How and why were the UN SDGs created? What does the UN hope to achieve and how has the business community become involved?
It was a phenomenal feat when 193 countries came together at the UN in 2015 and agreed on 17 global goals. The SDGs provide a definition of what sustainability means and what a prosperous planet would look like. It puts every major issue on the radar, and the UN wants the business community to take collective responsibility for achieving them.
What has the financial services industry contributed towards meeting the goals? How and why is this project relevant to the industry?
The industry has a central role to play. Its power to influence who gets the money is critical. For instance, if a sovereign wealth fund decides to invest heavily in energy transition, it will change the future of that industry or the country in which it is investing.We have to make sure we find the money to create solutions to these problems – and that we move money away from places that are causing them.
Which of the 17 goals have seen most progress?
In climate change there have been big steps forward with COP 21 [the 2015 Paris climate change agreement]. Every participating country must have a climate action plan and most large global firms are measuring and reporting on their carbon footprints.
Gender equality and women’s empowerment have taken centre stage in the last few years too, with the UK mandating pay gap reporting and the #MeToo movement questioning how safe women feel in the workplace. Many organisations are looking at gender bonds and gender funds, where a project might directly benefit and empower women in rural areas through economic opportunity and access to work.
Infrastructure, industrialisation and innovation are all moving at a rapid pace and have been for the last few decades. Digitisation is helping manage the enormous amount of data that we need to solve different sustainability issues. It facilitates a lot of auditing and reporting to understand whether a proposal is a genuinely green or social project. And it has practical uses, such as using digital satellite imagery to monitor the heat efficiency of a building.
Which goals have received less attention?
Oceans, where acidification and coral reef degradation are big issues, have a long way to go. The plastic in oceans is something that everyone has plugged into. People are looking at their own plastic use, even things like deciding not to use a straw next time they have a drink. That is the way we want to approach these SDGs, with a sense that every little bit counts. In biodiversity, life on land has a long way to go as global population growth competes with the preservation of flora and fauna. For food security, there are parts of the Middle East and Africa that are becoming uninhabitable and non-arable because of desertification. The poorest are suffering the most. Water is an issue that has been overshadowed in comparison to the climate debate. We forget how vulnerable our water resource is.
What part has BNP Paribas played in meeting the goals?
We have mapped our entire business to the UN’s SDGs. For climate action, for example, we have set science-based targets for ourselves to reduce our carbon footprint towards the 1.5C scenario – the globally agreed level at which to limit temperature rise to curb global warming. And we have made decisions on our loan book to support the energy transition. We have divested from areas we don’t believe will be productive in the future – such as new coal-fired power plants – and we have an active target of GBP 15 billion investment in renewable energy.
We are leaders in green bonds and are developing other products like positive incentive loans, which give corporates reduced rates if they exceed their sustainability targets, or charge more if they fall short. We are moving into social impact bonds. In Connecticut, we are working with the state government to fund local charities that support troubled families to keep children out of the care system. We get paid based on success – if a parent passes a drug test, for instance. The state saves money on its care bill but, more importantly, children from troubled families go on to lead better lives. We are going out to our clients across the spectrum, trying to figure out finance solutions to their sustainability challenges. We want to make it financially viable for them to switch to sustainable practices and incentivise them for doing so. It makes us partners with clients on those projects and highlights the values we share in common
“The financial services industry has a central role to play. Its power to influence who gets the money is critical. We have to find the money to create solutions to these problems – and move money away from places that are causing them”
What are the risks to the sector, and the world, if we fail to achieve the goals?
Even if you don’t care about social and environmental issues, the financial cost of failing to tackle these issues is enormous. In a world where billions of people became impoverished because we failed to protect our planet’s resources, it would be impossible to do good business.
Which areas of the world are leading in adopting sustainability? How is the private sector reacting?
Europe has been a leader in areas like energy transition and sustainable transport. In India and China, there is a massive leapfrogging in how they look at sustainable energy – making alternative energies a core part of their mix and adapting them rapidly. In the US, individual states and cities are still leading the way, despite a lack of clarity on how the central government stands on issues like gender equality and the environment.When it comes to companies, investors are more bullish than corporates in asking for and demanding improvements in sustainability. But there are corporates that are excelling too, such as Unilever and Danone.
What would you encourage others to do to help achieve these goals?
It is important that every organisation undertakes the exercise of mapping their business to the SDGs. Dialogue is really important – that is why we organise our Sustainable Future Forums in Singapore, New York and Paris every year to bring corporates and investors together to talk about issues like water management, gender and new energies. Being an active participant in those conversations is how we will find solutions.
Sometimes there is pushback saying ‘this isn’t our business – our fiduciary duty is to shareholders’. I would challenge that in today’s world. For the first time, people at board level are starting to believe and act on the fact that safeguarding our people and planet is their business too. I think it is the business of every individual, company and government.
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ESG investing - an exercise in change management