Towards a sustainable financial system: lessons from national case studies and global practice
Date: 1st December, 11.15am – 12.45pm
Location: Générations Climat – Room 10
Organizers: I4CE & UNEP Inquiry
The UNEP Inquiry maps current best practice, draw together principles and frameworks, catalyze new thinking, and ultimately lay out a series of options for advancing a green financial system. This event will present some of the emerging practice from national case studies and global practice supporting the transition to a sustainable, low-carbon economy.
Introduction: Nick Robins – UNEP Inquiry – Overview of results of global report
Round Table: Changes in practice: national case studies and evolving global trends
Moderator: Stanislas Dupré, 2° Investing Initiative
- Romain Morel – I4CE: What is all the fuss around Article 173 in France?
- Leon Wijnands, Global Head of Sustainability, ING Netherlands: Key lessons from the Dutch national experience
- Sean Kidney, Climate Bonds Initiative: What policies are needed to grow the green bond market?
- Siobhan Cleary, Head of Research and public policy – World Federation of Exchanges: Exchanges as the nexus between issuers and investors
You can download the UNEP Inquiry Global report here: http://unepinquiry.org/publication/inquiry-global-report-the-financial-system-we-need/
Or the I4CE French Report here: https://www.i4ce.org/download/french-ecosystem/
On Tuesday 1 December, I4CE – Institute for Climate Economics and UNEP Inquiry organized a side-event at COP21 to discuss how national and asset-based initiatives are moving forward to build a more sustainable financial system.
Nick Robins, co-director of UNEP Inquiry, presented the main results (see slides below) of the two-year program showing that multiple initiatives have been implemented at different levels to improve the financial system and make it more sustainable. He described the challenges coming ahead as well as the opportunities for the financial system.
The roundtable, moderated by Stanislas Dupré from 2° Investing Initiative, detailed initiatives led in France and the Netherlands as well as global initiatives including how the green bond market is structuring itself and the role of stock exchanges.
Romain Morel, project manager at I4CE, presented what is at stake with the integration of sustainability factors in the financial sector in France. His presentation was based on a recent I4CE-UNEP Inquiry report on France. He explained that complex dynamics are occurring and that the existence of an ecosystem of actors helped these issues to move forward. France’s strategy is focusing on providing, improving and organizing information of climate-related issues in the financial sector. This year’s innovation on climate disclosure requirements (the much discussed article 173) for financial institutions builds on over a decade of innovation in France.
Leon Wijnands, Global Sustainability Director at ING, presented the process occurring in the Netherlands – detailed in a recent UNEP Inquiry report – which relies on voluntary actions of institutions. The Dutch government supported the creation of a cooperative process to share experience. The ‘polder’ model in the Netherlands is based on a long tradition of public-private collaboration.. Leon mentioned the issues of raising private capital and the refinancing of green assets, which in his view are not discussed enough. He ended his presentation by presenting the recent ING green bond issuance focusing on such issues.
Rob Fowler, Advisory & Research Services at the Climate Bonds Initiative, first explained how bonds fit into the broader flow of finance to climate solutions. He discussed the way that green bonds tap into an existing mainstream financial market, rather than trying to create a new or innovative tool. He highlighted the scale and speed of the global bonds market, and the primary use of green/climate bonds as a way to support the refinancing of green assets. Rob talked about the very-low risks which bond buyers need to invest, and the efforts to combine and package low carbon & climate resilient assets so that they can be financed by a green bond and funded by institutional investors, who are hungry for these investment products. There was also a discussion about the pricing of green bonds, and Rob highlighted that the massive scale of funding that we seek is from the mainstream bond markets, where investor mandates are not consistent with premium pricing. More information is available in the report by the Climate Bonds Initiative under the UNEP Inquiry on Scaling Green Bond Markets for Sustainable Development. It covers how policy makers can help to grow the green bond markets in their own jurisdictions – and will be released on Wednesday of the second week of COP21.
Siobhan Cleary, Head of Research and Public Policy at the World Federation of Exchanges focused on a different asset: stocks. She highlighted the role of stock exchanges in assisting the transition to a more sustainable the financial system. She explained that the role of exchanges is to provide relevant information in the best manner as possible to capital market players. It seemed increasingly clear that climate information fell into this category. Exchanges such as Brazil or South Africa had been encouraging sustainability disclosure by companies for a while, but companies obviously had a choice about where to list so in very competitive jurisdictions it could be more challenging to unilaterally impose more onerous disclosure standards. However, the recent issuance by the WFE of disclosure guidance demonstrated exchanges’ recognition of the relevance of this issue for issuers and investors.
Discussions with the public focused on the reporting taskforce implemented by the Financial Stability Board and the need for coalition of actors; participants agreed that the momentum is building and the dynamics must keep going.