Sustainable Finance in Context

Our planet is warming at an ever faster rate and there is no need to remind one of the effects. International institutions and governments are mobilizing resources in an effort to save the world as we know it, assuming that reducing CO2 emissions is the key objective in order to slow down climate change. Calculations are being made of how much investment is still needed to reach the 1.5°C target set in the Paris Agreement and it is quite clear that public money won’t be enough and that private financial markets need to be part of the change, too.

The demand for sustainable investment is on the rise, but the supply side is lagging behind; moreover, investors do not want to fall into greenwashing traps. Investees must become more transparent and disclose information about their impact on climate change and other sustainability issues. This creates a need for a common definition base, robust data with sufficient granularity and some level of automated processing. We also need to understand what kind of risks arise from ongoing climate change and our adaptation and mitigation efforts, whether they should be considered as financial risks and how they are relevant for CROs and prudential supervisors, as well as their possible impact on financial stability. These and many more issues will be discussed at the conference.

With three EU legislative proposals concerning sustainable finance in the regulatory pipeline and many other ongoing international sustainable banking initiatives, it can be challenging to keep track of everything. The first panel will be aimed toward providing a comprehensive overview of these different actions. Martin Špolc will focus on the EU Commission’s Action Plan on Sustainable Finance and its implementation, including the three pieces of legislation, which are currently in the approval process. Slavka Eley will present different workstreams and plans of the European Banking Authority with regards to Sustainable Finance. Armando Ferreira will speak mainly about the Principles for Responsible Banking, developed within the UNEP FI programme and inspired by the Principles for Responsible Investment.

Climate risk definition and treatment and prudential supervision will be on the agenda of the second panel, as well as possible capital allocation incentives. Climate change underscores the importance to take into consideration new types of risks. Climate risk as such is not a new phenomenon, but its translation into financial risk brings a new viewpoint for risk managers and prudential authorities and perhaps a discussion about its longer-term perspectives. Central banks also have roles other than supervision; they accumulate assets in their reserves. Does it make sense to buy sustainable assets? And finally, should we incentivise sustainable lending through the capital requirements pillar?  

Then, we will look at the business side of sustainable finance with the third panel, discussing the demand and supply of different financial products, as well as banks’ sustainable behaviour in a broader perspective. Panellists will discuss to what extent existing financial products are being adapted to the needs of sustainable business. Panellist will reflect upon the role of banks in mainstreaming sustainable finance and different possible ways to contributing to the scale-up without disrupting the risk-based logic of debt and equity businesses.  

Last, but certainly not least, we will dive into the issues of data, disclosures, reporting and rating, which are the prerequisite for solid and informed decisions of any kind. The last panel speakers will talk about the famous taxonomy file, as well as the disclosures needed to understand the degree of sustainability of a company, an asset or a project. This then leads to a new domain of the rating business.