By Mouna Lyoubi
Introduction
Following the Paris Agreement (COP21), climate mitigation efforts and green transitions of economic sectors have gained momentum. This has been influenced by a range of stakeholders, including financial institutions (FIs). Nevertheless, the role of financial institutions in contributing to climate change is also becoming more pronounced. The financial sector contributes to greenhouse gas (GHG) emissions through their own direct activities (scope 1 and 2) and through their financial products such as loans and investments (financed emissions – scope 3). According to the UN Environment Programme Finance Initiative (UNEP FI) the latter can reach 700 times the levels of their direct emissions. With the net-zero targets that global economies are setting all around the globe (example: EU’s Net-Zero 2050), now more than ever, FIs are under unprecedented pressure to accelerate their climate mitigation contributions by updating their regulations, considering climate risks across their portfolios, and developing green financial products. FIs are increasingly feeling the impact of climate change on their portfolio and clients. Their awareness of this additional but unpredictable risk reinforces their commitment to reduce both their vulnerability as well as that of their clients, to climate shocks.
Barriers to FI’s climate-friendly transition
According to UNEP-FI, FIs are facing several challenges which hinder their transition into climate friendly business models. These challenges include the lack of a universally accepted, end-to-end vision for net-zero and climate mitigation, coupled with rapidly evolving standards and a multitude of confusing frameworks. These hurdles are compounded by insufficient access to accurate emissions and climate data, making it difficult for banks to clearly define their climate journey, set targets, and integrate various initiatives effectively. Finally, FIs’ knowledge capacity of climate change concepts, methodologies and tools further hinders their action.
What is being done?
From 6-8 May, 2025, UNEP-FI held a regional roundtable for 45 of its members in Africa & the Middle East. The roundtable was held in Marrakech, and formed part of UNEP-FI’s 2025 biennial series of five major regional events on sustainable finance. The event gathered finance professionals to discuss critical sustainability issues, including:
- climate mitigation and adaptation;
- nature-positive finance;
- just transition and financial inclusion;
- sustainability policy and regulation;
- real economy transition;
- carbon trading and;
- carbon finance.
During the last day, E Co. was invited to participate in an exclusive, technical workshop. During this event, participants from central and national banks from Morocco and Sub-Saharan Africa, were introduced to several tools and networks that would support their path to net-zero. This included:
- UNEP-Fi’s Climate Mitigation Journey (CMJ) methodology and its 15 capabilities;
- Principles of Responsible Banking;
- Partnership for Carbon Accounting Financials (PCAF); and
- Sustainable Insurance Facility (MSME inclusion).
The discussions held within the workshop were fruitful and highlighted the banking sector’s needs and priorities in the MENA and sub-Saharan African context. Particularly noteworthy was the need to consider physical risk, such as, floods, sea-level rise, water scarcity and droughts, as well as the development of a national strategy specific to climate finance. The discussion also conveyed the need for capacity building for FIs’ staff, to ensure they set climate targets and roadmaps. Furthermore, it was noted that the implementation of a national Moroccan FI coalition/ task force, which coordinates their efforts under the Central Bank’s guidance would be beneficial to the region. Finally, the need for regional and local climate scenarios (UNEP-FI’s Risk Center support) was also emphasised within discussions.
All in all, the transition towards climate mitigation is an indispensable journey for FIs and crucial for forging an inclusive, sustainable path to net-zero across economies worldwide. This necessitates a deep consideration of local contexts and needs, coupled with the establishment of interconnected regional platforms for peer-to-peer knowledge and best practice exchange such as UNEP-FI’s 500 membership network. At E Co. we are committed to being a part of these conversations, and using our expertise and experience to help foster meaningful dialogue that catalyses sustainable transformation.
