The importance of building ties between the public and private sectors to drive the fight against climate change and the opportunities this will spawn for businesses are the main takeaways of the panel on How can institutions foster sustainable development? held during the first edition of the BBVA Sustainable Finance Forum.
The roundtable, moderated by Cristina de Parias, Head of BBVA Spain, consisted of Pablo Zalba, Chairman of the Official Credit Institute (ICO); Birthe Brunh-León, Director, Iberia Operations, European Investment Bank (EIB); and Valvanera Ulargui, Director General of the Spanish Climate Change Office.
The three panelists agreed that in a context such as the current one, where investment levels may not suffice to combat climate change and fund the energy shift, public and private sectors need to come together and promote joint actions.
Cristina de Parias recalled that BBVA is pioneering the issue of green bonds and described the bank a leading example of collaboration between the public and private sectors. In this respect, she underlined BBVA’s involvement in the financing of the Novo Hospital de Vigo - the first Green Project Finance in Spain – with a €176 million loan.
Social issues to create jobs
ICO Chairman Pablo Zalba stressed the importance of initiatives such as the BBVA Sustainable Finance Forum, which bear witness to the private sector’s commitment to the fight against climate change. But, at the same time, he underscored the need to increase the social dimension of public and private activities.
Zalba detailed the initiatives that the ICO is undertaking in these areas. Indeed, the Institute is pioneering the issue of social bonds as a way to finance SMEs and is fostering the adoption of the Ecuador Principles in the management of financing activities, the funding of energy efficiency and investment in social impact funds.
He also noted that ICO has completed four social issues to fund SME projects. The first, in 2015, for a total of €1 billion; the second in 2016, totaling €500 million; and the third, in 2017, also for €500 million, and a fourth in Swedish Krona, for an amount equivalent to €52 million. The first two issues helped fund over 35,000 SMEs and create over 200,000 jobs.
Birthe Brunh-Léon, Director of Operations Iberia of the European Investment Bank (EIB), underscored that sustainable finance is inherent to her institution. Indeed, the EIB has pledged about $100 million between 2016 and 2020 to fund both large and more local projects intended to fight climate change.
Clean transportation and energy efficiency
Regarding the funding of sustainable infrastructure and energy efficiency envisaged in the European Commission's recently approved sustainable finance plan, Brunh-Léon stressed that infrastructure financing is one of her institution’s traditional activities, and that it has intensified this activity in Spain, which received more funding than any other country in 2017.
Over the next decade, she continued, smart infrastructure, clean transportation and energy efficiency will become a priority.
For her part, Valvanera Ulargui, Director General of the Spanish Climate Change Office, explained that, regarding the Spanish Climate Change and Energy Transition Act — which guarantees the fulfillment of Spain’s agreements with the EU in energy and climate-related matters within the framework of the Paris Agreement — it is necessary to move toward new low-carbon energy models in a way that is both competitive and environmentally friendly.
Ulargui underscored that this is a law that affects all levels of society and that, in order to ensure that it succeeds, this transition needs to be tackled from a long-term perspective, involving the financial sector and citizens.
Regarding the Paris Agreement, BBVA will align itself with the scenario 450 of the International Energy Agency, which sets out an energy pathway consistent with the goal of limiting the global increase in temperature to 2°C by 2040. Besides managing environmental and social risks to minimize potential negative direct and indirect effects, it will include a public announcement with specific commitments in the 2025 horizon, with the purpose of contributing to mobilize the capital required to curb climate change and achieve these goals.
Opportunities for businesses
Valvanera Ulargui also noted that the low-carbon energy transition model is already a reality that will create new opportunities for companies, and that Spanish businesses are well positioned.
Fulfilling the established goals will require additional funding, and that is where key opportunities lie for Spanish companies, she underscored. In her opinion, compliance with the Paris agreement will drive private investment.