IBM: Accelerating the transition to net zero carbon emissions through tech-enabled finance
As we approach December’s Tech Green Finance Week, it’s timely to consider the finance industry’s potential to lead by example on the journey towards global net zero carbon emissions.
With technology as a key enabler of sustainability, real progress towards mitigating climate change requires the global finance industry to innovate by mobilising investments towards sustainable development and quantifying climate risk.
By adopting collaborative, secure, trusted data and skills platforms, financiers can accelerate climate progress while the public and private sectors use technology-enabled platforms to boost investments in climate resilience and sustainable infrastructure.
For this approach to reach its maximum potential, infrastructure must also be designed, built and operated with sustainable principles to secure a net zero future for the world and resilience to climate change. An open and collaborative approach to data sharing and innovation is vital to accomplishing this – trusted and secure platforms are essential for this.
Accelerating climate finance investment, using digital finance platforms and enabling new digital marketplaces will all help towards the goal. The benefits of these platforms include intelligent processes, standardisation, improved trust and transparency, decreased duplication, and enhanced analytics, security and auditability. The journey towards mobilising investment and achieving net zero through enabling technology also involves rethinking the quantification, qualitative analysis and comparability of climate-related financial risk and the transparency of disclosures around those risks and opportunities.
Climate impact: risk analytics and resilience
Technology platforms play a key role in understanding and mitigating climate impact. Financiers are increasingly responsible for minimising climate-related financial risk and delivering financial strategy to reduce carbon emissions in addition to safeguarding business interests. However, assessing climate risk and financial impact, is highly complex. It requires the right data, tools, and skills to derive actionable insights; furthermore, translating data into meaningful insights for rapid analysis is challenging.
The majority of finance and business decision processes are also highly manual and labourious, relying on disparate systems or incomplete datasets. Using technology, we can enhance climate risk analytics through dynamic data capture and faster, automated and intelligent processes. This helps improve climate and ESG impact assessments aligned to specific KPIs, benchmarks and performance monitoring - allowing consistent climate-related financial risk disclosures.
The digital marketplace’s role in financing sustainable energy and infrastructure
Securing finance is a challenge for sustainable infrastructure projects of any scale. however secure and scalable end-to-end digital technology platforms can help address this. With digital platforms serving as online marketplaces, climate entrepreneurs can quickly connect with funding, either though institutional investment or public and private financing for sustainable infrastructure. These digital platforms can speed up highly manual and inefficient documentation processes, deal flows, and collaboration across ecosystems partners with added transparency.
Developing policy and skills for sustainable finance
From a skills perspective, a marked lack of consistency exists globally, with sustainability standards across existing frameworks causing challenges for finance practitioners, investors and regulators preparing climate related financial disclosures and reviews.
Recent global financial regulatory updates on climate reporting and the role of technology are highlighting the need to constantly grow financier skills and finance training programs to address this and leverage the industry into a position to build cleaner and resilient economies.
Upskilling finance professionals to gain a better understanding of technology tools, information analysis, ESG impacts and sustainability standards, will dramatically improve consistency in decision-making and disclosures.
Technology is ideally positioned to mobilise investments, quantify climate change risk, and digitise the marketplace for financing sustainable infrastructure, while equipping finance professionals with the skills and digital tools. It’s the crucial catalyst in the toolbox of global financiers that can accelerate action and progress on sustainability goals and the transition to net zero.
This article was written by Murray Simpson, IBM's Global Director for Climate & Sustainability and Chair of techUK Climate Strategy & Resilience Council. To learn more about this author, please visit their LinkedIN page.
techUK is organising an event on Wednesday 8 December with industry experts and policy makers on the next steps for the technology and financial sectors to drive the green finance agenda. Find out more and join us on Wednesday!