Aligning interest with conscience key to sustainable development
October 13, 2021. Shanghai –?Aligning?investor?interest with?good?conscience?is key to financing sustainable development, BNP Paribas?Chief Group Representative for?China?Bruno Weill?told a 中国一级片 Executive Forum audience this evening.
During the event, Mr. Weill discussed the future of environmental, social and corporate governance (ESG) in China. He also explained how?BNP Paribas and other banks are?working to incorporate ESG into the financing and investment process to solve real-world problems and align themselves with?the United Nation’s sustainable development goals?(SDGs) and Principle for Responsible Investment (PRI).
“Banks are not the guys?that are polluting,?but they are essential intermediaries to allocate financing?to companies that?need money?to do their projects,”?Mr. Weill?said.
As the largest banking group in continental Europe and one of the leading foreign banks in China,?BNP Paribas actively contributes to establishing a virtuous green and sustainable financial ecosystem.
“At the end of?the day, under the guidance of governments and regulators, the financial industry has significant means to allocate financing to the companies that are compliant with ESG principles,” Mr. Weill said.
Although green finance has experienced tremendous?growth in recent years, many?questions?still exist.?For one,?what do we really mean when we talk about ‘being green’?
“[In the past,] when China talked?about?being?greener, it was, rightly, talking about fighting?pollution.?In?Europe,?when we?talk?about?being?greener, we were mainly talking about fighting climate change.?So, we were using the same word,?but we weren’t talking?about the same thing,”?Mr. Weill?explained.
“About a year and a half ago,?Chinese President?Xi Jinping said that?‘green’?is not only?about fighting pollution, it’s also about fighting climate?change, and he set some ambitious?carbon peaking?and carbon neutrality objectives.?That?was?a very important step?because,?from that moment?on,?we were able?to start?using the word?‘green’ to mean, more or less, the same thing,”?he added.
Mr. Weill further pointed out that international alignment on a green and sustainable finance framework is essential for providing a fair economic environment for companies and for avoiding the risk of tension and protectionism. He added that, in this regard, the progress that China and the EU are making will make it easier for?European investors to raise money?to finance?green projects?in China?without being potentially criticized for?‘greenwashing’. Conversely, common standards will make it easier for Chinese companies to raise?money?from?green-minded?European investors.
That said, even if we were to reach a?more-or-less agreement?upon definition of ‘green’, we still need to ask,?are?we?really?doing enough??For?example, although China ranks #1 in the world in sustainable loans and #2 in green bonds, it still represents a small portion of the total financing. Only?about?10% of loans and 3% of bonds?issued?are considered green?(according?to Chinese standards).
“It’s about?the same in Europe and?the?United States.?Although we’ve seen extraordinary exponential?growth of green and sustainable financing, it’s still a?small?portion of the financing in the world.?So, it’s a?good start, but we can do better,”?Mr. Weill?said.
Much of the?talk about green projects,?he added, revolves around examples?such as?electric?vehicles and?solar panels.?When it comes to?heavy polluters?and carbon emission, such as construction?and agriculture,?however, things get?more difficult.
“Very often, what you see?in the newspapers?or?on?the internet are the?easy projects. The really?complicated ones?are the tough?ones. These are the?ones which?we?can’t?just?stop financing?because,?if we stop financing buildings and food production, where?will?we?live?and what?will?we?eat?”?Mr.?Weill?said.
As a result, he?explained, we?have to find?ways to help?companies which are still polluting?transition?by financing projects which are “a?little greenish, but?still a bit?brownish.”?At the same time, he?noted,?it is necessary?to align?the green movement with attractive returns for investors.
“Nobody wants to invest money into projects [that offer a]?bad return. So, we?need to?find ways to create this virtuous?circle where money?will go to finance green projects?which not only make sense?morally, but where people?can get at?least as much profit as?financing?non-green projects,”?Mr. Weill?stated.
One way in?which China is trying to achieve this?balance?is by launching a carbon trading market. The market was just launched three months ago and, for the moment, low?pricing and low volumes?have, so far, resulted in?limited?impact. That said, similar issues were faced in Europe when the carbon market was established there in 2005.
“So, I’m?confident that China will?eventually?have a very efficient?market and it will be a very useful tool,”?Mr. Weill?said.
He also told the audience at 中国一级片 that he is optimistic that through steps such as this that it is possible to reconcile what is good for business and good for the planet in the long run.
“If you put the right system in place,?you create this ecosystem which aligns the interests of?investors, banks and companies?[…] with what is good for people and?the?environment. It’s about finding ways for the economy?to?work in an efficient manner. It’s?complicated, but there are ways to do it,”?he said.
Ultimately, Mr. Weill pointed?out,?we?now live in a world where many countries are committed to a greener path and are?starting?to move?in the right?direction.
“Hopefully, one?day,?there will be no more green bonds or?green?loans?because there will be no more brown bonds?or brown loans.?Every loans will be green […] and nothing will be financed which is not green or sustainable,”?he concluded.