The launch in Paris last week of the Principles for Positive Impact Finance by nearly 20 leading global banks and investors, and backed by the United Nations and the French government, begs the question of what they are and what their output will be; after all, we are not short of ‘Principles’ in the responsible investment world!
As RI reported the launch partners and the United Nations Environment Programme Finance Initiative (UNEPFI), which is incubating the Principles, say they are a “set of criteria” for investments to be considered sustainable via a global framework that can apply across different business lines such as retail and wholesale lending, corporate and investment lending, and asset management, via four principles: 1) Definition 2) Frameworks 3) Transparency 4) Assessment.
Speaking at the launch event in Paris, Eric Usher, Head of UNEPFI, said the Principles were work in progress, and the launch was a “call for collaboration”. He summarised the work as a translation of the United Nations 17 Sustainable Development Goals (SDGs) into transparent and measurable information for finance institutions via the concept of a “holistic balance sheet” where institutions demonstrate both positive and negative outcomes of their financing and work towards the former for a net positive balance.
The initiative has attracted the attention of senior management of some of Europe’s biggest banks.
RI spoke to Séverin Cabannes, Deputy Chief Executive Officer at Société Générale, the French banking giant, about their backing for the Principles:
Responsible Investor: Société Générale is one of the launch signatories of the Positive Impact Finance Principles, why?
Séverin Cabannes: It’s a long-term vision that we’ve had for some time, because we think sustainable development is going to be a big part of the business model of the future. It’s big companies like us that are leading the way because we are asking themselves what our businesses will be like in ten years time in a period of significant change, particularly post the COP21 climate change agreement when there was huge political and business alignment. With regards to the required energy transition, in both developed, and especially in developing countries, there needs to be a re-invention of economies based on sustainability, and a growing portion of our major stakeholdersare increasingly asking us about our reponse to this. Société Générale is also a major energy financer, therefore we have quite a big relative exposure and need to integrate risk analysis into these long-term financing issues.
Responsible Investor: You’ve taken major steps in issuing green bonds, which interestingly you’ve called Positive Impact Bonds (PIBs).
Séverin Cabannes: Yes, we think that the concept of green bonds should go beyond green, and that’s why we decided to demonstrate to the market that the underlying projects we did select on top of climate impacts had also social or development impacts and that the potential adverse impacts were correctly addressed. What we did is fully aligned with the Positive Impact Finance Principles. We issued two €500m PIBs, one in 2015, the other in 2016. We’ve also been involved in the financing of a further €2bn in value of positive impact projects, where we’ve either originated or financed the deal.
Responsible Investor: What will be the impact of the United Nations Sustainable Development Goals on the bank?
Séverin Cabannes: It’s a nascent area, and the Positive Impact Finance Principles are a starting brick towards building something bigger.
We have created a positive impact team, and are issuing new product like positive impact structured notes. We are also working on new impact based Business models. Our target is to gradually extend the amount and the scope to the full range of our bank activities, including corporate loans.
Responsible Investor: How do you see the Positive Impact Finance Principles developing?
Séverin Cabannes: We want this to be a success and for that we need to get more financial institutions on board. One of the questions now is eligibility for what qualifies as positive impact investment in the long-term, as well as the ability of the market to generate more financeable assets (additive finance). I see our role in this as a positive position for a bank because in the future the companies that need financing will be in this area. For us, it creates a competitive advantage ahead of the curve.