Paris financial market players mobilized to meet the challenges of financing the ecological transition
On Monday April 22, 2024, the Institut de la Finance Durable, a branch of Paris Europlace, organized the Rencontres de l’IFD. Placed under the High Patronage of the French Ministry of the Economy, Finance and Industrial and Digital Sovereignty, this1st edition focused on the theme ‘Financing the ecological transition: time for action!
‘The Rencontres de l’IFD provide a platform for exchange and reflection on the crucial issues of the ecological transition and its financing, by bringing together the key players and decision-makers involved in its success. They reflect the work undertaken by the Institut de la Finance Durable on the decarbonization of the economy. This year’s event brought together more than 25 speakers and over 500 participants at the Ministry of the Economy and Finance in Bercy, as well as almost 200 people online. The conference drew 3 main conclusions, all of which are addressed in the work of the IFD.
‘ To achieve this major transformation, a new political economy is needed. This new political economy must be based on a renewed definition of the roles, responsibilities, interactions and solidarities between the main players in the economy – the State, companies and financial institutions. The new context requires each of these players to transform themselves. Making a success of the ecological transition requires making the right technological and industrial choices, and mobilizing all the players involved. It also requires close dialogue between them. Yves Perrier, Chairman of the Institut de la Finance Durable
A successful ecological transition requires a global industrial revolution.
We need to trigger massive investment over the next 10 to 15 years. The financial sector therefore plays a critical role in redirecting resources from ‘brown’ to ‘green’ projects. Sources of financing exist, but require work on project profitability and use value, echoing the conclusions of the Institut de la Finance Durable’s report on financing the ecological transition, published in June 2023. To accelerate action, the Institut de la finance durable is continuing its work on financing the ecological transition, defining an ecological transition investment and fossil fuel trajectories.
‘Like many other activities, finance is faced with the challenge of making itself compatible with the global physical limits of our planet, including climate and biodiversity. This cannot be achieved by marginally adjusting an activity that is globally identical to the current one, and perhaps not by maintaining yesterday’s returns. So there are two huge managerial and strategic challenges ahead of us, which we’ve barely scratched the surface of at the moment. Jean-Marc Jancovici, Partner, Carbone 4 & Chairman, The Shift Project‘
The transition to sustainable economies exposes all economic players to profound transformations, both strategic and technological. As a financial institution, Societe Generale has a major role to play and is committed to supporting its customers and stakeholders in meeting these challenges. Concerted action between the various players, both public and private, is needed to meet the challenges imposed by the ecological transition while ensuring the competitiveness of European businesses.’ Pierre Palmieri, Chief Operating Officer, Société Générale
‘Unless we imagine a collectivization of the economy, the ecological transition can only be achieved if we make the decarbonization projects of businesses and households profitable. With public money in short supply, the only way to achieve this is to put a price on carbon, using the tax revenue generated to compensate, or even overcompensate, the most modest households.’ Christian Gollier, Executive Director, Toulouse school of economics
Governing this transition means defining new roles for each of the key stakeholders, and thinking beyond financial performance
The State must regain its role as strategist and coordinator of economic players, by giving itself the means to do so, notably through planning and targeted industrial policies.
Companies are in the front line, as they are the ones who design the technological and industrial solutions needed for this transformation.
Financial players must support the transition by allocating the capital needed for corporate transformation projects, and by developing a climate-focused market discipline analogous to the financial market discipline created in the early 1980s.
Through its very operation, the Institut de la Finance Durable reflects this organization for enhanced dialogue. It is also helping to improve the standardization of extra-financial analysis methods, so that decarbonization can be taken more fully into account in corporate projects.
Faced with the challenges posed by climate change, our role as bancassurance is to provide concrete support for all our stakeholders, and in particular our customers, in the transition to more sustainable economic models’. Stéphane Dedeyan, Chief Executive Officer, La Banque Postale
A transition that cannot take place without emerging countries
Financing the transition of emerging countries is a crucial issue for economic development and for keeping up with the global trajectory of lowering greenhouse gas emissions. Blended financing offers excellent prospects for the ecological transition in emerging countries, with significant deployment in recent years. However, it must be accompanied by a broader transformation of local economies.
The IFD has been mobilized since summer 2023 on the subject of blended finance and is fuelling reflections to remove obstacles in order to better mobilize private capital and better finance the transition in emerging countries.
‘ Despite progress, the amounts of public aid and climate finance remain far from what is needed, around 10 times higher. Mobilizing private finance, particularly through blended finance, is crucial for developing countries. With an appropriate regulatory framework, its deployment would enable financial flows to be better directed towards emerging and developing countries with a wealth of investment projects. This ambition is at the heart of the Paris Pact for People and Planet (4P). ‘ Amélie de Montchalin, Permanent Representative of France, OECD
‘ The time for action has replaced the time for awareness. Companies must seize the opportunity provided by the CSRD to rethink their business model in order to provide goods and services that are useful to society and have an impact compatible with planetary limits. The associated value creation will be captured by the investors best equipped to assess these evolutions.
‘Isabelle Kocher de Leyritz, Chief Executive Officer, Blunomy‘Bank of America is committed to deploying and mobilizing $1.5 trillion by 2030 for sustainable finance, including $1,000 billion for environmental transition and $500 billion for socially inclusive development. This is a concrete commitment; we have already mobilized $560 billion to foster the transition to a sustainable economy in several countries, including emerging countries.’ Vanessa Holtz, CEO, Bank of America Securities Europe S.A.