Related News

New template may spur open account trade finance distribution

Swift says CBDC testing for trade payments showing positive results

Olam bags US$625mn shariah-compliant facility

C2FO strengthens supply chain finance offering with managing director hire

World Bank to revamp guarantee business

The need for clear policy standards and definitions emerged at the Business Climate Summit in London as a major issue in helping businesses adapt to a low-carbon economy.

The summit focused on discussing best practices for implementing the COP 21 Paris Agreement, involving businesses and the financial community. According to Roberto Azevêdo, director general of the World Trade Organisation, the agreement was a good start, but the real challenge will be deciding on the specific policies needed achieve zero net emissions on a global level. “The major problem is defining what you want to negotiate. Right now, we don’t have that. You really have to sit down and have a conversation on what the priorities are,” he said.

Some of these negotiations may entail defining what an environmental good is, and measuring and establishing carbon pricing. In these areas, a cohesive and consistent framework for trade and investment will be particularly crucial, as these would affect the kind of tariffs imposed on traded goods. “We need a framework of definition to understand the playing field. Without that it will be difficult to agree on common policy,” said Jean-Louis Chaussade, CEO at Suez. 

On the financial side, HSBC chief executive Antonio Simeon advocated for more transparency and disclosure, policy stability, standardisation on pricing the cost of climate risk and a phasing out of fossil fuel subsidies. 

According to the conference’s speakers, the investor community is ready to back businesses supporting sustainable initiatives. “The pressure on companies will increase, not decrease,” said Saker Nusseibeh, Hermes Investment Management CEO, adding that investors also need to be “willing to finance alternatives, otherwise we are not solving the problem.”

Financial institutions can also make a significant impact in the development of sustainable infrastructure financing. According to Felipe Calderón, former president of Mexico and chair of the global commission on the economy and climate, around US$90tn will be invested in infrastructures around the world over the next 15 years, and it is of absolute importance that these go towards projects that are clean. Calderón had a clear position on the construction of new coal plants: “We need to stop it!” According to him, investing in sustainable infrastructure is not one path among many, it’s the only growth story of the future. “Infrastructure will either be the pillar on which we base our development and prosperity or it will lock us into a high-carbon pathway and become the gravestone that marks the failure of our civilisation.”

Speaking to the conference delegates, Amber Rudd, UK secretary of state for energy and climate change, sought to reassure infrastructure investors looking to operate in the country, despite the uncertainty deriving from the Brexit vote. In her speech, she outlined that fighting climate change will remain a priority for the government, focusing particularly on nuclear energy technology.

Nuclear power remains a challenging and controversial energy source, even from a financing perspective. “The challenge with nuclear is the length of payback,” noted Julian Mylchreest, co-head of global energy and power investment banking at Bank of America Merrill Lynch. “It has to be financed from the balance sheet of those who can afford it.”