Laying the ground for lively discussions, NatWest Group’s chairman, Sir Howard Davies, addressed the audience with a welcome note before our ESG specialists engaged in five roundtables with key ESG issuers, investors and market specialists. These included, for example, Sophie Landry, Head of Treasury Portfolio Management at the European Investment Bank; Sylvain Vanston, Executive Director Climate Change Investment at MSCI; Jean-François Masure, Head of Debt Agency for the French Community of Belgium; Matthew Reed, Head of Development, Sustainable Finance at EDF; Brice Javaux, Partner ESG & Sustainable Finance at KPMG; Camille Barré, ESG Analyst at Mirova and Théo Kotula, ESG Analyst at AXA Investment Managers.

• “Greenflation”: It’s important to consider the inflation potential of renewable energy generation: renewable energy is materially intensive (for example, solar panels require semi-conductors), which can initially push up prices on the transition path to a low-carbon economy.  However, given soaring energy prices, the economical case for renewable energy is robust.  
• Price inflation of carbon credits: Only 5% of companies committed to net zero aim to achieve their objective by restructuring their businesses and changing their processes, while 25% are determined to get to net zero by reducing carbon-intensive processes. Alarming: the large majority of companies, 70%, plan to become net zero through compensation mechanisms, such as carbon credits. However, there will not be enough carbon credits generating projects available. Simply speaking: There is not enough land on our planet to plant the number of trees needed to offset the carbon emissions of those 70% of companies. We will therefore very likely observe a price inflation of carbon credits.
• Market initiatives setting the scene for greater decarbonisation of portfolios: The Partnership for Carbon Accounting Financial (PCAF) has been instrumental in the harmonisation of methodologies, accounting and reporting approaches, to allow for better transparency and comparability between different financial institutions. Whilst the Glasgow Financial Alliance for Net Zero (GFANZ) has supported Financial Institutions since COP26 in defining credible and ambitious net-zero targets. The combination of these two initiatives has provided necessary guidance to the financial sector, which should result in greater alignment of portfolios with decarbonisation trajectories.
• Help for better environmental data disclosures is at hand: Investors are becoming more demanding around the quality of data disclosures regarding issuers’ environmental impact. Meanwhile, issuers want to better understand the risks and opportunities related to Natural Capital. The Taskforce on Nature-related Financial Disclosures (TNFD) aims to provide this much needed guidance and has already made significant progress on both the reporting and monitoring fronts. As of today, water and deforestation are the topics which are best captured by existing metrics.
• More clarity for the S in ESG: Investors and issuers alike are keen to support greater harmonisation in the field of social investments, as this will be a key catalyst for new eligible projects. The main challenge is to find relevant and comparable social impact metrics given the wide range of topics and sectors. With no clear announcements yet whether the EU will follow up from the EU Taxonomy with a Social Taxonomy, more guidelines and benchmarking tools are urgently needed.

If you want to find out more about the event, or topics discussed, please contact:
 

• Caroline Haas, Head of Climate and ESG Capital Markets 
• Philippe Bradshaw, Head of European Syndicate
• Tom Cascales, Associate, Climate & ESG Capital Markets
• Nathalie Larrousé, Director, SSA Climate & ESG Capital Markets
• Alexandre Foult, Director, DCM Origination and Rates Derivatives Solutions Sales 
• Joanna Neuvessel, Director, Flow Rates Sales and Head of FraBeLux Short-Term Market Sales 
• Philippa Cole, Associate, SSA DCM