Paris Europlace International Financial Forum: New Frontiers in Finance

Panel discussions, expert talks, and networking: The chances and challenges facing the global financial industry – including digitalisation and sustainable finance – were discussed at the International Financial Forum, which took place in mid-July 2019 in Paris. In a workshop moderated by Arnaud de Bresson, Chief Executive Officer of Paris Europlace and Chairman of the World Alliance of International Financial Centres, Frankfurt Main Finance (FMF) Managing Director Hubertus Väth discussed the cooperation between International Financial Centres (IFCs) and global economic growth alongside representatives from the IFCs Toronto, Astana, Tokyo and Abu Dhabi.

Digitalisation and Sustainable Finance in the Financial Industry

From July 9th to July 10th, financial industry experts, CFOs, CIOs, senior executives, investors and representatives of financial services providers, regulators, and politicians met at the annual International Financial Forum near the famous Champs-Élysées in Paris to discuss:

  • Sustainable Finance
  • European perspectives in a globally changing world
  • Digital trends in Finance
  • Growing capital markets

Two of those topics – digitalisation and green finance – were emphasized in the closing address presented by Francois Villeroy de Galhau, Governor of the Banque de France: The theme of this Forum – ‘New Frontiers in Finance’ – prompts us to look towards new territories that we have to explore and conquer. Regarding finance, I will focus on two of them: digitalisation and green finance. (…) Digitalisation is shaking up the way we live and consume, opening up a world of possibilities for corporates and customers alike. Worldwide, it clearly represents both an opportunity and a challenge for banks, as well as for supervisors. (…) We are currently witnessing a growing awareness from central banks, supervisors and financial institutions about climate-related risks. Clearly, green finance and climate risks management have gone from the ‘nice to have’ to the ‘must have’, from emotion to reason.

International Financial Centers: Cooperation for Economic Growth

In a workshop moderated by Arnaud de Bresson, Chief Executive Officer of Paris Europlace, FMF’s Managing Director Hubertus Vaeth, discussed Cooperation between International Financial Centres and economic growth alongside Keiichi Aritomo, Executive Director of FinCity Tokyo, Kairat Kelimbetov, Governor of the Astana International Financial Centre, Jennifer Reynolds, President & CEO of Toronto Financial International, and Philippe Richard, Director of the Financial Services Regulatory Authority, Abu Dhabi Global Market.

While Arnaud de Bresson highlighted the significance of financial technology, globalisation as well as green and sustainable finance for Financial Centres he also pointed out, that it is vital to further convey the relevance of International Finance hubs to the general public. Kairat Kelimbetov agreed and added that International Financial Centres should not only concentrate on the banking sector but rather focus on promoting the economy. Philippe Richard informed the workshop participants about current solar energy and Green City projects conducted in the United Arab Emirates and Abu Dhabi. Moreover, Hubertus Väth emphasized the role of young, innovative and agile start-up companies – which bridge the gap between agile technology and the financial sector – as a central competitive factor for all financial institutions.

Please find a photo gallery of the event on the Homepage of Paris Europlace.

CFS survey on Green Finance

In light of the growing debate over climate change and its consequences, sustainability considerations are also taking on greater importance in the financial sector. Under the headings “Sustainable Finance” or “Green Finance”, numerous initiatives have been launched to address the financial sector’s contribution to attaining climate goals. A recent survey by the Center for Financial Studies showed that the majority of the German financial industry (64%) believes that the financial sector could play a supporting role in achieving climate goals. Indeed, 17% of respondents would even attribute a major role to the financial sector. By contrast, 18% of those surveyed do not regard the financial sector as relevant to the climate goals.

“I see great opportunities for the Financial Centre Frankfurt to profit from the growing trend towards sustainable financial products as well as from trading in emission rights,” Professor Volker Brühl, Managing Director of the Center for Financial Studies, interprets the survey results.

Demand for sustainable investment products (e.g. green bonds) is on the rise. The majority of the financial industry (70%) believes that sustainability will be an important factor in how investors decide to allocate capital in the future. By contrast, 26% of respondents believe that sustainability considerations will not influence investment decisions.

On the issue of how much government influence should be exerted, the German financial industry is fairly unanimous (70%) that no government incentives such as tax relief should be offered for green bonds, nor should regulatory advantages such as lower capital requirements be granted to banks that do little or no business with companies harming the environment.

“Banking regulation should not be overloaded with climate policy goals. Firstly, the financial sector is already subject to a dense network of regulations. Secondly, looser capital requirements for environmentally friendly financing could lead to false incentives that jeopardize financial stability,” Professor Brühl adds.

Regarding the question of whether a company’s environmental impacts should be factored into banks’ corporate lending decisions (e.g. through ratings), opinions in the financial industry are rather divided. While 52% of respondents support this approach, 45% are opposed to it.

Hubertus Väth, Managing Director of Frankfurt Main Finance e.V., emphasizes: “The results clearly show that the time is ripe and sustainable products are in demand. In addition, they show that further government incentives are not necessary. This is an encouraging sign that today, sustainable products are already competitive.”

