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GARP - SCR > Chapter 4. Sustainability and Climate Policy, Culture and Governance > Flashcards

Chapter 4. Sustainability and Climate Policy, Culture and Governance Flashcards

1
Q

What is the greenhouse effect?

A

The fact that gases such as carbon dioxide trap heat in the atmosphere

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2
Q

What did Svante Arrhenius, a Swedish scientist, propose in 1896?

A

He proposed that fossil-fuel combustion, and the resulting increase in atmospheric CO2 concentrations, would result in global warming.

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3
Q

What does DICE stand for?

A

Dynamic Integrated Climate-Economy

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4
Q

What does the original formulation of William Nordhaus’ DICE model from the early 1990s suggest?

A

The DICE model suggests that a warming of 3.5°C would be optimal in terms of not unduly hampering economic growth while still mitigating the worst climate impacts.

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5
Q

What questions does understanding and wide recognition of the fact that human-caused emissions are warming and disrupting the global climate prompt?

A
  • What is the optimal level of emissions reduction?
  • Over who the allocation of (moral) responsibility is?
  • What is the potential trade-off between emissions and economic development?
  • How to overcome collective action problems?
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6
Q

What does COP stand for?

A

Conferences Of Parties.
They are subsequent summits of the UNFCCC.

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7
Q

Where and when did COP1 take place?

A

COP1 took place in Berlin in 1995.

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8
Q

What did the Kyoto Protocol require of “Annex 1” countries?

A

To attain 5% emissions reductions compared to 1990 levels by 2008–2012

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9
Q

What are the three market-based mechanisms that Kyoto Protocol offer countries to meet their emission targets?

A
  • International Emissions Trading
  • Clean Development Mechanism (CDM)
  • Joint implementation (JI)

These mechanisms ideally encourage GHG abatement to start where it is most cost-effective, for example, in the developing world.

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10
Q

For the Kyoto Protocol, what does the International EmmisionsTrading mechanism about?

A

To allow Annex 1 countries that had made deeper emissions cuts to sell surplus emissions allowances to other Annex 1 countries.

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11
Q

What is the Joint Implementation (JI) mechanism for the Kyoto Protocol?

A

It was meant to be between Annex 1 countries, where one country could undertake a project involving technology transfer in a fellow Annex 1 country.

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12
Q

What is the Clean Development Mechanism (CDM) for the Kyoto Protocol?

A

To provide a way for emissions cuts to spread to developing economies. Under the CDM, an Annex 1 country could get credit for conducting an emissions reduction project in a non-Annex 1 country.

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13
Q

Where and when did COP15 take place?

A

In Copenhagen in 2009

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14
Q

On which COP was the aspirational goal that global warming should be kept to below 2°C established?

A

In COP15

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15
Q

Where and when did COP21 take place?

A

In Paris in 2015

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16
Q

What is the commonly agreed aspiration on which the Paris Agreement is based?

A

To keep global temperature rise “well below 2°C above pre-industrial levels” and to “pursuing efforts” to limit the rise to 1.5°C, combined with national efforts by each individual party in this direction.

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17
Q

What does NDC stand for?

A

Nationally Determined Contribution

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18
Q

What are the Nationally Determined Contributions (NDC)?

A

The means and plans from all Parties’ best efforts to meet the Paris Agreement’s aspirational goal. They are submitted to the UNFCCC and periodically re-evaluated at every COP meeting.

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19
Q

What is the ratchet mechanism the Paris Agreement established to re-evaluate the NDCs?

A

The countries are expected to tighten their NDCs every five years, and these are to be evaluated at COP meetings

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20
Q

What is the purpose of the High-Level Champions?

A

To connect the work of governments with the many voluntary and collaborative actions taken by cities, regions, businesses, and investors, as per nations’ decision.

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21
Q

What do NDCs require to be achieved?

A

Domestic climate change policies. They can be economic-wide or sector-specific.

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22
Q

What are the types of Carbon Pricing policies?

A
  • Carbon taxes, which impose a price per ton of CO2 emitted
  • Emission-trade schemes, or cap-and-trade schemes, in which the amount of emissions is capped (and the cap gradually lowered), but emissions permits can be traded between participants
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23
Q

According to the World Bank, how many pricing initiatives are there worldwide?

