Financial centres in the spotlight over green finance as survey launches

Investment professionals are being asked for their views on the sustainability credentials of global financial centres, in a bid to help “cut through the greenwash”.

NGO and European advocacy group Finance Watch has launched a survey in partnership with think-tank Z/Yen, ahead of the creation of a Global Green Finance Index. The pair hopes the index will help make sense of the growing number of ESG pledges and initiatives being launched by financial centres including London, Mexico, Luxembourg, Paris and Beijing.

Z/Yen already runs a conventional Global Financial Centres Index, but has decided to work with Finance Watch to create a sustainable one in light of all the activity going on in the space.

London, for example, claims to be “amongst the premier venues for the provision of green services”, with a Green Finance Initiative led by the City of London. The Irish Department of Finance has funded Finance Green Ireland, which aims “to drive awareness of Ireland’s world leading green finance credentials and promote Ireland as a leading Global Green Finance Centre”. Deutsche Börse launched its Frankfurt Sustainable Finance Initiative last year, with around 100 members from the financial and civil society communities. Paris also ramped up its activities last year with the launch of the Finance for Tomorrow initiative, which seeks to “differentiate the place of Paris… The quality of its products and its expertise in green and sustainable finance”. Beijing hosts an annual sustainable finance summit, overseen by the People’s Bank of China’s China Financial Society Green Finance Committee; while Shenzen and Shanghai stock exchanges have green bond initiatives. The Luxembourg Stock Exchange has a dedicated ‘green exchange’, known as LGX, and stock exchanges in Mexico, Oslo and London have dedicated green bond segments/lists.

Last month, Philippe Zaouati, CEO of Mirova and Chair of Finance for Tomorrow, stated that the initiative “has started a direct relationship with the Chinese Green Finance Committee and we have the ambition to create a strong bilateral collaboration between Paris and China, the first two places for green bonds … but not only.” The same month, the UK announced its “continued cooperation” with China on green financial regulation.In a document, it said it welcomed the first meeting of “the Bank of England and People’s Bank of China Joint Symposium” – a group chaired by Governor Mark Carney and Zhou Xiaochuan. The group, it said, would discuss joint work on green finance.

In September, 10 financial centres unofficially formed the Casablanca Network. The Casablanca Finance City Authority, which led the initiative, is a pan-African centre. Its CEO said at the time that its vision was to “establish Casablanca as a hub for green finance dedicated to Africa”. Astana, Casablanca, Dublin, Hong Kong, Milan, London, Luxembourg, Milan, Paris, Qatar, Shanghai and Stockholm all backed the Casablanca Statement, pledging to push forward on climate change and sustainable finance. RI understands the group will formally launch at an event in Milan in April.

The new green finance index hopes to encourage “a race to the top”, according to Greg Ford, Senior Advisor at Finance Watch.

It will combine market responses to a perception survey with around 100 hard data topics on financial centre development, such as the air quality of the city and the quality of financial education, and the local green finance offering. Green finance metrics could include the amount and proportion of green bond listings, the carbon intensity of flagship indices, and banks’ ratio of green energy to high carbon energy corporate lending, among others. The survey responses and the data are then combined using a factor assessment model and will be published as a ranking every six months.
“It will be very interesting for people to compare the index, which includes a perception element, with standalone market data,” says Ford. “So it should help cut through any greenwash”.

The index will assess up to 108 finance centres, depending on the level of responses the developers get from the market. The first version of the index is expected to launch in the Spring.

The move comes on the back of a report published in December, assessing the green performance of the main G7 financial centres. The study, put out by PwC, think-tank the Institute for Climate Economics, and EU-funded body Climate KIC, is called “Benchmarking the greenness of financial centres”.