In the lead up to SustainableFinance.Live, set to take place on November 29th 2022, Finextra is giving all interested parties a taste of the weighty discussions scheduled for the event.
We spoke to Robert Spruijt, EMEA head of sustainable finance at ING, around how the bank is planning to implement ESG methodology and sustainable solutions into the future.
Sustainable ambitions have become increasingly relevant in the current era of climate change and environmental catastrophe, and financial services providers must therefore grapple with their environmental impact and take action towards resetting their sustainability
strategies.
Noting the manner in which ESG objectives have become common practice within financial institutions’ overall strategy, Spruijt lists initiatives such as the
Net Zero Banking Alliance as good influences on the transition towards financial institutions becoming more ESG-driven.
He adds that looking forward, further regulation and data requirements for corporations and financial institutions would be beneficial to inform and guide clients in the transition, in order to create a sustainable profile and monitor their emissions in
their respective industries.
Using the plastics industry as an example, Spruijt explains: “It is hard for the circular business models to compete with the virgin plastic producers. Now we see more activity on the circular side, which is driven by the EU regulation which dictated that
by 2025 plastic bottles should contain 25% recycled PET. So you can argue that clear regulation, standards, and voluntary initiatives will enhance the integration of ESG in the market and also with financial institutions.”
On the growing integration of sustainable practices within financial institutions, Spruijt recounts that
the first green bond was issued in 2007 by the World Bank and the European Investment Bank (EIB), and in 2017 ING created the first Sustainability Linked Loan for Philips. He details that the
green bond market made over $600 billion during 2021, demonstrating that growth in the industry is evident.
Spruijt continues: “We see that in many other products ESG is being integrated nowadays, so I will not be surprised if lenders and investors will become more critical over time in case no sustainability features are integrated in a facility.” In this way,
it is clear that ESG will become intrinsic to the services and products of the financial industry in the future.
While this is not guaranteed, it paints a hopeful future for the financial industry. However, as companies are striving to create more sustainably-featured products, we now recognise that in certain circumstances sustainability is being seen more of as a
trend than a critical and necessary process. Many financial institutions have been accused of using sustainable buzzwords rather than taking decisive action.
“Until recently, greenwashing was a rather subjective term,” Spruijt explains. “More clarity is being provided through standards, like the EU taxonomy (EUT), which defines ‘sustainable economic activity’. So you could argue that if a company is issuing a
financial product within the EU, but it does not adhere to the EUT while including the ‘green’ label in the communication, it can be seen as greenwashing.”
He adds that the EUT is not entirely stipulatory as a whole, and there is still infighting around what is included in the taxonomy, such as gas and nuclear. Consequently, member states continue to disagree on the definition of ‘greenwashing’ and many green
issuances detail how they deviate from the EUT. Spruijt adds that green issuances would also become easier to tokenise in the future in light of the clarity the EUT sheds on sustainable economic activities.
Spruijt reasons that communication and transparency are the solutions to the greenwashing dilemma, though how this would be enforced is still up in the air.
On the role of technology and data in opening up opportunities within the industry, Spruijt believes that data is key in understanding the risk and analysis necessary to smooth the transition.
When asked about what SDG projects financial institutions should be prioritising at present, Spruijt indicates that companies should engage with their clients across sectors and “take a holistic approach to address material ESG issues relevant for the respective
client."
The future of the financial industry in matters of sustainable impact on the world is unclear, but Spruijt provides a hopeful view in the continued growth and development of the sector in this matter.
To hear from more experts, register here for Finextra’s fifth Sustainable Finance Live conference and hackathon to take place on 29th November.