900 leaders, innovators, innovators and investors gathered in London to deliberate on global green finance directions in the 2020s
Conference Report: The Headline Numbers
The Climate Bonds Conference in 2019 saw 900 people from 55 nations discussing how to grow green bonds - and the underlying activity needed to transform our economies - that is commensurate with the huge challenge of addressing climate change.
Here are some participant quotes that crystallise the proceedings and mood:
Urgency & Collective Action
Regulators, policymakers and leaders stressed urgency:
“Climate change is the result of the greatest market failure that the world has seen,” said Knut N. Kjær, Executive Chairman, Sector Asset Management and first manager of the Government Pension Fund of Norway, as he pressed that markets should be considering the long-term when accounting for the risks and returns of their investments.
“In 11 years, we have to rethink, dramatically, almost every aspect of the way we live, we travel, we consume, it’s an incredible challenge!”
“But as Sean [Kidney] just said, it’s a question of ‘will’ and again the counterfactual, ‘do nothing’ is so worrying, not for the planet…it’s about us.”
“Some of you may know Jean Monnet, one of the founding fathers of EU, he used to say, ‘I’m not optimistic, I am not pessimistic, I am determined,’ and this is what we need to be now.” – Olivier Guersent, Director General, DG-FISMA, European Commission
Tools to Deliver the Trillions
“100 trillion is needed for a sustainable transition? At the moment the biggest game in town is the green bond market, at over USD500bn to date, so there is a clear funding gap.”
“Bank balance sheets are not large enough to finance the infrastructure projects needed. We need to free up the bank’s balance sheets to provide space for more investments.” – UK based global asset manager
“If the cost of having a liveable planet, where human beings can flourish, is some of these DFOs/agencies losing their triple-A status, I’m OK with that. I think that MDBs do need to take on more risk, and their shareholders should be prepared to lose some money sometimes. I think that’s the only way MDBs will be able to close the funding gap.”– Jeremy Oppenheimer, SystemIQ
“Leveraging the capital is absolutely necessary to address the massive funding gaps we have discussed. A lot of the projects needed – solar, wind, transport – are capital-intensive upfront, so the cost of capital becomes a very sensitive parameter. And that’s where the sweet spot for development banks is, we need to lower that cost and multiply private capital meaningfully.” – Chris Knowles, Advisory Council Member – former head of climate change lending at European Investment Bank & Climate Bonds Advisor.
Political Leadership
“In both developed and emerging markets there is too much inertia, unwillingness to change, we need more incentive to create change.”
“The role of regulators is pivotal. The work by the NGFS (Central Banks Network for Greening the Financial System) is laudable in developing green markets. Especially the Bank of England’s work on integration, not just supporting green a bit more but integrating climate risk into the core of risk management frameworks.”
“The EU green taxonomy will accelerate the transition, it will help benchmark projects across the world especially for emerging economies.”
“Green bond standards, both from ICMA & Climate Bonds help green definitions and streamlining of the verification process. This increases the credibility of green bonds in the market. They are the guide for policymakers in nudging markets towards best practice, support for new issuers and assurance to investors.”
“This is a hearts and minds issue. One of the biggest challenges facing the green bond market and the salvation of our financial system as a whole is using knowledge we acquire here to change political behaviour and practice.”
A Cross-section of Comments from the Conference
What the Green Issuers are Saying
“We started considering issuing green bonds due to investors asking about this, and the clamour got louder so we couldn’t ignore it – plus Sean Kidney called us out at a conference a couple of years ago!” – Mark Merrigan, National Treasury Management Agency, Ireland
“I can tell you: once we issued a green bond, there was no department happier than our corporate communications team!”
“Issuing green really helped to communicate our strategy and message of doing business responsibly/green, to the financial industry and more broadly to civil society – George Duncan, Head of Group Funding, SSE plc (UK)
“We are very happy with oversubscribed issuance, especially as was our first-time to market. Without a green bond, it would have taken much longer to achieve investor base diversification.”
“A key question was whether to issue social/green/sustainability bonds. We chose to drive maximum liquidity within a single of those markets, so green seemed the most developed and relevant option.” – Vincent Gaillard, CFO, Societe du Grand Paris (SGP), responsible for a ten-year multi-billion Euro green bond programme to upgrade the Paris metro network.
“Issuing green has benefits outside of financial considerations. It increased staff motivation and education noticeably and gave a sense of a broader mission. In the context of a bank, it brings together the assets and liabilities sides, also with clients. This emotional link was great to see and quite unexpected.”
“Due to the green bond, it has also become easier to understand climate risk and to obtain/give information related to this, e.g. to public affairs team. So, issuing green helps a financial corporate understand its climate risks and prepare for what is coming anyway.”
“These are important “unintended/hidden benefits. However, green bonds are a vehicle – let’s not forget the real impacts and additionality are on the asset side.” – Armin Hermann, Head of Treasury, DKB
“We saw some pricing benefit with latest green sukuk. The earlier ones occurred in the under-developed market, so we can’t make a definitive assessment [on their pricing].”
“On the latest green sukuk, 29% of the were investors were green. One third from Europe/USA, one-third Islamic and one third from SE Asia."
"We were satisfied with the genuine new demand from investors/dedicated investors.” – Luky Alfirman, Director General of Budget Financing & Risk Management, Ministry of Finance, Indonesia
Brown-to-Green & the Global Emitters
“The focus generally in the green markets has been on the very brown and very green, but 70 percent of the GHG emissions arise from the 100+ largest companies of the world and we need to work with them to drive the transition.”
“Green and general financial markets are coupled and performed similarly in 2018. This conversation of the very green or very brown still dominates, but the economy in the middle needs to the transition from brown-to-green to survive in the future low-carbon world.”
“We will see more diverse instruments emerge in the market, such as last year we saw Green loans and ESG-linked loans. Investors need to demand from markets to deliver more products.” – Daniel Klier, Group Head of Strategy and Global Head of Sustainable Finance, HSBC.
The Last Word
We’ll leave that to our CEO…
“We have the solutions and there is no shortage of capital that needs to be invested in the new low-carbon economy. We need to design the future sustainable world in which to invest that capital."
"Above all we need audacious ambition on the part of governments, where the focus needs to move towards switching the economy sideways, from brown-to-green.” – Sean Kidney.
‘Till next time
Climate Bonds
Acknowledgments: It’s not possible for an NGO to hold such an international event without the support of Conference partners. We’d like to thank all of them, in particular, HSBC, the AIFC and Amundi. A full list of conference partners can be found here.
