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Corporate lending 18 Jul 2018

“The role of banking should be key in legislation promoting sustainable finance”

The European Union continues to redouble its focus on sustainable finances and as part of this strategy the European Parliament last week held a forum attended by the main players in the financial world, among them BBVA through the presence of Antoni Ballabriga, Global Head of Responsible Business at the Bank.

The event, which took place on July 11 in Brussels, was organized by the European Parliamentary Financial Services Forum (EPFSF), of which BBVA European Public Affairs is a member in representation of the BBVA Group. The forum regularly brings together financial industry representatives and MEPs to debate the latest regulatory issues in the area of financial services.

In his remarks, Antoni Ballabriga emphasized the banks’ role as the main source of financing for the European economy and advocated that the leading role it plays in promoting sustainable finance be accordingly reflected within ongoing European legislation.

The conference, moderated by the British MEP Molly Scott Cato, was also attended by representatives of other institutions from the financial world (HSBC, Luxembourg Stock Exchange, Amundi, UBS, Union Asset Management Holding, London Stock Exchange and Insurance Europe), as well as financial services users (Finance Watch), and the European Commission (Barbara Gabor, DG FISMA).

Ballabriga insisted on the importance of legislative proposals in the pipeline ensuring a holistic view of sustainable finances. The Global Head of Responsible Business at BBVA lamented the fact the proposed regulation on establishing a common European taxonomy refers to ‘sustainable investment’, rather than the broader term ‘sustainable finance,’ which would cover a wider range of activities, including lending. In his opinion, sustainability in the financial industry should cover all environmental, social and governance aspects. “Ongoing legislation proposes putting back the inclusion of social aspects until the end of 2021. We can’t wait that long. We need to adopt a more holistic focus from the start”, Ballabriga concluded.

The meeting also provided an excellent opportunity to convey to European regulators BBVA’s conviction that financial education is of incalculable value for society. Not only does it develop responsible behavior by individuals in managing their finances but also provides the necessary basis on which to evaluate the risks inherent in financial products they acquire, encourages saving and reinforces the stability of the financial system.

In this regard, Antoni Ballabriga pointed to financial education as a key tool in implementing Sustainable Development Goals (SDGs) and called on the European Commission to include this aspect in its Action Plan for financing sustainable growth as well as in the framework of the Capital Markets Union (CMU).

With respect to the incentives required for the transition toward a low-carbon economy, participants gave further backing to the idea of the possible introduction of a ‘green supporting factor’ being phased in with priority being given to establishing a common taxonomy based above all on data and empirical analysis that justify the application of this factor from the point of view of risks. On the other hand, the possibility of opting for a ‘brown penalizing factor’ failed to win the support of those taking part.

The Global Head of Responsible Business at BBVA argued for the establishment of a consistent policy and pointed out that many of the industries considered ‘brown’ continue to receive subsidies.  Ballabriga added that under the 450 Scenario, European energy will continue to depend 60 percent on fossil fuels in 2050, which in his opinion backs the idea of working on regulatory frameworks that instead of penalizing investments in these sectors allow financial players to accompany clients in the transition toward business models compatible with climate challenges.

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