“Green” financing is on the rise and is positioned as a great ally in the fight against climate changeBut, given the lack of regulation, it runs the risk of being used by companies and investors to wash their image instead of having a real impact on the decarbonisation of the planet.
Green financing, one of the main topics of debate at the upcoming Glasgow Climate Summit, is part of sustainable finance or ESG, which is aimed at investments related to environmental, social and environmental factors. of corporate governance.
Currently, the sustainable label is awarded by specialized rating agencies, which evaluate projects or companies based on financial, environmental, social and good corporate governance criteria using their own research methodologies.
Sustainable finance icon
The most widespread modality is “green bonds”, debt issues whose funds are used to finance projects related to the fight against climate change, such as renewables, electric mobility or energy efficiency.
“The green bond is the icon of sustainable financing, it was the first product to appear (the first issue was made by the World Bank in 2017) and it is the one that has had the most development,” the Secretary General of the Observatory explained to EFE. Spanish for Sustainable Financing (OFISO), Juan Carlos Villanueva.
To these have recently been added the bonds linked to sustainability objectives or SLB (Sustainability Linked Bonds) in which the issuer commits to achieve objectives such as, for example, reducing its emissions to a certain level, in such a way that if It does not comply, it will be penalized (it will pay more interest) and if it exceeds it, it will be prioritized.
From the investment point of view, there are sustainable funds, which invest only in companies or projects that meet certain sustainability criteria and which are aimed at investors who, in addition to obtaining profitability, want to combat climate change.
Issuer gains reputation
“The trend is that the investor increasingly discriminates where to invest and where not” and that is where it becomes important to achieve the “green” label when attracting funds for a project, said Salvador Jiménez, consultant in the area of Economic Analysis and Markets of International Financial Analysts (AFI).
The advantage for the investor is that this way he knows that his savings are not used for activities that go against his ethical and moral values, while the issuer sees his reputation strengthened, which allows him to diversify and expand his sources of financing and lower his cost, Jiménez pointed out.
Keys to avoid the “green face wash”
In this upward trend there is the danger of what is known as “green washing” or “green face wash”: make believe that certain investments or actions are more respectful with the environment than they really are or that some companies make specific investments just to look good, Jiménez has warned.
“If this is not regulated there is a risk of generating a bad reputation in relation to sustainable finance, the key is to have stricter controls”, according to Jiménez, who recalled that banks are also betting on granting “loans green ”, both to companies and consumers, and that this also requires specific supervision.
In regulation there is much to advance, the phenomenon is beginning and for now there is nothing binding, beyond the commitments that are voluntarily acquired in the prospectus that precedes an issue or in the foundational bases of a fund, he has warned.
It must be strategic and not punctual
For the secretary general of OFISO, the important thing is that companies resort to this type of financing “as a strategic vector that shows their commitment to decarbonizing the economy” and that they do not go to it only “on time.”
In his opinion, this would eliminate the temptation to resort to sustainable financing for marketing reasons and not because it really believes in the green economy.
“It is a risk that exists and against which it will be fought establishing an increasingly tight, severe and standardized regulation in all countries that forces those who want to resort to this type of financing to meet certain requirements. For now there are no binding rules and everything is purposeful, ”Villanueva pointed out.
In parallel, he added, the market itself will impose its own rules and penalize everything that is shown to be unsustainable.
At the end of August it became known that the SEC, the US stock market supervisor, was investigating DWS, a subsidiary of Deutsche Bank, suspecting that it was exaggerating in the use of sustainable investment criteria to manage its assets.
In a report, the European Central Bank (ECB) has warned that although these instruments are important to channel capital towards sustainable projects, there are doubts about their real impact and fear of greenwashing.
In his opinion, in the case of green bonds, the relationship between their issuance and the reduction of CO2 emissions is not being clearly seen and in the case of ESG funds, the absence of a common definition hinders the analysis of their impact on long term.
It doubled in the first semester
According to data from the Spanish Observatory of Sustainable Financing (OFISO), between January and July in Spain green bonds were issued for a value of 8,853 million euros, 70% more than a year before, and the first SLB bond issue was registered , starring Repsol worth 1,250 million.
In September, the Public Treasury carried out its first issuance of green bonds, worth 5,000 million euros and for 20 years.
Worldwide, green bond issues totaled 208,347 million euros, more than double that of a year before (+ 109%), and those of SLB bonds (practically non-existent in 2019) 32,592 million.
In total, sustainable finance moved 443,934 million euros worldwide, 123% more than in the first half of 2020, and represented around 1% of total financing.
The most active companies in this field are being the energy companies (electricity, oil and gas), led by the Spanish Iberdrola, which has green financing (bonds and loans) or linked to sustainability criteria for more than 32,000 million euros, and the of electric mobility.
Among the funds with the most green investments are Black Rock or the Norwegian Sovereign Fund which, in parallel, are undoing positions in assets related to fossil fuels.
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