Investor appetite for sustainable products has been growing exponentially in recent years. BBVA's Global Head of Responsible Business, Antoni Ballabriga, revealed that “This year $350 million in sustainable bonds and corporate loans will be issued around the world, 30 percent more than last year, according to data from the Institute of International Finance (IIF).” During the ‘Sustainable finance in the face of environmental challenges’ forum, organized by Spain’s National Association of Economists (Consejo General de Economistas), Ballabriga stressed that “there is still a lot to be done” and “one of the current challenges is to incorporate this trend into the SME and consumer markets.”
BBVA’s Global Head of Responsible Business described the financial sector’s important role in sustainability, specifically “the functions of financing, management, and engagement.” According to United Nations data cited by Ballabriga, financing alone represents “an investment opportunity of between $5 and 7 billion in order to globally advance the agenda of sustainable development and climate change, moving the world towards alignment with the Paris Agreement.”
“As banks, we have to facilitate this transition, and we have to embrace a more global vision, focusing not only on the climate, but also prioritizing social issues in this transition” Antoni Ballabriga stressed.
We need to assess the impact our business activity has on people
In the opinion of BBVA's Global Head of Responsible Business, financial institutions, along with the financing role, need to assume the mantle of a second function: management. “We have to manage and incorporate these new challenges into our management models, strategies, and risk models, among other areas. We need to assess the impact our business activity has on people and society, and determine where the greatest impact is and identify the goals we should set for ourselves so we can mitigate this potential negative impact,” he explained during his discussion.
Finally, he talked about the industry’s duty to engage interest groups, “Alone, we will achieve very little, we need to engage all our interest groups: our customers — corporations and individuals —, and public institutions, but also employees, investors, our competitors, and industry regulators.” He singled out initiatives such as the Principles for Responsible Banking, which “were recently ratified by more than 140 participating entities, representing a third of the banking system.”
Antoni Ballabriga, BBVA's Global Head of Responsible Business, during his speech in ‘Sustainable finance in the face of environmental challenges’ forum. In the background, Carlos Trías, Counsellor of the European Economic and Social Committee. - Spain’s National Association of Economists (Consejo General de Economistas de España).
The forum’s closing session was conducted by Spain’s acting Minister of the Economy, Nadia Calviño, who advocated for the integration of climate change elements “into day-to-day business, building costs and risks into financial valuations, but also taking into account the opportunities.” She explained, “From a financial, environmental, and social standpoint, we are moving in the right direction in order to keep the economy growing for a sustainable future.” In her opinion, the financial sector plays “an important role” in this process, channeling savings into productive investments and the transition process. The Minister confirmed the Treasury Department’s plans to issue a green bond in 2020.
Other participants in the event included Francisco Javier Garayoa, Director of the Spanish Sustainable Investment Forum (Spainsif); the head of Spain’s Department of Climate Change, Valvanera Ulargui; and the President of Spain's National Association of Economists, Valentín Pich. The latter pointed out that “the ecological transition could represent a significant opportunity for our economy.” According to Pich, “Investments must look for three kind of returns: social, environmental, and economic. One cannot overshadow the others.”
The economic impact of energy transition
Spain’s central bank, Banco de España, was represented by José Manuel Marqués, head of the Financial Innovation Division. He explained how important it is for financial institutions to quantify the impacts of climate change risk. “This is a priority for the Banco de España in its role as supervisory authority. Undertaking a global assessment of the impact for the whole of the economy is something much more complex,” he summed up.
Spain's National Association of Economists coordinates and represents nationally and internationally all the associations of economists and mercantile officials in Spain, in addition to regulating and upholding the professional practice of its members. At present there are 55,000 members across the 57 active associations.