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The status of climate risk management in Latin American and Caribbean banks

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A survey among 78 financial institutions in Latin America and the Caribbean holding 54% of the total assets managed by the banking sector in the region, revealed that 38% of banks incorporate guidelines on climate change in their strategy and 24% have a policy on climate risk evaluation and disclosure.

The study entitled “How the Banks of Latin America and the Caribbean incorporate climate change in their risk management,” presented today during an online event, was prepared by the UN Environment Programme Finance Initiative (UNEP FI) and CAF – Development Bank of Latin America, with the collaboration of the Latin American Federation of Banks (FELABAN).

69% of the participant banks identified forestry and agriculture as the sector most exposed to climate risks, followed by the energy generation sector at 44%.  80% of the institutions recognized that the main physical risk to be incorporated in their risk evaluation and management was ‘flooding,’ followed by ‘drought’ (mentioned by 41% of the banks).

Banks in the region have an opportunity to improve the assessment of climate risks in their plans and strategies, with the aim of increasing their resilience and be better prepared to support the transition to low carbon economies.

According to the report, 41% of the institutions that took part in the survey recognized they do not have mechanisms to identify, analyze and manage climate risks.

The authors concluded that climate risks remain unmanaged mainly due to a lack of knowledge regarding the financial impact of climate change, and because of the absence of regulatory demands.

Banks in the region still tend to perceive climate risks from the perspective of how companies impact the environment, and not how exposed these companies are to climate threats. Considering the latter is key for financial institutions in the face of the expected increase in disasters and other impacts of extreme weather, the report notes.

According to the Intergovernmental Panel on Climate Change, given current concentrations and on-going emissions of greenhouse gases, it is likely that by the end of this century the rise in global temperature will exceed 1.5°C above preindustrial levels. This will come with higher sea levels and more frequent and intense climate disasters.

“During the last decade, banks in Latin America and the Caribbean have made significant progress in integrating sustainability criteria in their different areas of work. The study that we present today will also contribute to the timely management of climate risks in their financing portfolios,” said Julián Suárez, Vice President of Sustainable Development at CAF.

“Climate risk assessment is key to the goal of aligning the banking industry with a sustainable and equitable global economy in the 21st century, which becomes even more relevant today as we need to build back better after the COVID-19 pandemic,” said Eric Usher, Head of UNEP FI. 

The authors call to follow the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and to replicate initiatives like the UNEP FI pilot project with 16 of the world’s leading banks to develop analytical tools and indicators that strengthen the assessment and disclosure of climate risks.

The survey revealed that 53% of the banks utilized the Sustainability Report as a mechanism to disclose risks linked to climate change, while only 16% reported through regulatory financial forms as advocated by the TCFD recommendations.

Due to the lack of knowledge regarding climate-related risks definitions, the authors also recommend the banking sector of Latin America and the Caribbean to prepare a common taxonomy on these issues.

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Environment

How food waste is trashing the planet

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18 June is Sustainable Gastronomy Day, an international celebration of local cuisine that is produced in ways that are both environmentally friendly and minimize waste. That last part is becoming increasingly important. A recent report from the United Nations Environment Programme (UNEP) found the world is in the grip of an epidemic of food wastage. In 2019, consumers tossed away nearly a billion tonnes of food, or 17 per cent of all the fare they bought.

That is deeply problematic in a world where 690 million people were undernourished in 2019, a number expected to rise sharply with COVID-19. It’s also bad for the planet. Some 10 per cent of all greenhouse gas emissions come from producing food that is ultimately thrown away.

UNEP recently sat down with two of the authors of the 2021 Food Waste Index Report: Clementine O’Connor, food systems expert with UNEP, and Tom Quested, an analyst with the non-profit organization WRAP. They talked about what the world can do to end the scourge of food waste.

UNEP: What are the main findings of the 2021 Food Waste Index Report?

Tom Quested: A staggering 17 per cent of all available food for human consumption is wasted. If you can picture 23 million fully-loaded 40-tonne trucks – bumper-to-bumper, enough to circle the Earth seven times – then that’s what we’re talking about. The report estimates that, in 2019, 61 per cent of food waste was generated by households, 26 per cent from food service and 13 per cent from retail.

UNEP: Why does food waste matter?

Clementine O’Connor: Even before COVID-19, some 690 million people in the world were undernourished. Three billion people are unable to afford a healthy diet. Uneaten food is a sheer waste of energy and resources that could be put to better use. Reducing food waste at the retail, food service and household levels can provide multi-faceted benefits for people and the planet. Up to now, the opportunities provided by food waste reductions have remained largely untapped and under-exploited.

