Investments in the future of business

The role of financial institutions in developing a green economy. Funds for sustainability.

Session partner:





Introduction to sustainable financing

Building and broadening a green economy will not be possible without appropriate financing strategies. As presented in the UNEP Green Economy Report, decoupling the use of natural resources from economic growth is critical to achieving this. An annual investment of 2% of GDP would enable the essential transition to a green economy. Even investments of between 0.25 and 0.5% of annual GDP could improve the sustainability of “natural resource sectors”, such as forestry, agriculture, freshwater and fisheries. The financial sector plays a key part in enabling a transition to a greener economy by financing low carbon technologies, forest assets, etc. On the other hand, banks and investors need to work with corporate clients and investee companies to reduce their net environmental impact so as not to become a liability for their loan or investment portfolio. Claiming that SusCon 2012 will focus on action, a good part of the conference discussion will be spend on answering the question “How to make it happen?”.

Various strategies have been developed and applied already:

Some of the experiences:

In the overall context financial institutions with a sustainable approach can play a strong role in developing a green economy. They are in the position to decide not to lend money or to finance business models and projects that are environmentally or socially irresponsible. Also, innovative and sustainable business models can be treated preferentially. And, financial institutions can collect “green capital” from a growing number of consumers interested in sustainable banking and/or insurance services.

The role of financial institutions in developing a green economy

Environmental and social factors are entering the mainstream financial sector. More than 200 financial institutions are currently members of UNEP FI. The Principles of Responsible Investment (PRI), which was established at UNEP FI, has more than 1000 signatories. The recently launched UNEP FI Principles for Sustainable Insurance (UNEP FI – PSI) at Rio+20 has already more than 30 signatories with a total value of 10% of global insurance premiums.

The Equator Principles have been set up for banking institutions involved in project finance (e.g. large infrastructure projects) to include environmental and social factors in every aspect of the project development, including due diligence. Another recent initiative is the Natural Capital Declaration, which stimulates financial institutions to integrate natural capital considerations in loans, bonds, equities and insurance products.

Microfinance schemes can have a broad impact on sustainability issues. In most cases microfinance aims to empower the poorest by combining income generation with environmentally friendly micro-business models. Particularly in countries with insufficient legal frameworks and/or non-functioning control (and sanctioning) systems responsible financial institutions could have a strong impact by rejecting non sustainable investment projects. In recent years various organizations and collaboration groups have developed specific tools for financial institutions to understand environmental and social risks better when assessing investment and/or lending projects. Managers in financial institutions are nowadays aware and sensitized to environmental and social risks. Nevertheless, a major part of global business activities is still unsustainable. At the same time, the existing micro finance systems cannot satisfy the demand for such services.

This session focuses on the role of financial institutions as “change makers”. One Best Practices investment case (equity financing), as well as one Best Practices from the microfinance sector and one Best Practices of the insurance sector have been selected. In all cases, co-operation partners will present their work briefly and then share their experiences.


Moderator: Ivo Mulder, UNEP FI

Best Practice Case:
Manuela Marques, DEG
DEG Equity Financing of Sekem Group

Best Practice Case:
Helmy Abouleish, Sekem Group
DEG Equity Financing of Sekem Group

Best Practice Case:
Stefan Henkelmann, Sparkassen Stiftung
Microfinance

Best Practice Case:
Felistas Coutinho
Tujijenge Afrika Ltd
Microfinance


Session tasks:

1. Identify bottlenecks and solutions for a quicker and broader implementation of principles for responsible investments,
lending and insurance business.

2. Clarify whether governments should regulate the financial sector, in particular consider whether minimum social and environmental requirements are fulfilled.

3. Consider how microfinance structures can be used as a tool for benefit sharing between rich and poor economies. 

Background information

1. Finance Chapter – UNEP Green Economy Report

2. Principles for Sustainable Insurance: http://www.unepfi.org/fileadmin/documents/PSI_document-en.pdf

3. http://www.unpri.org/piif/

4. Natural Capital Declaration http://www.naturalcapitaldeclaration.org/

5. IFC's Sustainability Framework

6. http://www.povertyactionlab.org/publication/latest-findings-randomized-evaluations-microfinance

7. http://www.microfinancegateway.org/p/site/m/

8. https://www.globalcompact.de/sites/default/files/jahr/publikation/nachhaltige_finanzierungen_in_mittelstaendischen_unternehmen_cscp_2012.pdf (Only in German)


in cooperation with:
BMZ
brands and values
NABU
NürnbergMesse
WWF Deutschland
BfN
Rapunzel
cscp
DP-DHL
DGCN
Danone
DEG
IFOAM
Serviceplan
UTZ certified
Naturland
Rainforest Alliance
FiBL
RWE
Lavera
FLO
Soil and More
ICRAF
KRAFT FOODS
FSC
Rewe Group