Financial Agents and Sustainable Transition

The collective awareness regarding the profound social and economic implications of climate change is now irreversible. A recent study by Oxford Economics estimates that global GDP could decrease between 2.5% and 7.5% by 2050 if the global temperature rises by 2º C above pre-industrial levels. The World Bank warns that this same warming could push 100 million people into poverty as early as 2030, and the World Economic Forum’s Global Risk Perception Survey has shown that over the last decade, purely economic risks have been overshadowed by environmental ones.

The World Climate Summit taking place these days in Madrid will undoubtedly represent a great opportunity to further highlight these and other consequences, and to rally more organizations, individuals, and companies to make a positive, urgent, and collaborative net contribution during the transition to a more sustainable economy. In this context, however, there is an incontrovertible truth: pivoting towards a more sustainable economic model will require significant investments from all economic agents—ranging from large multinationals to the smallest SMEs, regardless of their area of activity—and financing these is not feasible for organizations established to combat climate change. For example, it is noteworthy that in the European Union alone, the decarbonization of the economy by 2030 will require annual investments of around 2.5 trillion euros.

In light of this reality, the financial sector has stepped up and explicitly accepted its indispensable role not only as a financier of the sustainable transition but also as one of the driving sectors of the same, as demonstrated by the pioneering Katowice Commitment and more recently reaffirmed by the six Principles for Responsible Banking and the Principles for Sustainable Insurance of the United Nations. In this regard, and aware that the Spanish productive fabric requires even more grassroots work due to the high presence of SMEs—still today, this segment of companies is the one struggling most to understand the benefits and transition to more sustainable models—, in 2019, ahead of COP25, the associations representing the banking, savings banks, insurance, collective investment institutions, pension funds, and credit cooperatives in our country launched Finresp: the Center for Sustainable and Responsible Finance in Spain.

And indeed, although at times we correlate the contribution of financial agents to alleviating climate change with sustainable finance, in reality, it also encompasses areas such as investment or insurance, which is directly linked to environmental risk, whether it be civil liability or related to natural disasters.

From its inception, the center has also integrated into the International Network of Financial Centers for Sustainability (FC4S), which not only connects us with good practices in responsible and sustainable finance from the other 27 centers established since 2017 around the world, but also serves as a conduit for Finresp and Spain to become references for how to contribute to the sustainable transition of the productive fabric, especially of small and medium-sized enterprises.

In the coming days, Finresp will have the opportunity to participate in the World Climate Summit to further clarify and make visible its commitment and that of the sectors promoting it to contribute to mitigating climate change and to social transformation, and to establish itself above all as a loyal and committed partner of the administration and companies: the other two corners of the essential triangle for the fight against this change, both social and economic, to be truly effective and transformative. But especially after COP25, we will continue working to turn the Spanish financial sector into a change agent in the transition towards a new sustainable paradigm, aware that this is a long-distance race and not a sprint.