The growing importance of sustainable finance in the global agenda, as one of the key elements to meet the United Nations Sustainable Development Goals (SDG) and the Paris Agreement on Climate change. This was the content of the debate of the second panel of the BBVA Sustainable Finance Forum, an event that convened in Madrid business leaders, investors and institutional representatives.
Antonio Ballabriga, Global Head of Responsible Business, BBVA, officiated as panel moderator. Ballabriga underlined the turning point reached in the process of linking sustainability to its financial impact, He also praised the banking sector’s role in this process.
In first place, he said, thanks to its status as financer of the transition towards a low carbon economy. But also, he insisted, through the progressive integration of environmental matters into risk models and, likewise importantly, the involvement of all stakeholders to collectively contribute to achieve a higher impact in terms of sustainability. “The future of banks is to provide funding thinking about the future,” said Ballabriga.
Leadership and example
Simone Dettling, Banking Team Lead of the United Nations Environment Programme-Finance Initiative (UNEP-FI), pointed out the challenge and the opportunity that lie for the global financial industry in promoting a sustainable economy. A process in which “we need to make quick progress”, she said, but which also entails “a long-term goal.” “We are sprinting and running a marathon at the same time," she noted, using a highly visual analogy.
"The future of banks is to provide funding thinking about the future"
Dettling also spoke about the need to “define a clear roadmap” to move forward in the common challenge of the fight against climate change. She called for a greater level of awareness and leadership from all parties involved in the journey towards sustainability, including the financial industry and global leaders. “The more leadership we see, the more we will be able to do,” she said.
In this sense, she argued that sustainability is the answer to the financial crisis, and cited BBVA as a “fantastic example of bank that has reinvented itself and that is changing its culture to adapt to the new scenarios.”
From left to right: Carlos Torres Vila, Soraya Sáenz de Santamaría y Francisco González.
The importance of banks
José Manuel Marqués, Head of the Financial Innovation Division, Bank of Spain, focused on the importance of promoting this type of meetings to raise awareness about the relevance of sustainable finance and the crucial role of the financial sector in the challenge of the fight against climate change. “Without its involvement we will not be able to take on the challenge that lies ahead of us,” he said.
In this respect, he stressed that “the climate risk that all institutions are facing must be part of their risk management function.” And he urged banks to foster another set of initiatives to promote sustainability, such as the creation of financial products that allow retail customers and SMEs manage their climate change-related risks and contribute to fight it. For example, by marketing green mortgages.
Marqués underscored how important it is for “financial institutions to define a clear strategy and a vision of where they want to go,” aware that the transition towards a sustainable economy is “a complex process, which cannot be accomplished from one day to the next.”
He recognized that “from the world of central banks, there are many things that can be done” to foster sustainability, such as promoting initiatives in the area of climate risk measurement, or reviewing reserve and collateral management processes applying, also, climate risk criteria.
Wim Mijs, CEO of the European Banking Federation (EBF), closed the panel devoted to sustainable finance and the global agenda. According to Mijs, “banks are rethinking their role in society,” building on a “sense of urgency and opportunity to create a new banking industry, that will require collaboration between the public and private sectors to reach the global sustainability goals.
In this respect, he underscored the need to adapt the regulatory activity to the speed that the transition process towards a sustainable economy requires. And he called for a deeper and closer dialogue between central banks, regulatory authorities and the financial industry on how to measure climate risks.
The EBF officer expressed his concerns over the fact that some banks remain oblivious to the sustainability challenge. And he warned: “We need to set 30-year goals and start rushing in three years’ time.”