Edition 2020 Ninth edition

(see 4.4 below)
are a means to try to reconcile the common imbalance of interests 
between landlords and tenants in these matters.
3.5. 
As businesses choose or are increasingly expected to operate in ways more 
sensitive to these issues, their owners and customers may tend to demand 
more relevant credentials to prove this. For larger businesses, such credentials 
might include:
•
The increasing expectation on them to report on their performance in this area;
•
Demonstrations of Corporate Social Responsibility (CSR);
•
A Carbon Reduction Commitment (CRC);
•
Accreditation according with ISO 14001 — the international standard for envi-
ronmental management systems or EMAS, the EU-wide Eco Management and 
Audit Scheme.
A tangible example of such commitment by either party may be the use of "green leases".

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III. Valuation and Sustainability
European Valuation Standards 2020
3.6. 
34 central banks and financial supervisors, representing the supervision of 
two thirds of the global systemically important banks and insurers, created the 
Network for Greening the Financial System (NGFS) in 2017 which has agreed to:
•
Integrate the monitoring of climate-related financial risks into day-to-day su-
pervisory work, setting expectations that finance considers the financial risks 
from climate change, embedding an awareness of risks;
•
Ease access to data on climate-related risks;
•
Build capacity and knowledge on managing climate-related risks across the fi-
nancial system.
It encourages the development of metrics and classification systems to identify 
which economic activities contribute to the transition to a green and low-carbon 
economy, supporting financial actors to make sustainable investment and lending 
decisions. As the Governors of the French and UK Central Banks set out in a joint 
letter of April 2019 with the chair of the NGFS, the aim is to avoid:
"a climate-driven 'Minsky moment' — the term we use to refer to a sudden collapse 
in asset prices."
The incoming President of the European Central Bank, Christine Lagarde, has said 
that the ECB's Strategic Review in 2020:
"… will include the immense challenge that climate change is addressing to each 
and every one of us, wherever located, and whatever our mission and duties … we 
will take up the fight that is taken up by the European Commission and I hope other 
European institutions, and see where and how we can participate in that particu-
lar endeavour."
(Statement and Press Conference, 12
th
 December 2019)
The ECB's tools for this include:
•
Banking supervision, by raising awareness of risk so that banks manage them;
•
Financial stability, communicating the risks posed to the financial system by 
climate change;
•
Some investment in green bonds.
3.7. 
The international Task Force for Climate-related Financial Disclosure (TCFD), now 
with supporters across banks, asset managers, pension funds, insurers, credit 
rating agencies, accounting firms and shareholder advisory services with balance 
sheets totalling over $120 trillion, has a critical role in this. It is driving climate dis-
closure as part of financial decision making at this level with the bearing that will 
have on property, forming 10 per cent of global investment portfolios, including:

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European Valuation Standards 2020
III. Valuation and Sustainability
203
•
Physical risks from the exposure of mortgage books to flood risk and the 
impact of extreme weather events on sovereign risk;
•
Transition risks including exposures to carbon-intensive sectors and property 
lending with new energy efficiency requirements.
The work of the TCFD is also intended to promote the allocation of financial re-
sources to financing resilient and sustainable development.
3.8. 
These trends are being transmitted through the financial system. The IMF's fi-
nancial stability report now includes a chapter on sustainable finance, including 
this view: