For COP29, the NGFS publishes a Conceptual Note on Adaptation and a Synthesis Report on the greening of the financial system”

Baku, 14 November 2024 

On the occasion of COP29, the Network for Greening the Financial System (NGFS) is proud to announce the release of two documents: a Conceptual Note on Adaptation, which provides insights on the relevance of climate adaptation to central banks and supervisors, and a Synthesis Report on the greening of the financial system.

These initiatives build on the momentum of the recent NGFS Cali-Baku Pledge, reports on climate change, the macroeconomy and monetary policy, and the latest Phase V release of NGFS long-term scenarios, underscoring our commitment to supporting the alignment of financial flows with climate goals. Coinciding with these releases, the NGFS is organising two side-events on COP29 Finance Day, bringing together key actors and decision-makers from the green finance community. The focus of both events will be on solutions to enable action within the financial system for transition to a net-zero and nature positive economy, with one taking a deep dive into adaptation finance in particular. The events will bring key NGFS products to the attention of a broad audience of potential users, including the first presentation of an updated data directory, a centralised platform designed to facilitate access to climate data. 

The NGFS releases a Conceptual Note on Adaptation

The Conceptual Note is the first contribution of the NGFS focused on this topical issue, as, to this point, NGFS work mostly focused on climate change mitigation. It builds on the NGFS Technical Document on Scaling Up Blended Finance for Climate Mitigation and Adaptation in Emerging Market and Developing Economies (EMDEs), published at COP28, which already stressed the importance of climate adaptation. 

“Severe weather events are intensifying due to climate change. These events inflict massive damage on communities and infrastructure. Adaptation measures – for example, building additional flood barriers, or upgrading existing infrastructure to improve resilience to climate perils - can reduce human tragedy and limit the economic impact of climate-related disasters. But, adaptation finance is currently insufficient to support the investments needed. This note helps central banks and supervisors deepen their knowledge of adaptation finance, and to understand the barriers that may be holding back adaptation finance flows”, emphasises Sabine Mauderer, Chair of the NGFS and First Deputy Governor of the Deutsche Bundesbank.

Recognizing that climate adaptation is increasingly critical for financial stability and consequently for the mandates of central banks and supervisors, the Conceptual Note highlights the importance of mainstreaming adaptation into risk management practices and scaling up adaptation finance. The Note also explores the complex interlinkages and relationships between adaptation finance, insurance protection gaps and the prudential risks that a failure to adapt could pose to the financial sector. Six national case studies are included in the Annex to showcase some of the specific actions already being taken by authorities, both individually and in collaboration with other public and private sector groups. 

This Note identifies areas for further consideration to limit risks and to contribute to advancing climate adaptation efforts. The Note outlines four specific areas of interest for central banks and supervisors that lay the groundwork for future NGFS initiatives, with the aim of identifying good practices and developing recommendations and guidelines: 

• the role of metrics and tools for better measurement and disclosure of adaptation
• exploring the need to enhance policy, supervisory and regulatory frameworks
• fostering an enabling environment for adaptation finance
• collaborating at the international level, with actions focused on local considerations.  

Sean Carmody, Co-Chair of the NGFS Task Force on Adaptation and Executive Director, Policy and Advice Division, Australian Prudential Regulation Authority: 
“Central banks and supervisors have been working on the financial risks of climate change for a number of years now. It is increasingly clear that climate adaptation must become a major part of the overall response to the risks of climate change for the finance sector."

Shelagh D. Kahonda, Co-Chair of the NGFS Task Force on Adaptation and Executive Director Financial Stability Directorate, National Bank of Rwanda: 
"Resilience in our financial systems must be as adaptable as the ecosystems we strive to protect. Climate adaptation is not just an environmental imperative; it is an economic foundation for a future where both nature and markets can thrive."

By shedding light on the role of adaptation and resilience in addressing future climate challenges of the financial system, the NGFS reaffirms its prominent role as a pathfinder exploring new topics, delving deeper into specific aspects of climate for the benefit of the financial community and helping further raise awareness of topics that are relevant to the NGFS’ ambition.

The NGFS releases a Synthesis Report on the Greening of the Financial System

This report provides a holistic and up to date view on the state of climate finance, by building on knowledge and data from NGFS members, observers, and stakeholders. 

“With COP29 setting itself to be “the finance COP”, this Synthesis report aims to inform discussions by providing the latest available evidence on the greening of the financial system. While bridging funding gaps remains essential, this report highlights that embedding climate, nature, and transition considerations into financial decision-making is key to driving systemic change across the financial system", says Yann Marin, Secretary General of the NGFS and Deputy Director for Financial Stability at Banque de France

This report is a collective effort to synthesize critical data points, strategic insights and progress on the greening of the financial system and the alignment of the financial sector with global climate goals. Leveraging the NGFS’ expertise, the report builds on publications from the NGFS, as well as recent reports from the International Monetary Fund, the OECD, the World Bank, as NGFS observers and from the Climate Policy Initiative (CPI) and the World Wildlife Fund (WWF) as NGF knowledge partners.

The report assesses three key areas to provide an overview of the financial system’s progress towards archiving the Paris objectives. Each area constitutes one of the three foundations necessary to build a greener financial system:  i) developing a common understanding of what climate goals mean for finance and the progress made on the provision of finance aligned with those goals; ii) scaling up the relevant market instruments and strategies, and iii) establishing regulatory and supervisory frameworks that foster and enable an ecosystem for an effective and just green transition.

While the financial sector has made progress towards aligning with climate objectives, significant work remains to build a financial system that is truly green. The report provides recommendations that highlight some key steps that public and private financial actors can take to advance the greening of the financial system.

About the NGFS

The Network for Greening the Financial System (NGFS), launched at the Paris One Planet Summit on 12th December 2017, is a group of central banks and supervisors, which on a voluntary basis are willing to share best practices and contribute to the development of environment and climate risk management in the financial sector, and to mobilise mainstream finance to support the transition toward a sustainable economy. The NGFS brings together 141 central banks and supervisors and 21 observers. The NGFS is chaired by Ms Sabine Mauderer, Member of the Executive Board of the Deutsche Bundesbank. The Secretariat, headed by Mr Yann Marin, is provided by Banque de France.

For more details, visit the NGFS website, LinkedIn and X account or contact the NGFS Secretariat at Banque de France sec.ngfs@banque-france.fr 
Press Office at Banque de France: +33 (0) 1 42 92 39 00 / presse@banque-france.fr