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Two Steps Forward

5 themes for a capital week

On the eve of GreenFin 21, a rich cache of trends.

GreenFin - 5 trends

GreenFin 21 takes place this week (April 13–14), a fact that I hope has not been lost on you. We’ll be livestreaming the daily 75-minute plenary sessions on, starting promptly at 11:30 a.m. Eastern / 8:30 a.m. Pacific, although you’ll need to register to partake in the dozens of breakout, roundtable and networking sessions that will follow both days.

It’s such an exciting time in green finance, with significant news and developments happening at a whirlwind clip. In just the past week, for example, Bank of America announced a goal of deploying $1 trillion to accelerate the transition to a low-carbon, sustainable economy; BlackRock, the world’s largest investment manager, said it would peg the interest rate of a $4.4 billion line of credit to its performance on such metrics as female leadership in the company and its employment of people of color; Invesco, a global investment manager with about $1.3 trillion under management, set a goal of integrating environmental, social and governance (ESG) metrics into all of its investments by 2023; and JetBlue announced it would tie senior leaders’ compensation to a series of ESG metrics, including reduced emissions per available seat-mile and efforts to engage and work with minority- and women-owned businesses.

That’s a mere sampling of what seems to be taking place every week lately.

It’s such an exciting time in green finance, with significant news and developments happening at a whirlwind clip.

But enough about the past. Let’s talk about this week. Here are five themes you’ll be hearing at GreenFin 21 — and, presumably, beyond — that help define this moment in sustainable finance and corporate sustainability reporting.

In no particular order:

1. The rise of sustainability in corporate finance. The above headlines demonstrate the rise of ESG on the investor side, but there’s plenty happening on the corporate site. For the first time, chief financial officers, corporate treasurers, chief investor relations officers and other corporate leaders are leaning into ESG metrics, since these things have become important to lenders and investors. And that’s driven the sustainability agenda up the ranks, all the way to the board of directors.

Of course, merely reporting data to investors and banks doesn’t necessarily equate to the kinds of things that matter to people and the planet: drastically reducing carbon emissions, turning waste streams into circular value, creating jobs, ensuring environmental justice and more. So, there’s also increased attention — by activists and regulators, as well as investors — to corporate greenwash, in which a company’s actions doesn’t match its proclamations.

2. The revolution in social finance. The “S” in ESG is also rising. There are new investment funds targeting women, people of color, rural communities and others who haven’t historically had sufficient access to capital. And, as noted above, companies are being assessed by investors and credit-rating agencies in part by their attention to diversity, especially in the higher echelons of company leadership. Social justice issues are another growing field for companies, including ensuring access to healthcare and education, protecting human rights and fostering employee well-being.

Still another area that’s gaining traction are company investments in local businesses. In the past, that has been difficult for big firms to do at scale — there’s just too much due diligence and risk for most corporate appetites. But innovative social enterprises are finding ways to funnel tens of millions of big-company dollars to lend to women- and minority-owned local businesses, potentially enabling these companies to grow and thrive, along with their communities.

3. The need to simplify ESG data and reporting. This has been festering for years, but suddenly there’s hope. The recent rapid rise of ESG in finance circles seems to be spurring global efforts to consolidate and harmonize the many reporting standards and frameworks. The past year saw a relative flurry of activity by nonprofit and professional organizations to align and harmonize their frameworks. SASB, GRI, CDP, TCFD, et al. — the whole alphabet soup of corporate reporting seems to be coming together.

The big kahuna, though, is a relative newcomer to the sustainability space: the IFRS Foundation, which sets global accounting standards. It is moving — slowly, but ever so surely — toward a unified set of sustainability reporting metrics. Meanwhile, in the United States, the Biden administration’s Securities and Exchange Commission is moving toward mandatory climate-risk reporting, joining its European counterparts. That would likely accelerate the standardization of reporting, moving everyone forward.

4. A growing menu of financial products. We’ve been covering the world of green bonds and sustainability-linked loans for a while now, so it should be no surprise that these and other financing mechanisms are on the rise. Issuance of sustainability-related bonds — green bonds, blue bonds, sustainability bonds, social bonds and more — are among the fastest-growing products offered by financial institutions. Each quarter seems to set a new record in the issuance of such bonds and loans as the demand by investors seems to show no end, leading some to predict a green-financing bubble. Many of the bond issuances have been oversubscribed — meaning investor demand exceeds supply — by five or ten times.

What’s also significant is how these bonds and loans are aligning the interests of corporate finance and sustainability departments, which historically rarely ventured into the other’s territory. (See theme No. 1, above.)

5. Financing the just transition. In some ways, the focus on ESG is the least interesting part of the sustainable finance arena. The standards and language will eventually sort themselves out, and ESG reporting will become humdrum routine. The much, much bigger question is how to find and deploy tens of trillions of dollars globally to fund the transition to a clean and just economy.

For my money, this is one of the most exciting and dynamic challenges the world will face in the coming decades. There’s roughly a quarter of a quadrillion dollars available globally — yes, quadrillion with a Q — according to a study by the William and Flora Hewlett Foundation. Whether and how that money can be used to finance clean energy, electrified transportation, sustainable food production and other parts of the clean economy represents perhaps the biggest economic opportunity in human history.

That’s just a taste. I hope you can join us this week at GreenFin 21. There’s still time to request an invitation.

I invite you to follow me on Twitter, subscribe to my Monday morning newsletter, GreenBuzz, and listen to GreenBiz 350, my weekly podcast, co-hosted with Heather Clancy.

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