Green and Sustainable Finance Cluster_ Grüneburgpark Frankfurt

Green and Sustainable Finance Cluster Germany

Strengthening efforts for a sustainable future in the Financial Centre Frankfurt

A strong and responsibly acting financial sector is of utmost importance to a sustainable future – just filling the forecast gap in the level of emissions avoidance necessary for Germany to meet international obligations by 2050 requires €530 bn in investments alone, as a report published by the Green and Sustainable Finance Cluster Germany (GSFCG) points out. Read more

Green and Sustainable Finance Cluster

Green and Sustainable Finance Cluster Germany releases baseline report

Mobilising the finance sector for climate protection and sustainable investment

On Friday, in Frankfurt, the Green and Sustainable Finance Cluster Germany issued its baseline report presenting an inventory of sustainability activities at the financial centre of Frankfurt/Main. The report is the first publication from this cluster, created in spring 2018 in a merger between the Green Finance Cluster Frankfurt of the Hessian Ministry of Economics and the Accelerating Sustainable Finance Initiative of Deutsche Börse. The cluster’s objective is to further mobilise the finance sector for climate protection and sustainable investment.

One encouraging result is that sustainability is now a hot topic in the boards of financial institutions, resulting in more and more innovative products and services, notes Hessian Minister for Economics Tarek Al-Wazir. “Now it’s about coordinating these activities to make Frankfurt a leader in this area that can articulate the German voice in international discussions.”

The report analyses the current state of sustainable activities in Frankfurt and other European financial centres. The baseline report draws from extensive field research. The results show that 86 per cent of respondents discuss sustainability topics at management board level. 100 per cent of participating companies report on their sustainability activities. The increasing importance of this topic is also evident in current figures from a survey by the Forum Nachhaltige Geldanlagen (Sustainable Investment Forum), which found that sustainable investment in Germany was already at €1.4 trillion in 2017. Since 2005, annual growth has hovered at 27 per cent.

Al-Wazir made reference to European Commission estimates that €180 billion per year in additional investments are needed to meet Europe’s 2030 climate targets.

“The required sustainability investments are far too great for the public sector to bear alone. This means we must mobilise large volumes of private capital. For investors, this is about creating high demand. Practically every financial centre in the world now recognises the importance of green and sustainable finance. Frankfurt must play a leading role in this, concludes Karsten Löffler, Co-Head of the Frankfurt School/UNEP Collaborating Centre for Climate & Sustainable Energy Finance, and one of the two cluster directors.

Analysis of the baseline report finds that sustainable finance should become a much more prominent topic in the finance sector, not only for reputation, but also for its strategic business potential. It is becoming increasingly vital to identify risks to investments and financing arising from factors such as climate change. On the other hand, this also offers a variety of new business opportunities, stemming directly from the financing of sustainable infrastructure needs. In light of the high financing volume required for the transformation to a more sustainable economic system, financial institutions are increasingly compelled to take a forward-looking tack and develop corresponding strategies.

Aside from many encouraging trends, the baseline report still finds insufficient data on sustainable investments, due to factors such as a lack of standards and definitions, explains Kristina Jeromin, Head of Group Sustainability at Deutsche Börse and second cluster director.

“This is a key issue,” agrees Al-Wazir. “Uncertainty is poison to investment. Investors must have confidence that they are not getting scammed.”

The cluster wants to take on this and other challenges in four defined areas of activity:

  • Inventory and innovation: e.g. taking stock of activities thus far, identifying potential for development
  • Metrics and standards: e.g. developing definitions and measurement methods for sustainable investment
  • Data and digitalisation: e.g. expansion of the traditional key business figures to include environmental and social indicators
  • Dialogue and knowledge building: e.g. employee training, creation of permanent platforms for dialogue

The cluster is an association. The current sponsors are BNP Paribas Germany, Commerzbank AG, DekaBank Deutsche Girozentrale, Deutsche Bank AG, Deutsche Börse AG, DZ BANK AG, Deutsche Zentral-Genossenschaftsbank, Helaba, KfW Bankengruppe and Metzler Asset Management GmbH. The cluster is headquartered at the Frankfurt School of Finance & Management. The signatories to the Frankfurt Declaration also support the cluster.

For the full baseline report and further details on the Green and Sustainable Finance Cluster Germany, please visit the new website at http://www.gsfc-germany.com

 

Sustainable Finance, Frankfurt

What is Sustainable Finance and why is it reaching the mainstream of financial markets?

Increasing pressure on the environment, damages to ecosystems and environmental changes are presenting a global challenge. Integrating sustainability considerations into the financial system can play an important role in meeting the objectives agreed upon in the United Nations’ Sustainable Development Goals (SDGs) and the Paris Climate agreement. Therefore, the inclusion of sustainability criteria in the financial sector are essential to address the future challenges – this also includes the establishment of financial market structures that create incentives for large-scale shifts in investments and a more future-friendly capital allocation.

As part of the growing awareness that a shift in the financial industry is needed, sustainable finance is increasingly gaining attention from global financial and political actors as well as the broad public. But what does it mean?

Sustainable Finance aims at integrating environmental, social or governance (ESG) criteria into financial services. Decisions about investments and capital expenditures should take those criteria into account, while being beneficial to both the investor and society at large. Moreover, the sustainability risks that may impact the stability of the financial system should be made transparent. However, the future-oriented investment strategies should be based on valid data as well as medium to long term risks and returns. While this previously was a niche investment strategy, the approach increasingly reaches the mainstream of international financial markets.

An important component of Sustainable Finance is Green Finance, which refers to raising capital and financial investments into companies, services, products and projects that accelerate the development of an environment friendly and climate-resilient economy – an undertaking to which technological innovation and digital finance are essential to. By using big data, artificial intelligence and the internet of things Green FinTechs present innovative and efficient opportunities to further the greening of the financial system while mainstreaming the green finance approach by making sustainable financial services more accessible.