Méndez (Finresp): “We want to discuss with the authorities a Sustainable Finance Plan”

Finresp (Center for Sustainable and Responsible Finance of Spain) was conceived in 2019 and launched in January 2020, just before the outbreak of the Covid-19 pandemic. This platform brings together five employer associations: AEB (Spanish Banking Association), CECA (Spanish Confederation of Savings Banks), Inverco (employers of management companies), Unespa (the insurers’ association), and Unacc (the credit cooperatives). Moreover, it is an initiative integrated into a global network of similar centers under the United Nations. José María Méndez, general director of CECA, has presided over this platform since May 2023. He explains that his priority at this moment is to discuss the Sustainable Finance Plan that the Government is preparing. Pedro Sánchez announced on January 11 the publication of a Green Book on sustainable finance and the creation of a sustainable finance council. Finresp already has a date for its major annual event, where the entire industry will gather: it will be held next March 14.Looking ahead to the coming months, what is your top priority as president of Finresp? One of the functions of Finresp is to collaborate with all regulatory bodies in the production of the normative framework for responsible finance. The focus is now on the Sustainable Finance Plan and the Green Book on sustainable finance that the Government intends to launch. As publicly announced by the Government president, the objective is to release at least for consultation a Green Book on Sustainable Finance this year and to create a sustainable finance council. For us, this is a critical element. We understand that we are facing a major challenge that requires public-private cooperation; therefore, [the desirable thing would be] to have collaboration and cooperation bodies. At Finresp, we are eager to receive a draft of the project. This would be the most relevant objective for this year: to discuss with the authorities a Sustainable Finance Plan for Spain.And what would Finresp propose? There are four areas in which we are willing to make that effort in sustainable finance. The first is disclosure. Although a significant amount of information is already being standardized at the European level with the SFDR [Sustainable Finance Disclosure Regulation], the goal is to homogenize the information provided by entities. A second area is how we interact with our clients to understand their sustainability preferences through suitability tests, in order to offer them products that align with their expectations. The third area concerns risks: entities have already incorporated environmental risks, both physical and transitional, into their risk analysis. Physical risk implies that in assessing the risks of your borrower, you consider the eventuality that climate change may cause losses. Transitional risk refers to the possibility that, if you finance entities undergoing their decarbonization pathway, you could be harmed by the losses incurred by not transitioning towards decarbonized economies. The fourth area, which should also be included in the Sustainable Finance Plan, is that all entities, which already have their environmental, social, and governance objectives, seek best practices and metrics.Regarding the Disclosure Regulation for sustainable funds, shouldn’t the names be simplified, given the complexity it implies for retail investors to understand terms like ‘Article 8’ and ‘Article 9’? Yes. Even so, these products have had impressive success. Nearly a third of the assets in investment funds are already in Article 8 or 9. This means there are more than 7 million participants in Spain who have invested in them. In pension funds, which is a segment with lower volumes, there are about 4 million. What stands out to me are the year-on-year growth rates, which are in double digits, reaching up to 113 billion euros already invested in these funds. However, we can continue to refine it and simplify it to provide more information to clients, ultimately achieving a uniform product labeling system. But this cannot be done only in Spain, because there is a lot of cross-border marketing of funds; this country not only sells CNMV-registered funds but also products from the European Union.But do you consider it important to simplify those fund labels? Yes. Overall, the Sustainable Finance Plan and this entire dialogue are very important because the goal is very ambitious. It is about changing the productive model in Europe to make it more compatible with the environment. The financial system is the circulatory system, we are decisive and critical in this change of productive model. But we also need to be clear about our role. It is our responsibility to finance renewable energies and green projects, but also to finance the transition. As of now, the economy is carbonized. We must follow the decarbonization pathways of the entities and finance their transition. It is not just about financing the green. This is a critical role in that change of productive model.To what extent is financing cheaper when it comes to sustainable financing? I think that cannot be demonstrated. It depends on other variables, such as market appetite. I find it complicated to calculate the green premium. I do not believe that, at this time, the market perceives a higher return from a green bond compared to one that is not.