The trends in the sustainable debt market and the importance of achieving a balance between decarbonisation and competitiveness were some of the topics addressed by corporates, investors and ESG experts at the BNP Paribas Sustainable Future Forum (SFF) in Madrid.
Regulation took centre stage in the SFF agenda. ‘It is now essential to analyse which economic activities are receiving the investment they need and which are under-invested to close the investment gap,’ explained Helena Viñes, Chair of the European Commission’s Sustainable Finance Platform and member of the Board of Directors of the Spanish Securities Market Commission (CNMV). Viñes stressed that there is the need to identify which sectors are fundamental to reach net zero, as well as the technologies to be developed. Viñes also noted that ‘studies show a correlation between levels of alignment with the taxonomy and performance in financial markets’.
Sustainable debt is a key instrument for corporate strategies
According to Bloomberg EMEA corporate sustainable issuance (as of 8 November 2024), the market volume has been consolidated over the past four years. This means that one in four euros of corporate bonds in the region correspond to a sustainable bond issuance. A much higher level than in 2019, which was less than one in ten euros. For the EMEA syndicated loan market during the first nine months of the year, one in five euros correspond to a loan linked to sustainability, according to Dealogic 9M 2024.
The issuance of sustainable debt is used by companies to support decarbonisation, as some of the speakers pointed out. Redeia initiated its sustainable financing strategy in 2017. ‘Since then, the company has committed to reaching 100% sustainable financing by 2030’, referenced Tomás Gallego, Redeia’s Financial Director.
Sustainable debt is also a fundamental tool in the strategies of institutional investors as evidenced by Cristina Álvarez, Director of SRI at Caixabank Asset Management: ‘having investment options in sustainable fixed income products is crucial’.
Speakers also stated that regulation and taxonomy are fundamental for transparency, communication, and homogenisation of information, facilitating the creation of a working framework between the areas of finance and sustainability within a company.
‘Using European standards when issuing green bonds provides security and the certainty of knowing that it is 100% taxonomy. In fact, it seems that many issuers are planning to report their percentage of alignment, even if it is lower than the percentage established by the standard, which will be very well received by investors,’ explained Helena Viñes.
The role of biodiversity for corporates
‘Biodiversity is becoming an increasingly important lever for fully embedding sustainability into our business strategy’, as mentioned Sara Peña, Corporate Sustainability Director at Zelestra. Peña also highlighted that ‘our sustainable financing is currently linked to environmental and social objectives, but we are seeking to incorporate biodiversity goals with a more local sense’.
Regarding the measurement of diversity and the need to develop homogenous metrics, Penelope Peron, Senior Associate ESG & Climate Consultant at MSCI, noted that ‘biodiversity metrics are less developed than climate metrics. While land-based metrics, such as those we have at MSCI like PDF and MSA, are improving, marine metrics remain a significant challenge due to monitoring complexities’.
The economic cost of climate policies
Mario Draghi’s recently published report on the Future of European Competitiveness underscores the potential of decarbonisation as an opportunity for Europe. However, the report emphasizes that without a coherent strategy to meet climate targets, decarbonisation risks undermining competitiveness and growth. One of the primary recommendations of the report is the establishment of a synchronised decarbonisation and competitiveness plan, which is essential for fostering sustainable economic growth.
Lara Lázaro, researcher at the Elcano Royal Institute, pointed out that ‘the geopolitical and economic context has changed with respect to the one we had in 2019, with some sectors such as agriculture asking for less regulation and others such as renewable energies requesting an acceleration of permits’. In spite of this, Lázaro noted that the European Green Deal continues to be the guiding star of policy in the EU, ‘although some flexibility may be considered in certain dossiers, to strike a balance between decarbonization, competitiveness and energy security’.
‘The Draghi Report suggests developing asymmetric strategies for industry’, as Lara Lázaro explained. ‘It advocates for a differentiated strategy depending on the cost differential between the EU and its competitors (in e.g. photovoltaic solar panels, batteries, hydrogen, heat pumps, etc.)’, she concluded.
In conclusion, SFF Madrid highlighted the importance of regulatory developments in driving the energy transition. However, progress must balance climate goals with industry competitiveness.
