Sustainable finance granted new momentum by crisis, writes Commerzbank’s Say Huan Long in Renewables Investor

Sustainable finance had already been gaining momentum prior to the pandemic, but the current situation has prompted a greater sense of urgency around the need to transition towards a greener global economy. Long Say Huan, senior banker for financial institutions at Commerzbank, explores the role of financial institutions in driving this change in Renewables Investor.

The recent oversubscription of the Kookmin Bank’s COVID-19 Response Sustainability Bond, — the first COVID-related issuance by a non-sovereign institution in Asia — provides tangible evidence of growing interest among financial institutions in prioritising sustainable outcomes. Transitioning to a greener economy, argues Long, requires financial institutions’ perspectives to be adjusted to look beyond immediate commercial gains towards longer-term sustainable profitability.

Read more in Renewables Investor.

Commerzbank releases latest edition of FI.News

Commerzbank has published the latest edition of FI.News, the bank’s newsletter for financial institutions. Featuring various in-depth articles and interviews, the biannual newsletter collects Commerzbank’s latest insights on the challenges and opportunities that lie ahead for financial services in today’s transformational times.

Financial institutions are understandably operating in challenging circumstances. Yet this edition of FI.News keeps its gaze firmly ahead –  exploring the ways that the current situation could be a catalyst for change in a number of areas, including digitalisation, trade finance, African trade and sustainable finance. The newsletter also provides latest news stories and internal updates from the Commerzbank Institutionals division.

Moorgate has produced FI.News since 2013. The latest edition may be found here.

Case study: Encouraging a sea-change in global shrimping

Targeting investors, Moorgate-Finn helped launch Planet Tracker’s “Shell Shock” campaign that highlighted concerns about unsustainable shrimp farming practices.

 

Planet Tracker is a non-profit financial think tank aligning capital markets with planetary boundaries. It was created to investigate the risk of market failure related to environmental limits – an investigation primarily focused on and for the investor community where environmental limits, other than climate change, are poorly understood, even more poorly communicated and not aligned with investor capital.

Planet Tracker creates ground-breaking in-depth financial analytics delivered through reports and briefing papers to raise awareness of “values-at-risk” to the financial community, and engages with institutional investors and analysts to unlock and redirect the transformative power of capital markets to deliver on sustainable development objectives.

Planet Tracker and Carbon Tracker are two initiatives of Investor Watch, founded by Mark Campanale and Nick Robins. Planet Tracker investigates the risk of market failure related to ecological limits, focusing on oceans, food and land use, as well as materials such as textiles and plastics. Carbon Tracker carries out in-depth analysis on the impact of the energy transition on capital markets and the potential investment in high-cost, carbon-intensive fossil fuels.

On the back of our strong work for S&P Global Ratings’ Sustainable Finance team, Planet Tracker approached Moorgate-Finn Partners to help launch some of their most critical reports. As with S&P Global Ratings, the strategy was simple: to “communicate their expertise”. This meant highlighting the depth and calibre of Planet Tracker’s research output by using both the information and data within the reports but also the expertise of the authors. As with previous reports, the need was to highlight the concerns, but specifically the risks, to investors using every available news generation and thought leadership tactic.

This included using its reports as news triggers for straight coverage, but also as the basis for thought leadership commentary articles (“sliced and diced” to target different audiences) and for citation, interview and podcast opportunities. The aim was also to engage with both the tier one and specialist media but also other influencers, including environmental lobbyists and analysts within leading financial institutions (perhaps utilising their blogs or internal publications).

The Approach

Starting in January 2020, our first assignment was to raise awareness among companies and investors in the US$45 billion global farmed shrimp industry, based on a Planet Tracker report called “Shell Shock” (part of their Oceans Tracker series). Hidden within the environmental concerns regarding the industry’s practices were financial exposures that Planet Tracker identified as potentially impacting investors within the supply chain. In some cases, listed companies and global brands held investments that could prove both a financial liability and reputational burden – thus providing them with a financial incentive to prefer sustainable investment and enhanced risk disclosure over practices such as mass mangrove deforestation. Ultimately, the aim was to encourage a sea-change in global business practices in the shrimping industry.

