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Change finance and put sustainability at the heart of finance – NGOs raise the debate

Change finance and put sustainability at the heart of finance – NGOs raise the debate

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20 December 2017

Different civil society events have been, and are being, organised to explain the lack of financial reforms, and to raise demands from civil society for much more change ten years after the 2008 financial crisis. After a series of complex EU legislation and G20 summits, many promises to reform the financial sector did not materialise and civil society demands have been ignored. Witness to that extent is the recent abandonment of an EU legislative proposal to separate the too-big-to-fail banks, and the deferment of a financial transaction tax (FTT), a longstanding NGO demand. Deregulation is back, either openly (US), or in the form of new laws (EU: the EU’s Capital Markets Union). Worse, experts warn that another financial crisis is possible and will be “horrid”(opens in new window) .

Recently, on 4-5 December 2017, Finance Watch organised a “Change Finance Forum”(opens in new window) with workshops and keynote speeches on how to make “finance a servant again”. Diverse perspectives on finance were debated, from radical (central) banking reforms to the role of finance as a driver of inequality; from the ethics of fintech to the role of financial services in trade agreements. Action labs discussed how to strengthen civil society as a counterweight to the financial sector while young academics proposed different ways in which they can support civil society. Keynote speeches covered lessons learned from Occupy Wall Street, what a serviceable financial system really looks like and how civil society can build momentum for it. The discussions inspired more than one hundred participants from 19 countries to continue their work to achieve a different financial system in diverse networks and organisations, at universities or individually.

A follow-up on how civil society and non-governmental organisations will be organising themselves in 2018 will take place at a meeting on 11 January 2018 in Brussels. The purpose of this strategy gathering is to coordinate activities so that civil society demands are clearly heard when “remembering” the ten-year anniversary of the financial crisis that engulfed the EU (on 15 September 2008 with the fall of Lehmann Brothers). The goals are to present arguments why, and alternatives for, attaining another financial sector. For civil society and many other stakeholders, the financial system itself has lost its core purpose(opens in new window) and is incapable of tackling the many challenges societies face, not least climate change. That needs to change.

On 6 December, a conference on sustainable finance, organised by Finance Watch, exposed some hot topics on the issue. Olivier Guersant, Director-General of the European Commission’s Directorate for Finance (DG FISMA) highlighted(opens in new window) that the EU wanted to become a leader in sustainable finance – as a business opportunity within a context of international competition for green bond standards, but also as a way to “re-engineer” finance for long-term mobilisation of capital for the common good, dealing with environmental, social and governance (ESG) risks and climate change. Mr Van Ypersele illustrated (opens in new window) the urgency of tackling climate change as called for by scientists. One panel(opens in new window) of experts discussed the usefulness and need for a credible and predictable carbon price. Another panel emphasised that a just transition(opens in new window) requires combining the burden with changes in companies and the financial sector, including mechanisms for workers to adjust, and for avoiding greenwashingm. During the final panel(opens in new window) , some European Parliament members argued for a comprehensive approach to sustainable finance in order to ensure that all investors were subject to the same duties and requirements. A hot issue is whether banks need an incentive when lending for “green finance” through a “green supportive factor”, i.e. less capital requirements, or need a “brown penalising factor” as a disincentive for loans that contribute to climate change.

The EC announced that its action plan on sustainable finance is to be presented in March 2018, based on the report of the High Level Expert Group on Sustainable Finance(opens in new window) , which will be published in early February 2018. The EC has already revealed some of its plans and taken some action, as explained in the speech of Commissioner Dombrovskis(opens in new window) at the One Planet Summit in Paris on 12 December 2017:

integration of sustainability factors into investment mandates;
a common classification system for what is considered green and sustainable;
envisaging lowering capital requirements for certain climate-friendly investments.