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Leveraging finance for a sustainable future
For BNP Paribas, our commitment to sustainability is much more than a slick marketing slogan about being the bank for a changing world.
Today, when we analyse a project, we are paying increasing attention to sustainability criteria. We look at the environmental impact but also other impacts on public health and social inclusion, and the benefits for individuals and local communities, and we take a view that is not always straightforward or immediately obvious when we make decisions around funding.
We have integrated the United Nations' 17 Sustainable Development Goals (SDGs) into our strategic business plan, and have put in place tangible goals and performance indicators in areas such as renewable energy, diversity and working with social businesses and community organisations.
The message is clearly becoming more urgent. We are operating in a new world; we see increasing climate risk, as highlighted by the UN Intergovernmental Panel on Climate Change-issued warnings just recently.
We see rising inequality; we see technological disruption. We face unprecedented challenges.
This IPCC report will undoubtedly be keenly debated in this region when we look at the role the Asia-Pacific plays as both the biggest energy consumer, the biggest carbon emitter in the world, but also, hearteningly, the biggest growth engine for renewable energy investment.
Governments alone cannot tackle these issues. The private sector cannot just be a bystander.
This is especially true for banks. The ways in which we raise capital, factor the risks, invest and finance the economy are all evolving. More than ever, the decisions we make are having a profound impact. We need to ensure this impact is positive for society, that we do our bit to contribute to a better future.
While we can each make a difference in taking such decisions, we will be more effective if we work together and with others. At BNP Paribas, we want to be part of meaningful coalitions. It means working differently and often with organisations we have not worked with before.
For example, BNP Paribas has joined with the United Nations Environment Programme to develop specific financing solutions adapted to developing countries.
They take the form of what we call "Sustainable Finance Facility" (SFF) programmes.
We're proud of our achievements in this space this year:
- The Tropical Landscapes Finance Facility, which was inked on the sidelines of our first SFF in 2016, announced its first project this February. The proceeds of TLFF 1, a multi-tranche US$95 million bond, were issued to Royal Lestari Utama, or RLU, a joint venture between Michelin and Indonesia's Barito Pacific Group. This money will help to develop a climate-smart natural rubber plantation, employing 16,000 people and, importantly, rehabilitating an area of land the size of Singapore.
This structure attracted new investors, hungry for high quality assets that directly promote better living standards. Unlike traditional "green" or "sustainable" bonds, this project bond has strict covenants around deforestation, jobs creation and wildlife protection. Issuing these bonds is not easy. It requires the collaboration of governments, NGOs and private sector investors and banks. But as the market becomes more comfortable with the structure, we can unlock the finance needed to advance more such projects in an area that desperately needs a onger tenor and higher quality investments.
- Along a similar line, we are working with the government of Andhra Pradesh in India. The Zero Budget Natural Farming project, or ZBNF, will work with 6 million farmers from across India's biggest agricultural state to improve their productivity while also improving sustainability. Requiring a US$2.3 billion investment, BNP Paribas will contribute to structure the finance to again unlock new revenue streams that are more stable and reliable than grant funding. This has the potential to improve the future of food supply in the world's second most populous nation.
To realise the SDGs by the 2030 deadline is dependent on a few key things:
- We need SCALE, we need to join forces with all the stakeholders;
- We need to leverage our balance sheet of over 2 trillion euros. It is scale but at the same time, it is still small compared to all the financing needed across the global economy, so we need to move collectively;
- We need to free up part of our balance sheet to support those clients that are going in the right direction, and work less with clients who are not preparing for the future. This may at times be tough but it is necessary for long-term sustainability and profitability.
- We at BNP Paribas can also play an important role in channelling capital from private investors to game-changing sustainable projects - we are the bridge connecting those who need capital and those who have it;
- We need to make sure that our 200,000 staff at BNP Paribas all try to have a positive impact, including through their personal endeavours and contributions to their communities;
- We need the many brilliant ideas of our clients, informed through meetings with entrepreneurs, investors, startups and innovators. We have to listen to them and we need to be more disciplined and organised to build solutions together.
- The writer is Asia Pacific chief executive officer of BNP Paribas.