Sustainable Finance: hot topic at the 2021 IFF
On June 29th, the Paris Europlace International Financial Forum was held in Paris, and retransmitted live online. This year’s edition, that gathered international investors as well as policy makers, was focused on European recovery in a post-pandemic context, as well as sustainable finance. At a time when only few can still deny the reality of climate change and its disastrous impacts, environmental concerns have become a hot topic, even amongst those that turned a blind eye on it for a long time. Policy makers as well as investors, as you will read, are now voicing their determination to try and operate a so-called “green transition” of finance, a way to implement measures that preserve the environment whilst still generating profit.
IFF 2021: Sustainability as one of the core issues
Right in the opening address of the Forum, held by Augustin de Romanet, Paris Europlace’s Chairman, the development of sustainable finance is described as one of the two strengths Paris can build upon to attract foreign investors. A. de Romanet went on listing the six priorities of the Capital Market Union, a project at the center of many discussions on this day. The harmonization of goals of the European taxonomy for sustainable activities, as well as the the aim to bolster economy through sustainable finance amongst others were both included in those priorities.
European Commissionner McGuinness then proceeded to extrapolate on the road to European financial recovery after the pandemic, stating this path to recovery will serve the transition towards sustainable finance. Indeed, this was the opportunity to get finance flowing towards sustainable activities. « Money is key in all of this » she stated. According to her, « If Europe is leading in sustainability then that’s where the rest of the world is going to go ».
In his keynote address, French Minister Bruno Lemaire quickly underlined the fact that the fight against climate change ought to be the long-term goal. He also stressed the importance of the EU taxonomy’s role, concluding by stating that « It can be the beginning of a beautiful decade ».
After touching on the subjects of issuers as well as post-crisis technology investment opportunities, the final discussion on sustainable finance took place. This discussion brought together a variety of participants: Christian Gollier, Professor at the Toulouse School of Economics; Valérie Baudson, CEO of Amundi; Lorenzo Bin Smaghi, Chairman of the Board of Directors at Société Générale; Thierry Deau, CEO of Meridiam; and Philippe Heim, CEO of La Banque Postale.
On the Road to Glasgow’s COP 26
Prof. Gollier started off by stressing the importance of the impact of such a transaction towards sustainable finance, using the French Yellow Vests Movement as an example. Indeed, he qualified measures that raise the price of energy as generally regressive. Valérie Baudson agreed, stating that «we need to remain aware of global and local social impacts», praising the potential benefits of the establishment of a social taxonomy. Thierry Deau warned that small businesses were particularly difficult to encourage and support in this transition, outlining the fact that small companies represent a great share of employment in France.
The topic then shifted towards carbon pricing and the EU taxonomy, with Prof. Gollier advising the cost of CO2 be increased over the years, and the scope of carbon pricing be enlarged to all emitting activities. According to him, « Carbon pricing is inevitably the solution ». Valérie Baudson carried on stressing the importance of geopolitical balances and national interests, citing nuclear energy in France as an example. It is interesting to note on that behalf that the European Commission has now announced it plans to include nuclear energy production as a sustainable practice in its taxonomy.
Lorenzo Bin Smaghi on the other hand, expressed his feelings concerning the fact that regulators were not being clear on where they wanted to go, and that this generated uncertainty at levels that could be threatening the transition. Along the same tracks, Philippe Heim raised his concern on the risk of confusion a too complex European legislation could harbor, but testified to the fact that awareness on the subject was growing exponentially on the board of La Banque Postale.
On what ought to be done, Lorezo Bin Smaghi and Prof. Gollier agreed on the need for transparency in this transition, as well as the crucial role of data and that more should be gathered in order to produce a clearer, more reliable taxonomy. Valérie Baudson, after stressing the importance of making green energies more affordable for customers, expressed she felt like the COP had « changed minds, but not so much actions ». Her expectations for Glasgow’s COP 26 were an increased number of countries committing, as well as the implementation of shorter-term commitments, with deadlines as early as 2025 or 2030, in order to push executives in charge now to take actions aligned with their commitments, as they would be more likely to still be in office once the deadlines were reached.
Finally, she added her concerns on the sovereignty of data, and on the fact that it is feared that said sovereignty could concentrate in some hands, like the U.S.’s for example. Lorenzo Bin Smaghi stated the importance of entire boards being made aware of climate risks, and to not exclude them in favor of a few specialists. Expanding beyond the European scope of the forum, Philippe Heim recommended the implementation of globally applicable rules, calling upon European actors to broaden their intended impact for a more efficient transition towards green finance.
Picture Caption: Head promotion page of the 2021 Paris Europlace International Financial Forum.