14 Mar 2019
EUR 102.26 million
Financial institutions and SMEs
“In order to achieve a 1.5 Celsius degree pathway, incremental investments beyond business-as-usual is an additional 0.36% of global GDP”, says Dr Hoesung Lee, Chairman of the UN Intergovernmental Panel on Climate Change (IPCC) the NIB-arranged panel debate on sustainable financing at the COP24 in Katowice, Poland.
"The ratio can be compared to 0.3% of the global GDP for a 2 Celsius degree target”, says Dr Lee.
IPCC released the report "Global Warming of 1.5 ºC" in October, stating that urgent and unprecedented changes are needed to reach the Paris Agreement. Commissioned by the UN, the report concludes that every percentile of a degree of warming matters, and that further temperature rises will have substantial impacts on the environment, lives and the economy.
The 24th Conference of the Parties to the United Nations Framework Convention on Climate Change is held 3 - 14 December. The COP24 is hosted by Poland in Katowice, and the aim is to agree on a rulebook to make the Paris Agreement a reality. Meeting the targets of keeping global warming “well below 2 degrees Celsius” and making efforts to limit it to 1.5 degrees would mean profound changes to the environment, health, business and infrastructure.
Asked about his opinion on the four countries objecting, during the COP24 negotiations, to “welcoming” the IPCC report, but rather “noting” it, Dr Lee replies that “Our report speaks for itself”.
“Science is very clear and the key initiative is now with the nations.”
Ms Marie Baumgarts, Head of Sustainability at SEB and member of the EU Technical Expert Group on Sustainable Finance, says she is “increasingly optimistic because right now, the development of sustainable financing is happening at a tremendous speed.”
“The expert group is working to support the ongoing market transition, and is currently focusing on the taxonomy of what should count as green, criteria for green bond issuance, company impact benchmarks and climate impact reporting”, Ms Baumgarts says.
Ms Baumgarts also invites feedback on a recent working proposal from the working group. The deadline for commenting is set to 22 February 2019.
Understanding of risk
Mr Idar Kreutzer, CEO of Finance Norway, comments on the “problematic jungle” of different and competing sustainability frameworks and standards, saying all entities now looking to become more sustainable will need simpler guidelines for all to succeed.
Asked how he sees the role of the financial institutions, Mr Kreutzer replied that the finance need going forward is staggering and that financial services are an integral part of the solution.
“Climate change is a challenge for society and a threat to financial stability. This makes climate change and the risks it poses an important matter for the financial sector. But the transition to a low-carbon future also presents considerable opportunities for society, for the business sector in general and for the financial sector in particular”, Kreutzer says.
“The transition to a low-carbon future depends on large-scale investments in infrastructure. Look at the pension funds in Europe, which have EUR 12 trillion under management and less than one percent invested in infrastructure, with a small portion of that being green. The potential is significant.”
Mr Kreutzer says it is all about the understanding and pricing of risk.
“The financial sector’s ability to participate in a low-carbon future is dependent on close collaboration with the authorities to adjust regulatory conditions. When the authorities are able to cover part of the risk, the threshold is lowered for private capital to finance and invest in projects and ventures that are aligned with the UN Sustainable Development Goals, especially those that relate to climate change”, Mr Kreutzer says.
Mr Thomas Wrangdahl, First Vice-President and Head of Lending at NIB, says the Bank’s customers are very receptive to having a dialogue on the environmental impact of their projects, and how they match NIB’s mission of providing long-term lending to projects that increase productivity and benefit the environment.
“Our clients appreciate NIB’s angle of analysing the environmental impact of their projects and not only credit risk perspective“, says Mr Wrangdahl.
“We see an increasing cross-over effect between productivity and environmental aspects. Technical progress is very much related to the environment”, Mr Wrangdahl says.
Turning the table
Ms Anna Denell, Sustainability Director at Vasakronan in Sweden, says “Vasakronan issued the world’s first corporate green bond in 2013.”
“At that time, we could not see a price difference between a green bond and a normal bond. But now after five years we seequite a large difference, and that actually saves us a lot of money”, says Ms Denell.
“Even if we would not have any problems funding ourselves with normal bonds, we see that our green bonds can educate our investors on what is green and what is not green. It also allows us to create closer relationships with our investors”, says Ms Denell.
“Before, we were only one of a thousand investment objects for investors, but now our investors are actually climbing our roofs to see the solar panels.”
“Buildings are hugely important from an environmental perspective. Building companies are very capital intensive. We can also contribute to significantly decrease carbon emissions. Globally, existing buildings create a third of carbon emissions, coming from the energy consumption within the building and from the construction phase”, says Ms Denell.
NIB’s panel debate is part of a Finance Day, held at the Nordic Council of Ministers’ Nordic Pavilion at COP24. The Finance Day is arranged together with Nordic Environment Finance Group (NEFCO) and Nordic Development Fund (NDF).
You can watch a recorded webcast of the debate here.