UNEP: Is this a rich-world problem, or is it more widespread?

O’Connor: An important finding of the study is that household per capita food waste is broadly similar across country income groups (as defined by the World Bank), suggesting that action on food waste is equally relevant in high and middle-income countries. This breaks significantly with the narrative of the previous decade that household food waste is a rich country problem – and underlines the need for middle-income countries to measure baselines and develop national food waste prevention strategies. Providing technical support to help countries get started, UNEP is now launching Regional Food Waste Working Groups in Latin America and the Caribbean, Africa, West Asia, and Asia-Pacific.

UNEP: What are the key data gaps?

Quested: Most governments around the world have not collected sufficiently robust data to make the case for action. Even fewer have the data to track trends in food waste over time. However, there have been a growing number of national estimates of food waste in recent years. Areas with higher data coverage include Europe, North America, Australia and New Zealand. In contrast, North Africa, Central Asia, Melanesia, Micronesia, Polynesia and the Caribbean have no available estimates.  Data in the retail and food service sectors is also much more limited than for households. As measurement is an important early step to taking action on this important issue, much more measurement is needed.

UNEP: What’s the difference between food waste and food loss?

O’Connor: Food loss occurs along the food supply chain from harvest up to, but not including, the retail level. Food waste occurs at the retail, food service and consumption levels.

UNEP: How does food waste undermine sustainable development?

Quested: Food waste generates all the environmental impacts of food production (intensive use and pollution of land and water resources, exacerbation of biodiversity loss, greenhouse gas emissions) without any of the benefits of feeding people. Food waste, therefore, undermines sustainable development. Sustainable Development Goal 12, Target 12.3, aims at halving per capita global food waste at the retail and consumer levels and reducing food losses along production and supply chains, including post-harvest losses by 2030.

UNEP: Why should I reduce my food waste? How can I get started?

O’Connor: Reducing food waste at home is one of the easiest ways to reduce your personal climate impact. You eat – and make food decisions – at least three times a day. Some easy ways to get started:

Buy only as much as you need: check your fridge before you buy groceries (or add to your online shopping cart as you notice something is missing) to avoid impulse purchases. If you can, buy fresh food regularly and top-up when needed, rather than trying to get accurate quantities in one bulk shop.

Use what you buy: get portion sizes right by using a cup measure for rice, couscous or pasta. Cook creatively with leftovers: many recipes are flexible enough to absorb any wilting vegetables at the bottom of your fridge. Most leftovers will go into a taco, a sandwich, a curry, a frittata or a pasta sauce, and will be transformed with a sauce or relish. Chefs are increasingly keeping food waste prevention in mind when they share new recipes. Make good use of your freezer: food can be frozen until its expiry date or if it still looks tasty, if it doesn’t have a date. When you get back into a restaurant, you’re on the right side of history when you ask for a smaller portion or a doggy bag, so don’t hesitate to do so.

How will you be tracking progress?

O’Connor: Food waste data in relation to SDG 12.3 will be collected using the United Nations Statistics Division/UNEP Questionnaire on Environment Statistics. The questionnaire is sent out every two years to National Statistical Offices and Ministries of Environment, which will nominate a single food waste focal point in the country to coordinate data collection and reporting. The data will be made publicly available in the SDG Global Database and in UNEP’s Food Waste Index Report, which will be published at regular intervals up to 2030. The next questionnaire will be sent to Member States in September 2022, and results will be reported to the SDG Global Database by February 2023.

UN Environment

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Environment

A beginner’s guide to sustainable farming

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Industrialized farming has been a reliable way to produce lots of food at a relatively low cost. But it’s not the bargain it was once believed to be. Unsustainable agriculture can pollute water, air and soil; is a source of greenhouse gases, and destroys wildlife. All told that costs economies about $3 trillion every year. And to top it all off, some farming practices have been linked to the emergence of zoonotic diseases, such as COVID-19.

18 June is Sustainable Gastronomy Day, which celebrates local cuisine that is produced in ways that are both environmentally friendly and minimize waste. To mark the occasion, we take a closer look at how to make agriculture more sustainable and what that would mean for the economy, the environment and human health.

What exactly is sustainable agriculture?

It is farming that meets the needs of existing and future generations, while also ensuring profitability, environmental health and social and economic equity. It favours techniques that emulate nature–to preserve soil fertility, prevent water pollution and protect biodiversity. It is also a way to support the achievement of global objectives, like the Sustainable Development Goals and Zero Hunger.