A

Currently, there are 64 carbon pricing initiatives (taxes and emissions-trading schemes) worldwide, covering 46 countries and 65 subnational jurisdictions.

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24
Q

What is the needed price per ton for pricing initiatives to be effective?

A

USD100 per ton. Japan’s carbon tax is at the lower end, less than USD10 per ton, whereas Sweden’s is currently the world’s highest, at around USD125 per ton

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25
Q

What are the main types of Power generation climate change policies?

A

Renewable Portfolio Standards and Feed-in tariffs

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26
Q

What does RPS stand for?

A

Renewable Portfolio Standards

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27
Q

What are the main sectors regulated by sector-specific climate change policies?

A

Power generation and Transport

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28
Q

What are the central Transport climate change policies?

A
  • Fuel efficiency standards
  • CO2 emission standards
  • Electric Vehicles purchase subsidies
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29
Q

What is C40?

A

A global coalition of cities dedicated to combating climate change, founded by 18 cities in 2005 and now with 97 members

30
Q

What is America’s Pledge?

A

Organization of 25 state governors, over 500 cities and counties, 350 institutions of higher education, 30 healthcare systems, and close to 2,300 corporations and investment firms, committed to helping America reach its Paris climate goals.

31
Q

What does NSA stand for?

A

Non-state and Subnational Actor

32
Q

What does IFI stand for?

A

International Financial Institution

33
Q

What does MDB stand for?

A

Multilateral Development Bank

34
Q

What does IBRD stand for?

A

International Bank for Reconstruction and Development (commonly known as the World Bank)

35
Q

What does AfDB stand for?

A

African Development Bank

36
Q

What does ADB stand for?

A

Asian Development Bank

37
Q

What does EIB stand for?

A

European Investment Bank

38
Q

What are MDBs tasked with?

A

Supporting public-sector investment in physical and human capital projects conducive to socio-economic development.

39
Q

What does DFI stand for?

A

Development Financial Institutions

40
Q

What are MDBs and DFIs tasked with?

A

Supporting the development of the private sector

41
Q

What does IFC stand for?

A

International Finance Corporation

42
Q

What does OPIM stand for?

A

Operating Principles for Impact Management

43
Q

What is FC4S?

A

Financial Centres for Sustainability (FC4S), founded in 2017, is a network to promote sustainability among 30 financial centers, with public entities promoting their respective cities serving as FC4S members.

44
Q

What is the most significant way climate has become embedded in financial policy?

A

The financial policy’s role in supervision and oversight, especially by central banks tasked with overseeing the stability of both individual institutions and the financial system.

45
Q

What central bank was the first to begin working on climate change issues?

A

The Bank of England, the central bank and financial supervisor of the UK, was widely recognized as such in 2014.

46
Q

What is NGFS?

A

Network for Greening the Financial System.

It promotes collaboration and sharing expertise on climate risk among supervisory institutions. It was founded by the UK, France, and the Netherlands central banks, but the network now counts 89 members from all continents.

47
Q

What do banks and financial supervisors oversight in micro-prudential supervision?

A

Specific financial institutions (usually banks and insurers) for financial soundness

48
Q

What do banks and financial supervisors oversight in macroprudential supervision?

A

The stability of the broader financial system.

49
Q

Mention some examples of central banks and supervisors that have amassed, and continue to build up, internal capacity for climate risk integration.

A
  • The Bank of England (BoE)
  • The European Central Bank
  • The Monetary Authority of Singapore
  • The Australian Prudential Regulation Authority
50
Q

What are the general trends that cut across jurisdictions on climate integration?

A
  • Governance
  • Risk management
  • Disclosure
51
Q

What is the supervisory expectation in governance-climate integration?

A

The financial institutions have structures in place to ensure climate-related risks are actively considered and managed at the highest level by senior managers and boards of directors.

52
Q

What is the supervisory expectation in risk management-climate integration?

A

The firms are often asked to use some combination of scenario analysis and stress testing.

53
Q

What is the supervisory expectation in disclosure-climate integration?

