BNP Paribas was top of Bloomberg’s inaugural green loans league table for Europe, Middle East and Africa last year as sustainable finance volumes are rising.
The French bank was the number one book runner with a market share of 12.8% last year, an increase of 9.2% from 2017, with five deals totalling $1.2bn (€1.5bn) according to Bloomberg.
Spain’s Banco Santander was in second place with a market share of 10.5% and deal volume of $986m, a decrease of 3.1% market share since the same time last year. ING Group was third with a share of 7.1% and a deal volume of $668m.
Antoine Sire, head of company engagement at BNP Paribas, wrote a blog on the bank’s website this month about how banks and investors can support meeting the 17 sustainable development goals set by the United Nations in 2015. The UN has estimated that reaching the goals will require between $5 and $7 trillion in public and private funds annually until 2030.
Antoine Sire, BNP Paribas
“Banks could contribute to this, but their ability to finance large long-term transformative projects is limited, in particular by regulation,” Sire added. “In addition, the majority of capital available today is not held by banks but by investors – asset managers, pension funds, and insurance companies – who manage the considerable amounts invested by the citizens of the developed world in preparation for their retirement.”
He continued that banks can contribute through including environmental, social and governance standards into their criteria for granting loans to businesses and promote sustainable growth though green bonds, positive incentive loans, and social impact loans.
Sire said BNP Paribas has incorporated the 17 SDGs into its business plan, and monitors the percentage of its loans that contribute directly to these goals.
For example, food company Danone issued a €2bn positive incentive loan in February last year with a banking pool which included BNP Paribas as sustainable coordinator. Positive incentive loans include discounts or premiums for the financing cost based the issuer's ESG score. For Danone, a portion of the financing costs on are based on Danone's ESG rating as established by rating agencies Sustainalytics and Vigeo-Eiris.
Capital allocation and the inclusion of the social dimension into strategies for climate investment across all asset classes, including listed equities, bonds, private equity and real assets was highlighted as one of five areas of focus in Climate change and the just transition: A guide for investor action, published at the end of last year by the Grantham Research Institute on Climate Change and the Environment.
“A growing body of academic and practitioner work has shown both that unmanaged climate change generates significant value at risk for investors and that incorporating climate factors can improve returns,” said the report. "Alongside this, academics and practitioners are also showing that investing in training and development, health and safety, employee engagement, as well as diversity and inclusion, is associated with increased workforce productivity, reduced turnover and higher customer satisfaction.”
Failure to effectively manage the social dimension of climate change could also generate a new set of investment risks due to political instability, depressed economic activity and insufficient progress in the delivery of climate targets according to the study.
European action
The European Commission published an action plan on financing sustainable growth in May last year.
https://twitter.com/EU_Finance/status/1081187212908290049
As part of this plan the Commission today published draft rules on how investment firms and insurance distributors should take sustainability issues into account when providing advice to their clients.
“The new draft rules will help integrate environmental, social and governance (ESG) considerations and preferences into investment advice and portfolio management, and into the distribution of insurance-based investment products,” said the statement.
The Commission can only officially adopt these draft rules once new disclosure provisions for sustainable investments and sustainability risks, which put in place an EU-wide definition for ESG considerations, have been agreed at EU level.