Does sustainable agriculture really make a difference to the environment?

Yes. It uses up to 56 per cent less energy per unit of crops produced, creates 64 per cent fewer greenhouse gas emissions per hectare and supports greater levels of biodiversity than conventional farming.

Why does sustainably produced food seem more expensive?

It may be more costly because it is more labour-intensive. It is often certified in a way that requires it to be separated from conventional foods during processing and transport. The costs associated with marketing and distribution of relatively small volumes of product are often comparatively high. And, sometimes, the supply of certain sustainably produced foods is limited.

Why are some foods so much more affordable–even when they require processing and packaging?

The heavy use of chemicals, medicines and genetic modification allows some foods to be produced cheaply and in reliably high volumes, so the retail price tag may be lower. But this is deceiving because it does not reflect the costs of environmental damage or the price of healthcare that is required to treat diet-related diseases. Ultra-processed foods are often high in energy and low in nutrients and may contribute to the development of heart disease, stroke, diabetes and some forms of cancer. This is particularly concerning amid the COVID-19 pandemic; the disease is especially risky for those with pre-existing health problems.

Do we all have to be vegan?

No. But most of us should eat less animal protein. Livestock production is a major cause of climate change and in most parts of the world, people already consume more animal-sourced food than is healthy. But even small dietary shifts can have a positive impact. The average person consumes 100 grams of meat daily. Reducing that by 10 grams could improve human health while reducing greenhouse gas emissions. 

Is sustainable agriculture possible in developing countries?

Yes. Because sustainably produced food is typically more labour-intensive than conventionally made food, it has the potential to create 30 per cent more jobs. And because it can command higher prices, it can also generate more money for farmers.

Is it possible to make sustainably produced food that is affordable for everyone?

Yes. As demand for certain foods increases, the costs associated with production, processing, distribution and marketing will drop, which should make them less expensive for consumers.  Policymakers can also play a role, facilitating market access and leveling the financial and regulatory playing field.

If it is so important, why hasn’t sustainable farming been adopted as a global standard?

There is a lack of understanding of the way that agriculture, the environment and human health intersect. Policymakers do not typically consider nature as a form of capital, so legislation is not designed to prevent pollution and other kinds of environmental degradation. And consumers may not realize how their dietary choices affect the environment or even their own health. In the absence of either legal obligations or consumer demand, there is little incentive for producers to change their approach.

What are some ways to consume food more sustainably?

Diversify your diet and cook more meals at home. Eat more plant-based foods; enjoy pulses, peas, beans and chickpeas as sources of protein. Eat local, seasonal foods. Purchase sustainably produced foods and learn more about farming practices and labeling. Avoid excessive packaging, which is likely to end up as landfill. Don’t waste food: eliminating food waste could reduce global carbon emissions by 8-10 per cent. Cultivate your own garden, even if it is a small one in your kitchen. Support organizations, policies and projects that promote sustainable food systems. And discuss the importance of healthy and sustainable foods with producers, vendors, policymakers, friends and family.

UN Environment

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Environment

CEOs to G7 and World Leaders: Support “Bold” Net-Zero Commitments

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Over 70 CEOs said they stand ready to work with public sector leaders around the world to reduce emissions. Members of the Alliance of CEO Climate Leaders signed an Open Letter championing public-private cooperation ahead of the G7 summit in order to supercharge net-zero commitments, polices and actions.

The signatories are looking for governments to accelerate the transition to net-zero before COP26 in order to accelerate even more action from the private sector. The letter emphasizes public-private collaboration as vital and welcomes transformative policy change.

“It is an important and significant move for this many CEOs to put their names forward for deeper collective collaboration,” said Dominic Waughray, Managing Director, World Economic Forum. “It sends a clear signal to policy-makers that many global business leaders are ready to make the transition to a net-zero future. As we move towards COP26, public-private collaboration will be key to unlocking investment, setting more ambitious targets to reduce emissions, and turning this ambition into action.”

The Alliance of CEO Climate Leaders is the only CEO-led community open to all companies worldwide that want to make clear commitments and work to transition to net-zero. Members believe the private sector has a responsibility to actively engage in global efforts to reduce greenhouse gas emissions and to help lead the global transition to a low-carbon, climate-resilient economy. The World Economic Forum hosts the alliance.

The full text of the Open Letter and the list of signatories can be found here on the here on the Forum’s Agenda news site.

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