Minds in Europe are increasingly focused on accelerating a green and just transition. But the key question is: how do we pay for it? A distinguished group of panelists from the world of banking, government and civil society came together at Financing the Future, a high level plenary at CSR Europe’s SDG Summit 2021, to discuss the topic.
“As a sustainability network, how can we work best to optimise this evolution of sustainable investment?” asked Stefan Crets, Executive director at CSR Europe. “And how can we make that transition be as inclusive as possible?”
The EC’s Commissioner for Financial Affairs, Mairead McGuinness, was clear on the direction needed. “We won't reach the next frontier of sustainable finance with public money alone. We need the private sector to play a leading role.”
It’s clear that Europe’s leaders are not lacking in ambition, and increasingly lead the world on sustainable finance. Indeed, the EU’s European Green Deal Investment Plan (EGDIP) aims to mobilise at least €1 trillion in sustainable investments over the next decade.
Many European banks and investors are signatories to the UN-convened Net-Zero Asset Owner Alliance, a record-breaking network of 587 investors with US$46 trillion in assets under management. The alliance is urging governments to urgently implement measures including mandatory climate risk disclosure requirements.
But higher reporting standards present some businesses with challenges.
The first is the challenge facing some industries in their decarbonisation journeys. “Take for example the auto industry. Going from thermal propulsion to the electric world is a very different ecosystem,” said Hacina Py, Head of Impact Finance Solutions at Société Générale. “You will need infrastructure funds, sometimes new business models. We need to make sure we will have the right models in terms of regulatory capital.”
Hacina Py raised the prospect of some businesses being denied finance due to failures to meet ESG objectives. A transition asset ratio may be needed, she suggested, and initiatives to avoid a crunch on liquidity.