Moorgate-Finn:

  • Launched Planet Tracker’s “Shell Shock” briefing paper as news, targeting tier-one, financial, regional and specialist environmental, oceans, aquaculture and public affairs press
  • Co-ordinated a series of interviews and relationship-building meetings with both tier-one and specialist journalists: Examples: Reuters and Seafood Source
  • Partnered with other non-profit and institutional organisations dedicated to promoting sustainable development and policy i.e. the Center for International Forestry Research on podcast, blog and other thought leadership initiatives
  • Targeted upcoming features by key journalists with opportunities for Planet Tracker’s research to be cited, e.g. stories on the EU Action Plan on Deforestation; the UN Sustainable Development Goal 14: “Life Below Water”; global commitments to the Paris Agreement; and mangrove Vs. Amazon rainforest deforestation.

The results:

While the report’s launch was a key moment for first-round news coverage, it was a second and third round of thought leadership and expert citation – as well as broadening beyond the media to key influencers – that ensured the issues raised resonated with the key audiences.

Moorgate-Finn Partners secured coverage globally (an important client target) – including in Europe, Asia-Pacific and the Americas. This included in The Economist World Oceans Initiative, the Financial Times, Environmental Finance and Responsible Investor, Undercurrent News and The Asset (Asia’s leading financial/investment publication).

Leveraging the coverage, Planet Tracker has also reported engagement from more than 25 high-profile financial institutions, asset managers, investors and NGOs as well as endorsements from major players such as BNP Paribas and the Nature Conservancy Council, citing the tangible impact of the research on their business strategy/operations.

Hear also, the podcast on this subject: the Apple Podcast link is here and the Spotify link is here.

Since the launch of “Shell Shock”, Moorgate-Finn has successfully launched a major report on the relationship between Sovereign Bonds and natural capital, produced by Planet Tracker in collaboration with the Grantham Institute at the London School of Economics, its interactive Data Dashboards and a report on Food Loss & Waste in the European retail sector, “Scope for Improvement”.

Why banks are pivotal in a better, more sustainable world post-COVID

Despite the many uncertainties in today’s world, what is certain is that we now have a unique opportunity to rebuild and transform our economy into a sustainable and socially responsible enterprise. And it will be the banks that lead the way, writes Sarah Whitehead, Vice President at Moorgate Finn Partners.

To have a healthy and flourishing humankind, a healthy planet is essential. As such, the transition to a greener, more sustainable environment is an increasingly pressing priority for both public and policy makers worldwide – something all stakeholders must play a part in. More so than others – due to their central role in global economies and societies – banks have a critical role to play in helping limit the effects of global warming.

This role has been recognised within the banking community, which is making great strides in turning ideas and ambitions into actions and realities. In 2015, the Paris Agreement delivered a consensus that to address climate change, significant economic transition is needed. What’s more, last year the United Nations (UN) launched the Principles for Responsible Banking, which has seen 180 banks holding USD 47 trillion in assets (one third of the global banking sector) sign up to join the fight.[1]

In the Principles, banks have committed to strategically aligning their businesses with the goals of the Paris Agreement on Climate Change and the UN’s Sustainable Development Goals, and to massively scale up their contribution to achieving both. By signing up to the Principles, banks have declared that “only in an inclusive society founded on human dignity, equality and the sustainable use of natural resources[2]can their clients, customers, and businesses thrive.

Indeed, banks are where the financial sector and real economy meet, and are pivotal to driving investment in all sectors – whether that be infrastructure, transport, or real estate – all of which need to adopt a stronger emphasis on producing less carbon. Internationally, the European banks are leading the way for their APAC and US peers.

A number of investment banks in the region have already begun incorporating climate risk into their credit decision-making process. For example, French investment bank Natixis (a Finn Partners client) introduced a mechanism that results in them allocating capital to financing deals based on their climate impact, and have increased the proportion of their balance sheet dedicated to green lending.

As the world recovers from the impact of extraordinary impact of COVID-19, there is a unique opportunity: precisely because the economic havoc wreaked by the virus has meant that governments and financial institutions have the power and will to act. In some markets, for example, HSBC offers preferential interest rates for borrowers buying green cars and mortgages.

From financing housing developments to influencing investors’ asset portfolios, banks have a central role to play in ensuring a green recovery. Indeed, if we do not ensure that our post COVID-19 world is truly sustainable, we risk locking our future into unsustainable models that are less resilient and more exposed to future shocks, be these economic, epidemiologic or environmental.

 

 

[1] https://www.unepfi.org/banking/bankingprinciples/signatories/

 

[2] https://www.unepfi.org/news/industries/banking/130-banks-holding-usd-47-trillion-in-assets-commit-to-climate-action-and-sustainability/