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The sense of urgency that has begun to be apparent in public debate about climate change was noticeable at The GlobalCapital Sustainable and Responsible Capital Markets Forum on Tuesday 17 September at the Beurs Van Berlage in Amsterdam. Welcoming 165 issuers, investors, and financial intermediaries, the one-day conference analysed and debated the big questions and developments in sustainable finance. GlobalCapital ended the day by announcing the winners of its Sustainable and Responsible Capital Markets Awards 2019 during the conference cocktail reception.
The SDGs were central to Simon Zadek’s opening keynote interview, in which he looked at issues from a very different perspective: that of fintech. Zadek has been involved in several sustainable finance policy initiatives, but is now leading a task force for the UN Secretary-General on Digital Financing of the SDGs. Fintech has great power to drive social inclusion and give people more control over how their money is invested. But, he added, it was “a two humped camel. Digitalisation helps overcome barriers to sustainability but brings illicit financial flows.” In trying to ensure digital finance is used for social good, not ill, the main challenge is governance. Facebook’s effort to establish its own currency, Libra, is bringing the issue to a head. Zadek ended with a plea to the audience to get their fintech and sustainability people, who had probably never met, talking to each other.
Roelfien Kuijpers, Head of Responsible Investments at DWS, remarked in her keynote interview, “I’m ultimately an optimist but we are running out of time.” Scientists at the Potsdam Institute for Climate Impact Research believed, she said, “we have 18 months left to make the 1.5 degree outcome achievable. If we reach 2 degrees the curve stops being linear and it goes up much faster. Life as we know it is just not possible with a 5-degree increase. So I owe it to my children to do all I can do.” Kuijpers argued finance should strive to ensure there was a just transition.
This was followed by a heated discussion about the responsibility of the financial sector in the face of climate change during the opening panel discussion, Capitalism with purpose — can finance reinvent itself as a force for social good?. Rabobank’s Maarten Biermans argued that putting all the onus on the financial industry was not going to work. He called for governments to sort out industrial policy so that the economy was heading in the right direction – financial firms would then be happy to finance new industries. This drew a rebuke from Louise Wilson, co-founder of Abundance: “Finance is part of the problem. You can’t just put the responsibility back to governments. The financial sector has enormous power, she argued, and should tell the government to get its act together. Standard Chartered’s Amit Puri added that they have turned down some deals for environmental and social reasons, not putting profit before purpose. In response to the remark that the bank was still lending to fossil fuel companies, Puri said: “We are trying, we are a big machine. Cultural changes takes time. It took nine months to agree three words: no more coal.” S&P’s Corinne Bendersky remarked that social purpose is subjective in nature, so there needs to be dialogue. Several speakers picked up on an analogy of Sean Kidney’s (Chief Executive Officer of the Climate Bonds Initiative): “We’re standing beside a railway track. There’s a train coming, and our kids are tied to the track.” Environmentally sound investing was not about doing good, he argued — it was about “saving our skin” — though you could make money at the same time.
A focus session on The meaning of impact brought together three bond investors and a former investor now at an NGO to discuss the now ubiquitous buzzword ‘impact’. Does an investor have impact just because its money goes to a good purpose — or is it important how much the investor has contributed to bringing that result about? Investors say they are having impact because they can identify one result of their investment. But shouldn’t they be thinking about impact in the round? Investments do not just have one kind of impact but many, both good and bad.
Four corporate finance chiefs joined Stéphane Marciel, head of sustainable bonds at Société Générale, to discuss progress in sustainable financing in the corporate sector on the panel Corporate finance makes SRI waves. Marciel said corporate issuers were making up a higher share of the sustainable bond market than last year, but added: “It needs to go faster.” The panellists discussed how sustainability plays into the relationship between banks and companies and the role of the rating agencies.
In the afternoon, there was a special discussion about one of the hot topics of the moment: Transition bonds. Joop Hessels, head of green, social and sustainability bonds at ABN Amro, supported the idea of a new class of bonds dedicated to financing issuers that perhaps are not green yet, but are making a transition to cleaner technologies and practices. He welcomed Enel’s recently issued bond which has a coupon step-up linked to sustainability criteria. However, other speakers were more sceptical about transition bonds, especially because there is a risk they can be used as a cover for unsustainable activities.
Elvira Eurlings, agent at the Dutch State Treasury Agency, and Robert Zima, director of Poland’s public debt department, discussed Sovereign green bonds: now a must-have? and anchored the issue firmly in the political sphere. Julien Bras, portfolio manager at Allianz Global Investors, emphasised that sovereign issuers “need a clear, ambitious strategy in the field of climate change”. Navindu Katugampola, head of SSA and sustainability bond origination at Morgan Stanley, said: “The sovereign green bond isn’t the starting point. A sovereign should think how they deal with ESG investors.” But he strongly supported issuing them, saying: “Doing nothing when it comes to issuing green bonds also has a cost.”
The audience broke into smaller groups later on in the afternoon for focused Target Tables of 10 people each, covering blue bonds, ESG ratings, sustainable infrastructure and urban regeneration, catastrophe bonds and gender equality. In a panel on Finance where it’s needed: green capital markets at the sharp end, speakers discussed whether smaller and innovative companies striving to bring about the green transition can obtain the financing they need. In the Securitization Roundtable, three investors in the little-known world of synthetic risk transfer securitizations for banks explored the potential for this kind of investing to be done with an ESG lens. In the session A regulated market — how does EU legislation change SRI? two issuers and an investor considered how markets will cope with the Taxonomy of Sustainable Economic Activities, Green Bond Standard and other rules being brought in by the EU.
The conference drew to a close with a final debate, Defining goals for the sustainable bond markets, with speakers from the World Bank, KfW, European Investment Bank, Amundi Asset Management, ICO and PRI. Carmen Nuzzo, head of fixed income at the Principles for Responsible Investment, said it was “the duty of any bondholder to be more inquisitive of where the money is going and what risk the ESG factors pose to them.” She added: “Client demand has risen. The regulators are waving their stick. There has been lots of progress on enhancing transparency but we haven’t seen capital changing yet.”
Euromoney would like to thank all of our sponsors, speakers and delegates, without whom the event would not be possible. We look forward to the eighth Sustainable and Responsible Capital Markets Forum in 2020, and to seeing you all there.
For speaking and sponsorship opportunities for 2020, please contact Sara Leech, Head of Programming - email@example.com
Sustainable Financing and Investing Survey
The Sustainable Financing and Investing Survey is now closed. Analysis of the survey will be published in September with excerpts of the data displayed at the Forum.
Awards Poll and Ceremony
Voting for the awards poll has now closed. The Sustainable and Responsible Capital Markets Awards 2019 will be presented at the cocktail reception following the Forum. Decided on the basis of a poll of market participants conducted in June and July, the Awards are the only ones that truly reflect the market’s opinion.