Innovation
Since players in the financial markets respond primarily to commercial opportunities, one key area of focus is to explore how new financial instruments and new ways of structuring financial products can change the risk-reward profile of sustainable activities.

Examples of this work include:

• Forest-backed bonds
• Adapting to climate change in developing countries
• Finance for cleantech, and
• Commercial microfinance.
• Valuation

Existing ways of valuing companies do not tend to capture the externalities of certain behaviours. The resulting allocation of resources may maximise profits for companies and investors in the short term but is not in the long-term interests of society, and may not be in the long-term interests of the company or investor itself. We work to increase awareness of the impact of extra-financial issues (such as environmental degradation, climate change, labour standards) on a company’s financial performance, to encourage better analysis of these issues by the financial sector and to divert capital towards companies which have clear strategies in place to respond to them.

Examples of this work include:

• The London Accord and
• work with the private equity industry.

We recognise that the markets do not always create an incentive for the financial sector to support sustainable development. Where there are market failures requiring government intervention, we help to bring key recommendations to the attention of policy-makers, through Forum’s strong relationship with the public sector.

Other Relevant Cross-Sector Initiative
Initiatives in the recent past which are changing the way the financial sector operates include:

• the Equator Principles relating to large project finance transactions, and
• the Enhanced Analytics Initiative relating to extra-financial research carried out on behalf of pension funds the Carbon Disclosure Project which requires companies to provide investors with information on their carbon output and their strategy for reducing their emissions.

For more information please contact finance@forumforthefuture.org.uk