Sustainable finance, ESG factors, ESG Environmental social and governance, SRI Socially Responsible Investment, green finance, green bonds, green products, environmental protection, green labels, financial market, sustainability, Stockholm Conference, shareholders pressure, NGFS Network for Greening the Financial System, central banks, PRI Principles for Responsible Investment, financial institutions, estate debt, war in Ukraine
In April 2022, the Intergovernmental Panel on Climate Change released a report focusing on the mitigation of climate change. The experts underline the emergency of a new way of life in order to limit global warming to 1,5°C. To respect the agreement taken during the COP 21, the IPCC proposes solutions to reduce our greenhouse gas emissions. Among the solutions proposed, the IPCC recommends reducing energy demand by using electric vehicles or alternative modes of transport (carpooling, bicycle, scooter…). However, these modes of transport still need to be developed to be accessible to the whole population. This requires significant investments that can be financed by "green finance". Green finance corresponds to actions and financial operations that promote the energy transition and the fight against global warming. Sustainable investments are growing rapidly and reached $100 billion in 2017, of which €37 billion were invested by French, making France the second-largest issuer of green bonds in the world behind China. In addition to environmental considerations, savers are increasingly interested in investing in projects with a social dimension. Despite the growth of investment towards renewable energies, the Ukrainian conflict has reminded us that our economy is still dependent on fossil energies. Indeed, according to the 2022 Banking on Climate Chaos report the sixty largest banks allocated more than $4.6 trillion into fossil fuels between 2015 and 2021, with $742 billion in 2021 alone. The dichotomy of banks' behavior towards renewable energies highlights two things: on the one hand, green finance is gaining momentum and, on the other hand, banks are locked into their traditional pattern, financing non-green actions.
[...] For example, the SNCF is looking to introduce hydrogen trains in 2023 in order to reduce CO2 emissions. However, this program requires costly investments. Green bonds appear to be the solution. As we have explained, savers want to be assured that their savings are being used for sustainable purposes. On the one hand, the labels that were presented in the previous section reassure investors. On the other hand, market finance reduces the asymmetry of information, reinforcing the attractiveness of green bonds and thus their influence on environmental protection. G. [...]
[...] In the same idea of increasing market transparency, Ostrom (2009) proposes to intensify communication to enable collective learning and cooperation. Communication will demonstrate to investors that green bond capital is being used for its stated purpose and secondly, communication will establish standards and procedures, thus helping the private sector to draft coherent and robust strategies to respond to climate change (Oreke, Witteneben and Bowen, 2012). According to Fernando and Lawrence (2014), the communication of green bond companies about their commitments and procedures will encourage other companies to adopt the same codes to legitimize their business to investors, demonstrate regular accountability to regulators and other relevant stakeholders. [...]
[...] "Climate Change: Challenging Business, Transforming Politics." Business & Society 51 p.7 - 30. doi:10.1177/ 0007650311427659 Ostrom, E. (2009). A Polycentric Approach for Coping With Climate Change (Policy Research Working Papers). The World Bank. doi:10.1596/1813-9450-5095 Pigou, A. C. (1924). The economics of welfare. London: Macmillan Pivo, G., & Fisher, J. (2010). [...]
[...] Financial institutions like La Banque Postale (LBP) abide by the PRI. In 2019, LBP signed the PRIs which are in line with its policy. LBP has always been a socially responsible bank that makes finance accessible to all (e.g.: creation of the "Livret by La Poste, creation of the "Club de l'Initiative contre l'exclusion bancaire" in 2012). It is also one of the first banks in the world to be carbon neutral throughout its operational perimeter. Green Labels The incentive from financial institutions to promote green finance has resulted in an influx of capital for sustainable investments. [...]
[...] For example, MSCI decided to downgrade the Russian government's ESG rating from B to CCC on March a decision that Belisk believes came eight years too late. Learnings from the Ukrainian war regarding responsible investment The war in Ukraine has provided an opportunity to step back from responsible investment and draw lessons to strengthen its relevance. The war in Ukraine has highlighted the violation of human rights by investors. Institutional investors who place their clients' savings in countries considered totalitarian, even though the investment is environmentally virtuous, expose themselves to reputational risk. [...]
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