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On the Money

Tapping capital markets for corporate climate action

Two tools funding decarbonization: Green bonds and supply chain financing programs.

Sustainable finance

Image via Shutterstock/Miha Creative

Financial institutions can play an outsized role in funding action on environmental and social challenges. At GreenBiz 24, I heard from countless sustainability professionals who are embracing sustainable finance options, including debt such as green bonds and financing programs for supply chain partners.  

During a discussion about sustainable debt, a Prologis executive described the 27 green bonds the logistics real estate company has issued since 2018 — funding green buildings, energy efficiency and renewable energy projects. In another session, a Levi Strauss executive talked about how the apparel company has encouraged decarbonization in its supply chain with more than $2.1 billion in loans and other financing for partners.

Accessing capital markets for sustainability  

The transition to a net-zero economy is highly dependent on sustainable finance: an estimated $4 trillion in clean energy investment per year by 2030; more than $722 billion annually to reduce biodiversity decline; and up to $5.3 trillion to advance technologies for decarbonizing aviation, as just a few examples.

In order for companies to invest the trillions of dollars needed to transition to net zero, they will require standardized and streamlined systems for deploying and measuring the impacts of those investments. Financial institutions have a well-defined framework to do this, and some have helped many clients align their financing with sustainability goals.

I asked five sustainable finance leaders to reflect on this question: What is the most powerful way financial institutions can support the net-zero transition? Here are their thoughts:

Patrick Flynn, former Salesforce sustainability lead and now an advisor, board member and investor: "For most companies, the majority of their emissions stem from deep in their supply chains. So without economy-wide emission reductions, those far-flung parts of their footprint will remain — and net-zero targets will remain — out of reach as well. Companies must approach their financial suppliers like any other part of their supply chain, and ask for products that do less harm and more good. Meanwhile, leading financial institutions need to meet this enormous tsunami of demand with an excitement commensurate with the scale of the opportunity in front of them — literally the largest change to capitalism and capital flows that the world has ever seen."

Chris Hagler, head of ESG for Independence Point Advisors: "Many banks offer green financing, but it represents a fraction of their portfolio. Many measure financed emissions and have goals but lack a credible pathway to net zero. These are good steps but lack impact when not integrated across the bank. To progress the transition, educate ALL bankers on how climate risk impacts their clients, and engage with them in creating company transition plans. We must move beyond discussion to practical action." 

Davida Heller, head of sustainability strategy at Citi: "Financial institutions are in the middle of navigating the practicalities of the energy transition, and helping companies and governments work through the transition. Transition finance is going to be a big opportunity area for banks. Banks like Citi can play a role in facilitating an orderly and inclusive transition with financing that supports clean energy solutions to help meet the world’s future energy demand with low-carbon sources of energy, while continuing to meet today’s global energy needs."

Kelli Keenan, head of sustainability for U.S. Commercial Banking at HSBC: "We recognize the critical role international financial institutions like HSBC play in the net-zero transition. At the core of our approach is our clients, ensuring we support their sustainability objectives, wherever they may be on their transition journey. Our net-zero commitments extend beyond our own ambitions. It's about enabling our clients with innovative financing solutions and delivering key partnerships needed to address climate change and decarbonization."

Robyn Luhning, chief sustainability officer at Wells Fargo: "Financial institutions need to continuously evolve to meet the needs of customers and communities who are seeking lower-carbon solutions and want to build resiliency. Wells Fargo has clients that are scaling clean energy solutions such as renewable energy developers and electric vehicle manufacturers, and we have clients across sectors who need products and solutions to support their sustainability strategies. This should be complemented with support to communities who need equitable access to opportunities and climate resiliency." 

[Continue the dialogue on building a net zero economy at GreenFin 24 — the premier sustainable finance and investing event, June 17-19, NYC.]

 

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