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23.01.2018 | Sustainable finance
Green finance, social business, social impact bonds, socially responsible investing—Sustainable finance touches many different aspects of society and takes on several forms. This is a major trend that responds to investors concerned about sustainable growth. Let’s learn more.
Sustainable finance is anchored in a long-term ethical vision of financial investing. It seeks to reconcile economic performance with positive social and environmental impact, by funding companies that actively contribute to sustainable development. Different models exist—some of which overlap.
- Microfinance, a solution that facilitates access to credit for the most disadvantaged populations (132 million customers worldwide for a total balance of 102 billion dollars in 2016).
- Impact Investing, which refers to investing one’s savings in companies with a strong social or environmental impact.
- Social Impact Bonds (SIB), which are bonds repaid to investors upon maturation only if the project’s social objective is met.
Encompassing individual investors, investment funds, institutions and companies of all sizes, sustainable finance applies to capital from a wide range of origins.
Who invests in Sustainable Finance?
“ sustainable finance comes down to integrating all the major challenges facing society, from human rights to environmental protection, as well as diversity and curbing inequality, into our decisions and the advice we give to customers ”
Corporate and Institutional Banking Manager at BNP Paribas
By developing several green initiatives and international partnerships, BNP Paribas has become a major player in sustainable finance. As underlined by Jean-Laurent Bonnafé, "we are fully conscious of the fact that, in this race against the clock, banking and finance need to join the frontline in building a low-carbon economy”.
The Group pursues its commitment to sustainable finance in several ways.
On the sidelines of COP21, 27 global investors (including BNP Paribas Asset Management) cosigned the Paris Declaration. They recognized their role in financing the energy transition through green bonds, while calling for a global standard to govern these types of bonds, in order to guarantee consistency and dynamic activity across the market. Several different standards are currently in existence, a situation that tends to hinder investor confidence.
Major corporations also have a key role to play in sustainable finance. Recently, ADIF (the operator of Spain’s rail network) raised 600 million euros in green bonds, in part among green investors. In addition, Apple has already issued two green bonds (the company issued a one billion dollar green bond in June 2017) dedicated to financing energy efficiency projects, while Starbucks just raised a sustainable bond of 500 million dollars to fund ethical coffee production.
Green or sustainable bonds enjoy robust political support in some countries, such as China, which now relies on environmental projects to stimulate growth. Its government has planned a new round of financial regulatory easing so that the country can authorize more green bonds. In fact, China’s green bond total grew from zero to 36 billion dollars between 2015 and 2016.