those to be set in the Convention on Biological Diversity Post-2020 Global Biodiversity Framework (GBF) and national and local targets stemming from the GBF. Mardi clarified that ISSB standards draw from the International Accounting Standards Board (IASB) standards and are closely aligned and share amongst other things terminology, user group and primary audience for reporting.

Both representatives invited feedback from Ministries of Finance (MoFs), particularly on what it will take for the standards/framework to be adopted in their jurisdictions.

• Feedback to the ISSB can be provided via comment letter or online survey IFRS - ISSB delivers proposals that create comprehensive global baseline of sustainability disclosures
• Feedback to the TNFD is welcome via https://framework.tnfd.global/ or feedback@tnfd.global.

Additional ISSB links:

• IFRS - Webinar on the ISSB’s exposure drafts – 28th April sign up link
• Exposure Draft IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information
• Exposure Draft IFRS S2 Climate-related Disclosures
• Snapshot, providing a high-level summary of the of the requirements
• Document comparing TCFD’s recommendations with Exposure Draft Climate-related Disclosures
• Document comparing the Technical Readiness Working Group’s recommendations with the exposure drafts

Additional TNFD links:

• Join the TNFD Forum
• The TNFD beta framework: Executive Summary | Full PDF
• FAQs, what is in the framework & what the TNFD will continue to evaluate

The Helsinki Principle 4 workstream has published a new report, Driving Climate Action through Economic and Fiscal Policy and Practice.

View/download the report

Mainstreaming measures to halt climate change and mitigate its impacts in policy planning, budgeting, public investment management, and public procurement is essential to effective action. Countries have made progress in these areas, building on robust, evidence-based planning and financial management systems.

The Coalition of Finance Ministers for Climate Action recognizes the critical role of ministries of finance in responding to climate change and its causes and impacts. This report highlights the importance of robust action—and the potential consequences of inaction—by ministries of finance. It outlines five key areas to help ministers of finance take leadership on climate change: macroeconomic modeling, climate-informed fiscal risk assessment, green budgeting, public investment and asset management, and green public procurement. The report draws on experiences and practices from member countries and includes a curated list of frameworks, guidance, and tools to support ministries of finance in mainstreaming climate change in economic and fiscal policy and practice.