Partner: International Development Finance Club (IDFC)
Agenda:
Moderator: Claire Eschalier, Head of Secretariat, Mainstreaming Climate in Financial Institutions
Keynote: Brahim Benjelloun-Touimi, Director and General Manager, Bank of Africa, Member of the Coordination Group of Mainstreaming Climate in Financial Institutions
Presentation: Stocktake of emerging best practices, Claire Eschalier, Head of Secretariat, Mainstreaming Climate in Financial Institutions
Roundtable discussion: The climate mainstreaming journey of five supporting institutions
- Maya Hennerkes, Director, Green Financial Systems, Climate Strategy and Delivery Group, European Bank for Reconstruction and Development (EBRD),
- Lourenço Tigre, Director of the Financial Division and Controllership Division, Brazilian Development Bank (BNDES),
- Damien Navizet, Climate Expert, Caisse des Dépôts (France),
- Nancy Saich, Chief Climate Change Expert at European Investment Bank (EIB)
Conclusion: Beryl Bouteille, Head of Secretariat, International Development Finance Club (IDFC)
Recording:
Summary of discussions:
Keynote: Brahim Benjelloun-Touimi, Director and General Manager, Bank of Africa, Member of the Coordination Group of Mainstreaming Climate in Financial Institutions
Despite the deep challenges we are facing in this post-pandemic areas, there is an opportunity to invent a new shape of finance. Finance is no longer a question of siloes. It is all about joining forces to invent something that should not only be capital, but capital, grants, guarantees, advice, etc.
With this conviction, BoA embarked in the sustainable finance journey.
In 2008, BoA started developing a social and environmental management system as part of a partnership with IFC.
The journey started with the vision of a Chairman who supported the institution’s corporate social and environmental responsibility and considered that CSR should be at the heart of the institution’s strategy.
In 2011 BoA developed an environmental policy to manage its direct impact.
Partnering was key in BoA’s journey. Bank of Africa joined the Mainstreaming initiative in 2016.
This helped BoA anticipate the climate-related financial regulation now implemented by Bank al Maghrib.
Roundtable discussion: The climate mainstreaming journey of five supporting institutions
- Maya Hennerkes, Director, Green Financial Systems, Climate Strategy and Delivery Group, European Bank for Reconstruction and Development (EBRD),
EBRD’s climate mainstreaming journey started in the founding papers of the Bank as the EBRD was created to support environmentally and socially sustainable investments.
Since then, EBRD adopted a Green Economy Transition approach, in which EBRD committed to be a majority green bank by 2025, as well as a Paris alignment approach and a climate-related risk management approach.
EBRD just released its third TCFD report.
There is an correlation between green and Paris Agreement aligned financial flows:
Green Economy Transition financial flows include activities that substantially contribute to climate and environmental objectives:
- Significant climate change mitigation benefits (mitigation finance)
- Significant climate change adaptation outcomes (adaptation finance)
- Significant environmental benefits (for example, protection and restoration of ecosystems, and pollution prevention).
Paris Agreement aligned financial flows include activities consistent with a pathway towards low greenhouse gas emissions and climate-resilient development in line with the objectives of the Paris Agreement. Projects characterised by:
- Consistent with long-term low-carbon climate-resilient development.
- Low carbon lock-in risk
- Resilient to physical climate hazards
All EBRD projects will be provided a Paris Agreement alignment determination by the end of 2022. EBRD alignment approach is based on the joint MDB approach as well as EBRD exclusion list.
Paris alignment assessments are different when assessing a project or a financial institution. To assess the alignment of financial intermediaries, EBRD will move from a focus on the use of proceeds to a focus on the counterparty, assessing them with a more holistic approach. First institutions will have to commit. Then EBRD is developing a temporary approach with its 350 client banks over 5 years. For institutions with the lowest risk of misalignment (green credit lines, SMEs, etc.) EBRD will investigate the use of proceeds. For institutions with a risk of misalignment, EBRD will undertake a Paris alignment assessment and work together with clients to develop transition plans. This will require time as questions remain on what needs to be included in a transition plan.
- Lourenço Tigre, Director of the Financial Division and Controllership Division, Brazilian Development Bank (BNDES),
This process takes time as all institutions are struggling in developing approaches for net zero.
One of the key elements for BNDES is how can social and envrionemental considerations follow the same path together towards a just transition?
BNDES created an environmental department in 1992. Today, BNDES goal is to mainstream environmental considerations to move from a departmental approach to an institutional approach.
To implement the Principles for Mainstreaming Climate Action within Financial Institutions, it is necessary to have the teams knowledgeable. BNDES is currently developing a comprehensive training program.
For decades, BNDES was crowding out the private sector. Over the past 6 years, BNDES created new mechanisms to attract the private sector in the green economy.
To bridge the infrastructure gap, it is important to develop a solid pipeline of projects and attract the private sector.
BNDES created an “impact factory” to identify how to best use BNDES capital for impact.
- Damien Navizet, Climate Expert, Caisse des Dépôts (France),
Caisse des Dépôts is a long term investor with 1,300 bn€ consolidated assets
The key ingredients for climate mainstreaming identified by the institution are the following:
- Vision and leadership: 2015 was a key moment for Caisse des Dépôts, as France was hosting the COP.
- Champions: within the group, the investment part of the bank led the climate mainstreaming journey, with the participation in the Net Zero Asset Owners’ Alliance
- Data and time to spread mainstreaming.
- Nancy Saich, Chief Climate Change Expert at European Investment Bank (EIB)
EIB started its climate mainstreaming journey with a climate vision in 2013. A second key step was the development of a climate strategy led by the Vice President.
One principle could be added to the five voluntary Principles for Mainstreaming Climate within Financial Institutions: walking the talk. To support clients, it is important to first walk the talk.
For MDBs it was important to think about article 2.1.c) of the Paris Agreement together.
In 2018, the EIB was undertaking the mid-term review of its climate strategy. In San Francisco, the EIB said that the implementation of the climate strategy would lead them to Paris alignment by 2020.
This process was bank wide and the biggest change of the bank.
Two main areas of work identified were adaptation and financial intermediaries.
In addition, the EIB created a climate and environment advisory council, made of experts, to discuss with the top management. This was very powerful.
As a conclusion, panellists identified areas for further work:
EBRD:
- Implementation of the Paris alignment approach
- Nature-based financing
- Adaptation finance
BNDES:
- GHG accounting of all projects
- Scaling up blended finance
EIB:
- Advisory services: clients are increasingly asking for help as they know that they need transition plans, others are asked to advance by their regulators.
- Sustainable finance agenda: support for clients in the portfolio will be key as MDBs are being looked at by different stakeholders.
Caisse des Dépôts:
- Transparency and disclosure: this is often difficult as systems are not fit for purpose
- How to ensure consistency across different business lines
Conclusion: Beryl Bouteille, Head of Secretariat of the International Development Finance Club (IDFC)
Mainstreaming Climate in Financial Institutions is a great community gathering both public and private financial institutions.
To align the financial system with the Paris agreement objectives, a renewed dialogue between public and private financial institutions as well as with regulators will be key and the Mainstreaming Initiative can play an important role for that.
