Shifting entire economies, businesses and ways of life to limit global temperature rises to 1.5 degrees requires huge amounts of capital to be deployed more effectively – and fast.
Annual investments in net-zero solutions need to triple to $2.6 trillion by 2025; and almost double again to $4.8 trillion in the 2030s.
The good news is that for several years, momentum has been growing.
Countries representing 90% of global GDP are now committed to net zero by 2050; 8,307 businesses and 595 financial institutions have signed up to the Race To Zero Campaign alone. This is a huge achievement.
Yet only a small percentage of listed companies and financial institutions have science-based emissions targets, and even fewer have a plan to reach those targets.
BARRIERS TO ACTION
We have identified the key barriers that are preventing financial decisions from aligning with climate needs at speed and scale.
A lack of science-based guidance (in the form of sector-specific frameworks, methodologies and standards) for climate-aligned investment decisions
Financial decisions at banks, investment firms and insurance companies are hampered by missing guidance and confusing methodologies, leading to slow and counterproductive actions.
Poor ‘information flows’ about what is happening and how that measures up against the scale of the challenge
While the market is flooded with more and more climate-related data, there are problems with accessibility, scientific integrity, fragmentation, duplication, standardisation, and applicability to financial decisions.
This is particularly the case for medium to small companies, those operating in emerging economies, and supply chains of large companies.
Insufficient ‘climate capacity’ in the financial community
At present, the data and knowledge to interpret climate implications and translate into financial decisions – at the point of investing, lending, or providing insurance for example – is not comprehensive and is concentrated on a few individuals and geographies.
HOW ARC ADDRESSES THESE CHALLENGES
Our efforts are focused on three strategic pillars:
Developing the frameworks. methodologies and standards that guide the direction and pace of financial decisions
Opening up and curating global flows of data, information and insights
Upskilling and creating networks of people worldwide to integrate climate science into financial decisions
HOW WE WORK
Arc uses systemic analysis and insight to understand how to strategically intervene. We do not seek to duplicate effective work. Instead we focus on additional capacity building. Arc works as:
Channeling funds to NGOs to help accelerate and scale up their work
Where there is a gap, Arc will develop new solutions through partnerships and in-house capability
A convenor and collaborative partner
Connecting the global community by collaborating on global research needs, co-creating solutions and sharing knowledge
Finance is a critical enabler of every climate solution. Arc has been created to unlock the flow of private finance at speed and scale – all around the world.