Pasqual Maragall Legacy

Stephen Nolan

Sustainable finance is growing, but we need more projects to invest in



SUSTAINABLE DEVELOPMENT AND ECONOMIC PERFORMANCE: ARE THEY COMPATIBLE?

According to Stephen Nolan,director of the United Nations Network of Financial Centers for Sustainability, FC4S (International Network Financial Centers for Sustainability), Sustainability is increasingly reliant on financial markets but there is a lack of projects to invest in.

The expert in sustainable financing spoke at our "How sustainable development meets profitability?" conference, part of the "Facing climate change" cycle of the Re-City platform. The conference was organized by the Catalunya Europa Foundation in collaboration with BBVA and supported by the Barcelona City Council, the Metropolitan Area of Barcelona and the Department of Territori and Sostenibilitat from the Generalitat de Catalunya. The conference was moderated by Humberto Llavador, Professor of Economics at the Barcelona Graduate School of Economics and Pompeu Fabra University, and Antoni Ballabriga, global director of Responsible Business at BBVA.

Stephen Nolan explained to the public that after the  2015 Paris Agreement, a European group of high level experts in sustainable finance was created to help mobilize resources towards climate action. That meeting was a turning point and since then sustainability has ceased being a marginal issue for financial markets, with investors increasingly looking with interest at sectors of the green economy, renewable energy, energy efficiency and the circular economy . Without a doubt, Stephen Nolan is one of those responsible for this change of mentality in the financial world, first as head of the organization Sustainable Nation Ireland, in Dublin, and currently as director of the United Nations Network of Financial Centers for Sustainability. Based in Geneva. The network was founded in 2017 after being proposed by  G7 environment ministers.

90 trillion dollars - the price of global decarbonisation

The FC4S network's goal is to mobilize the necessary economic resources to comply with the Paris Agreements and the Sustainable Development Goals. They estimate that 90 trillion dollars will be needed to give a transcendent boost to the decarbonization of the planet. In Europe this will include roughly 2 trillion euros in the next ten years".

Since it was founded just two years ago, the FC4S network has not stopped growing and adding new financial centers to their organization. Currently, there are already 22 financial centers, including Paris, London, Geneva, New York, Hong Kong, Dublin and Barcelona, recently incorporated through the Barcelona European Financial Center and financial institutions such as BBVA, consultancies and various professional associations. Barcelona has become the first Spanish city to be part of this important global network.

Sustainable finance, a growing sector

According to Stephen Nolan, the growth of the network demonstrates the great interest from the financial world in creating instruments that allow us to promote sustainable finance and face the challenges of climate change. He argued how sustainability was previously defended primarily by environmental groups, but that now it has entered financial markets. Rather than being simply about philanthropy or Corporate Social Responsibility, FC4S are looking at new business opportunities with a good return on investment.  These are not investments based on purely economic benefits however - according to Nolan Sustainable finance or "green finance" must be based on social criteria, providing assistance to projects favouring  the decarbonization of industry, emissions reductions or efficient technology in  natural resource use. These are objectives that Nolan believes can only be achieved with a type of governance based on public-private collaborations between governments and financial institutions.

Stephen Nolan gave Ireland as an example of a small country with a lot of experience in the field of finance. Working with the Irish government, Nolan promoted Sustainable Nation Ireland, an organisation which aims to encourage public and private organizations to work hand in hand to advance the transition to an increasingly decarbonised economy. To do this the Irish government estimated that 50 billion euros were needed in ten years. So far, they have committed half, in part thanks to the issuance of green bonds which have already collected 12 billion euros. For Nolan this shows that there are many ways to collaborate to invest in projects in the field of environment, sustainability or the circular economy. Clearly, governments are unable to fund the transition alone, emphaising the need for private capital. South Africa's commitment to renewable energy, China and its focus on the electric vehicle industry, and improvements in the energy efficiency of buildings in many countries were given as further examples.

Nolan concluded that sustainable finance is essential for climate action, the challenge now is to reach out to small businesses and retail investors, and stimulate the creation of projects for them to invest in. Governments  can help by creating favorable regulatory frameworks. Another pending issue is the need to create a taxonomy that defines what is green and what is not in order to provide a standard set of criteria.

Antoni Ballabriga, global head of responsible business of BBVA, highlighted the five major factors that he believes have made the sustainable finance sector change rapidly in just a few years, and that also open up new challenges and opportunities. These factors global agenda and the Paris Agreements; the market, which increasingly demands different financial solutions; investors, who prioritize environmental strategies; the increasing pressure of the regulatory world; and finally, technology, which will allow us to make a leap forward in democratization and access to new funds and projects.