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Page 2 - Hugh Wheelan: The politics is still like treacle, but the regulatory and economic blender of green finance is whirring

of deep-dive webinars on the Action Plan EU policymakers will be busy this Autumn with progress on MIFID, ESG data, ‘fitness check’, fiduciary duties and a “gear shift” on the Action Plan. But a lot will depend on how the politics at the EU level progresses. An informative, short article on Politico outlines the high-level political manoeuvres. And, as mentioned earlier, international pushback to the EU’s Action Plan ‘internationalisation’ plans is growing, or splintering as countries look to create their own taxonomies.
Satoshi Ikeda, Chief Sustainable Finance Officer at Japan’s Financial Services Agency, said a recent report by the Keidanren Japanese business federation had raised concerns about a taxonomy “stifling disruption” and not reflecting a necessary energy ‘transition’, but instead putting a “darkest of green” labels on the economy. RI has reported the Keidanren opposition.
Sean Kidney, Chief Executive Officer of the Climate Bonds Initiative, said the Keidanren report had been written by the Japanese steel federation so it was hardly surprising it was so negative.
The politics is still like treacle, but the regulatory and economic blender of green finance is finally whirring. At the supranational regulatory level, the Sustainable Finance Network of the International Organization of Securities Commissions (IOSCO) will deliver an assessment to the EU before the year-end on the direction of its regulatory travel and the shorter-term pressures it may face, according to Ana Martínez-Pina, Vice-President of the National Securities Market Commission at the Bank of Spain. And central banks within the Network for Greening the Financial System (NGFS), have been upping their game on ‘walk’ not just ‘talk’ with more than 25 of them now integrating sustainability factors into the management of their own investment portfolios. Satoru Moroshita, Vice Minister, Global Environmental Affairs at Japan’s Ministry for the Environment, said Japan had produced a practical guide for scenario analysis, and that for green bond issuance it was starting to offer financial assistance for any additional costs to issuers.

And in the banking sector, the OECD released its first guidance for environmental and social risk management for corporate lending and underwriting activity, in a report titled: Due Diligence for Responsible Corporate Lending and Securities Underwriting. All of these initiatives will be important as we approach COP26 in 2020, which will be the first five-year reporting tranche for the Nationally Determined Contributions (NDCs) for governments of the Paris Agreement. As Simon Zadek, Principal, Project Catalyst at the United Nations Development Programme, said: “Every financial institution that is licensed should be tracking towards these long-term goals.” Daniel Klier, Group Head, Strategy, and Global Head Sustainable Finance at HSBC gave a clear précis of what is working right now, and what is not, as we approach that post Paris 5-year marker. On the plus side, he cited the success of the green bond market at $250bn and the number of actors now talking ESG, including potent bodies like the NGFS and international regulators. But, he pointed to the funding gap to keep below 2 degrees: “We need $6-8 trillion of finance every year, and we have $1 trillion at the moment. He also noted the increasing “fragmentation of climate initiatives”. “This was very clear at the recent New York Climate Week, and we are long past the point that this is helpful.” Klier lamented that “we talk about the same barriers every year: lack of information and disclosure,” and said the sustainable finance field had to face up to some hard truths: “Take-up of the TCFD recommendations has stalled and the quality of the information is not good enough given the time left to mobilise. We also have to be honest that ESG integration hasn’t mobilised much green finance, and that we have a lack of experience out there for the right kind of financing: very few people have worked in hydrogen development or complex green infrastructure in Vietnam. Then, we have that old supply/demand problem: investors say there are not enough projects to invest in, but at the same time they also want US dollar de-risked projects with no political frighteners. We can’t seem to bridge this.” Klier said there was an urgent need


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