Sustainability also plays a role in the financing of trade, as explored in the event’s “Climate and Green Finance” session, moderated by Zoë Knight, Managing Director and Group Head, HSBC Centre of Sustainable Finance. “[HSBC is] taking a more active role within industry associations and other forums to really understand what the decarbonisation pathway looks like for various industries, but also how finance can be much more transparent about how it's supporting the pathway forward,” said Knight.
Investors and issuers alike are increasingly interested in green finance products, she explained, with a survey on sustainable finance finding that 94% of respondents viewed environmental, social and governance (ESG) issues as important or very important.
Panellists – Dr Peter Glynn, Vice Chair Environment and Energy Committee at Business, OECD, Chengcheng Xiong, Deputy Director of Green Finance Department, CECEP Consulting, and Carlo Ferrara, Head of Sustainability, Enel Argentina – delved deeper in the subject.
ESG frameworks and indices have come to the fore, noted Ferrara. “It’s interesting to see that more and more institutional investors are following the guidance of sustainability indices when deciding to invest in a company.” A good sustainability index result may attract an institutional investor portfolio and minimise the volatility over the lifecycle of the obligation, he explained.
Panellists also noted that banks can and should practise what they preach when it comes to green finance, ensuring operations transition to a net-zero model, for example, and aligning client portfolios with sustainability frameworks.
It’s not only corporate and investment banks with a role to play here. Dr Glynn also cited the role of multilateral development banks in encouraging green and sustainable finance, and ESG friendly projects more broadly, especially in emerging markets.
“Many developing or less developed countries’ commitments to climate change are through their nationally-determined contributions with the UN Framework Convention on Climate Change (UNFCCC). These are conditional on external finance – the challenge then is linking the available private sector funds with bankable projects in developing countries,” Dr Glynn said.
Examples include Chile, where the Inter-American Development Bank (IDB) is working with the Chilean government and Enel, the global energy company, on the closure of coal mines in favour of constructing wind farms. IDB has worked closely with Enel to develop the appropriate methodology for measuring the reduction in emissions and report on the cost-benefit of the project, while analysing the implications on employment, among other ESG considerations.