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. 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 banking groups.
Yesterday, RI spoke to Séverin Cabannes, Deputy Chief Executive Officer at Société Générale, the French banking giant, about the bank’s backing for the Principles: Link to article
In this second top-level chat, RI speaks to Peter Blom, CEO of Triodos Bank, one of the world’s biggest, specialist sustainable banking and financial services groups.Responsible Investor: Why is Triodos involved in the Positive Impact Finance Principles when you do most of this already?
Peter Blom: We want to see an integrated approach to sustainability more broadly introduced across the finance sector. As a bank, we’ve always said that if we could say after 70/80 years that we weren’t needed any more it would be a good thing. We think that we are agile as a bank in finding new and impactful business, but its healthy for an entrepreneurial culture to have competition in this area. That said, I’m not really sure if the bigger banking players can seriously bring this into their culture. Personally, I expect to see more take up in the smaller and middle sized banks.
Responsible Investor: What’s the business opportunity here for you as a bank?
Peter Blom: One area is in developing product and sharing some of that knowledge with our peers, which might sound strange! But, for example, we developed a green mortgage in the Netherlands where you get a better rate based on the energy efficiency of the property. I’ve asked peer banks in the Netherlands if they will offer the same product because we are never going to be able to underwrite all the green mortgages in the country. They have said they will come into the market when it starts to get big enough as a market, and now they are starting to do so.
Responsible Investor: How do you see the Positive Impact Finance Principles developing?
Peter Blom: What’s good about the Principles is that we are starting to talk about impact projects, not as a nice PR thing, or just risk control, but as the future of the economy and the future of finance. If this talk can be evolved by something like the Principles we have come up with, backed by the United Nations Sustainable Development Goals then I’ll be really happy. We should celebrate that already because 10 years ago it wasn’t the case. The next step is to look at the real issues we face. Where I have a real question is on the financing of mid-sized companies for impact. We have good pots of money for sustainability start-ups, and the money for green bonds issued by big companies is not a problem. But how do we find ways to invest in companies that will make the market difference for sustainability in the next 5-10 years, but who don’t have access to capital at the moment? What are the mechanisms to scale up companies from 20 staff to 1000 and be successful, because they are the hubs for innovation? Another question I have, is whether impact is just something we measure on a company’s balance sheet, or whether you get some kind of premium for leading the field and pushing it forward, which would encourage players to do so?