The European Commission organised a High-Level Conference on sustainable finance in Brussels on 22 March. The purpose of the conference was to discuss how to best put the European Commission’s Action Plan on Sustainable Finance into practice; a plan created using recommendations from the High-Level Expert Group (HLEG). It also gave spectators reason to hope for big changes. In his keynote speech, Michael Bloomberg illustrated the various environmental disasters that call on us to make urgent action an imperative.
Emmanuel Macron, the only head of state to speak at the conference, adopted the same tone earlier in the afternoon: "In the face of a climate emergency, we must change our current model and make various European policies more coherent, beginning with the budget and trade policy”. He displayed strong ambition, evoking the idea of not just devoting "40% of the European budget towards financing the transition to a low carbon and inclusive model, but also the remaining 60% towards not harming it".
Concerning the price of carbon, Emmanuel Macron made the case for combining a carbon price floor with a possible carbon tax along European Union borders. Convinced that "we can impose our model of sustainable finance and become the world leader in this field", the French president received a standing ovation.
Bring the flow of finances back to its source
To understand the enthusiasm generated by sustainable financial dynamics, we must follow the path of European institutions. In two years, they have found themselves further along than expected after having commissioned a diverse group of experts to draft recommendations.
Initially, it was more about developing green finance. But, the final recommendations provide a larger global vision. These are actions to be implemented to bring the flow of finances back to its source and change the current that drives it so as to facilitate an environment-friendly and job-creating economy. The action plan’s publication is just the beginning of a long fight. This notion was reiterated by several speakers, all stressing that the vast majority of economic and financial actors remain distant from these concerns.
Christian Thimann, president of the HLEG, spoke about leaders of very large companies who always have two speeches prepared. On one hand, a speech for financial analysts, full of figures, profit margins and dividends to disperse. On the other hand, a speech for employees, policies or the World Economic Forum in Davos, which evokes the company's business, social purpose and environmental or social issues. In principle, sustainable finance makes it possible to have only one speech.
Transparency in the face of climate risk
Sustainable finance should still win the game! But most sectors of financial activity do not reach this level, such as High-Frequency Trading, which involves servers that are able to conduct financial exchanges in a nanosecond.
Generalising climate risk transparency and considering the environmental and social dimensions of companies and investors requires a mix of regulation and commitment on the part of market players. "We need both," says Olivier Guersent, Director-General for DG Fisma. "Otherwise, we will not be able to finance sustainable growth, which implies changing financial sector practices”.
An additional method is to involve European citizens in this battle. They must be offered transparent savings products that finance the low-carbon economy transition and other environmental solutions. This is one of the key elements found in the HLEG recommendations.
It is also one of the methods Emmanuel Macron is choosing to follow. He reiterated the need for quality labels that avoid greenwashing, citing the example of French labels that encourage the adoption of these types of financial products in life insurance offerings.
Anne-Catherine Husson-Traore, @AC_HT, CEO of Novethic