A

The recommendations of the TCFD are increasingly seen as best practices by regulators and policymakers.

54
Q

What is one of the most essential macroprudential measures at central banks’ disposal?

A

Stress tests that model the reaction of a financial system to a hypothetical shock, including climate change.

55
Q

Besides the central banks’ stress tests, what other macroprudential measures have been proposed?

A
  • The carbon countercyclical capital buffer
  • The large exposure limits that would limit banks’ (over)exposure to carbon-intensive assets that are considered at high risk of stranding.
56
Q

What is “The Tragedy of the Horizon”?

A

In 2015, Mark Carney, the BoE then-governor, argued that while most climate damage is expected far enough in the future to be beyond typical investment horizons, climate change would eventually cause systemic (physical, transition, and litigation) risks to the whole financial sector.

57
Q

How did the BoE’s mandate of changed in March 2021?

A

The UK government modified it to include environmental goals:
- Support the greening of the country’s economy
- Help the country reach net-zero emissions by 2050

58
Q

What are the four critical pillars of the BoE requirements for firms adopting strategic approaches to climate change?

A
  • Governance
  • Risk management
  • Scenario analysis
  • Disclosure
59
Q

What is BES?

A

Biennial Exploratory Scenario, a dedicated climate risk stress test launched in 2021 by the BoE. It will be based on scenario analysis and use an early policy action scenario, a late policy action scenario, and a no additional policy scenario.

60
Q

What is greenwashing?

A

Marketing practices that portray products or activities as producing positive environmental outcomes even when this is not the case.

61
Q

What is FCA?

A

The Financial Conduct Authority, the UK financial regulator for conduct and financial consumer protection

62
Q

What is the EU Taxonomy?

A

A European Union public policy that clearly defines, from the top down, what counts as a sustainable investment.

Drafted in March 2020, it sets performance thresholds (referred to as “technical screening criteria”) for economic activities by sector and subsector.

63
Q

According to the EU Taxonomy, what does an activity require to count as “green”?

A

To count as “green,” an activity must:
a) make a substantive contribution to one of six environmental objectives
b) do no significant harm to the other five
c) meet minimum safeguards (e.g., the OECD Guidelines on Multinational Enterprises and the UN Guiding Principles on Business and Human Rights)

64
Q

What does OECD stand for?

A

Organization for Economic Cooperation and Development

The OECD is a unique forum where the governments of 37 democracies with market-based economies collaborate to develop policy standards to promote sustainable economic growth.

65
Q

Mention examples of corporate and investor groupings which have helped spread best practices regarding climate change:

A
  • UN Global Compact
  • Principles for Responsible Investment
  • Institutional Investors Group on Climate Change (IIGCC)
  • The Investor Agenda
  • Climate Action 100+
66
Q

What is The Investor Agenda?

A

The Investor Agenda is a shared leadership agenda on the climate crisis that is unifying, comprehensive, and focused on accelerating investor action for a net-zero emissions economy.

67
Q

What are the Investor Agenda’s interlocking areas?

A
  • Corporate Engagement: Engaging companies to drive and demonstrate real progress in line with a 1.5-degree Celsius future.
  • Investment: Managing systemic climate risks in investor portfolios and enabling the transition by shifting capital to value-creating businesses to succeed in a net-zero future.
  • Policy Advocacy: Advocating for policies aligned with delivering a just transition to a net-zero economy by 2050 or sooner.
  • Investor Disclosure: Enhancing investor disclosure to help stakeholders track investor action in line with a 1.5-degree Celsius pathway.
68
Q

What is Climate Action 100+?

A

An investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.

69
Q

What are the initiative’s key asks that a Climate Action 100+ investor looks for a company to commit to?

A
  • Implement a robust governance framework for climate change
  • Take action to reduce greenhouse gas emissions across the value chain
  • Provide enhanced corporate disclosure
70
Q

What is the Glasgow Financial Alliance for Net Zero?

A

The Glasgow Financial Alliance for Net Zero (GFANZ) is a global coalition of leading financial institutions committed to accelerating the decarbonization of the economy by providing the tools and resources the financial sector needs to implement its net-zero commitments.

GARP - SCR (7 decks)

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