Banks play a fundamental role in the planet’s sustainability due to their ability to finance sustainable activities and manage risks. This was the main topic discussed at a panel in Davos, Switzerland in which José Manuel González-Páramo participated. BBVA’s Executive Board Member and Head of Global Economics and Public Affairs encouraged all banks to join the Principles for Responsible Banking to press for this change. In his opinion, these principles give banks the opportunity to demonstrate their commitment to society.
José Manuel González-Páramo sent this message to the banks that have not yet joined the global coalition to redefine banking, empower people and better serve society. BBVA has been one of the founding members of this coalition since it was first launched in November 2018.
BBVA, together with ING, shared the round table with representatives from the United Nations (UN) and the financial industry under the auspices of the World Economic Forum in Davos, which unites more than 2,500 people representing governments, public and institutions, companies and civil society. Davos has been a forum where climate change and environmental challenges are increasingly present.
Banks’ role in the transition to a new economy
Financial institutions have a pivotal role in financing the transition to a low carbon economy. Banks also play an important role in attaining the UN Sustainable Development Goals (SDGs) and help to configure what jobs will look like in the future as part of the fourth industrial revolution.
Does this mean we should reconsider the role of banks? BBVA’s Executive Board Member believes that banks should be purpose-driven organizations and rethink their role in society in order to have a positive impact on people’s lives. He sees the Principles for Responsible Banking as the next step in this direction – and this is the message BBVA gives its shareholders and investors.
BBVA’s Executive Board Member and Head of Global Economics and Public Affairs encouraged all banks to join the Principles for Responsible Banking to press for this change.
As the moderator of the panel recalled, BBVA has already established science-based climate targets. But how exactly do these targets align with BBVA’s business strategy? José Manuel González-Páramo explained that one of the key components of the bank’s Pledge 2025 – BBVA’s climate change and sustainable development strategy presented in February 2018 – is the commitment to progressively align BBVA activity to the Paris Agreement. The bank is also part of the Science Based Targets Initiative, which is calling on companies to publicly commit to specific climate targets.
To achieve this, BBVA is working on initiatives such as defining sector norms; implementing methodologies to assess the financial impact of climate change in the bank’s lending portfolios; and abiding by the Katowice Commitment, an initiative with several financial institutions to measure the alignment of their lending portfolios to the Paris Agreement.
How BBVA propels change
Customers’ needs are evolving and banks must understand them, stressed BBVA’s Executive Board Member. He also recalled the bank’s commitment to contribute to the implementation of the EU Action Plan on Sustainable Finance, as well as the BBVA’s work to help set market standards like the Green Bond Principles. And of course, the bank joined the Principles for Responsible Banking, an initiative to redefine banks’ purpose and business model to align with the UN SDGs and the Paris Climate Agreement.
In his opinion, banks base their business on their clients’ long-term relationships, and sustainability is paramount for them. José Manuel González-Páramo explained that BBVA works to promote sustainable finance in wholesale and retail banking everywhere the bank has a presence. In fact, to finance this activity, BBVA issued the eurozone’s largest green bond last year.