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What is green finance’s role in the Covid-19 recovery? | News | Eco-Business

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Governments, central banks and financial institutions each have a role to play in ensuring that massive stimulus packages rolled out to revive Covid 19-stricken economies are channeled into green projects, said finance and responsible investing experts.

Because the carbon and environmental footprint of many investments, especially infrastructure projects, will be locked in for the next few decades, it is important they are designed to be low-carbon from the start, said Dr Ma Jun, director of Tsinghua University’s research centre for green finance development in China.

In a keynote address at the recent United Nations Virtual Forum on Responsible Business and Human Rights, Ma noted that a significant amount of government spending is to stimulate consumption—dishing out coupons to consumers to spend on goods and services, for instance.

To ensure the money is spent on greener products such as electric vehicles and energy-efficient refrigerators and air-conditioners, central and local governments could draw up a list of goods and services to subsidise, he said at a session titled Ensuring a Sustainable Recovery: What Role for the Finance Sector?

Governments should also be transparent with how the stimulus packages are being spent, so that the public is able to monitor its actions, he said.

Regulators should lower the cost of funding green assets

Central banks and financial regulators, meanwhile, should enhance environmental and climate disclosure requirements, said Ma, who is also special advisor to the United Nations Environment Programme and former chief economist at the research bureau of China’s central bank, the People’s Bank of China.

“We increasingly feel that (environmental and climate) disclosure needs to become semi-mandatory or even mandatory, in order to…enhance the quality and comparability of the data,” he said.

Countries and regions are beginning to introduce such rules. Hong Kong announced last year that it would make environmental, social and governance (ESG) reporting mandatory from 2021 and, in China, regulators are expected to make it mandatory for all listed companies and bond issuers to disclose environmental information by the end of this year, Ma said.

Regulators should also incentivise sustainable finance by lowering the funding costs of green and low-carbon assets, and increasing the funding costs of brown and polluting assets.

Last September, French bank Natixis voluntarily introduced a mechanism to incorporate climate risk into its credit decision-making process. Called the Green Weighting Factor, the mechanism allocates capital to financing deals based on their climate impact. Deals assessed to have a negative environmental impact are required to be more profitable than green deals, and the bank plans to increase the proportion of its balance sheet dedicated to green lending, Bloomberg New Energy Finance reported.

Financial regulators should formulate similar rules, said Ma.

I believe that trend will increase because we’re seeing that a lot of coal projects are also risky from a financial perspective as well as from an environmental perspective.

Dr Helena Wright, vice-president of Asia Sustainable Finance at the World Wide Fund for Nature, on whether more Southeast Asian banks would pull out of coal 

Fight temptation to weaken ESG safeguards

On their part, financial institutions such as banks can lobby for better green finance policies and adopt responsible banking principles such as UN Environment’s.

They must innovate to overcome barriers hampering the flow of funds to green projects—such as by introducing insurance that would enable companies to obtain low-cost financing for environmentally positive projects, he said.

Ma encouraged financial institutions to adopt environmental risk analysis, and said the Network for Greening the Financial System—a network of central banks—is coming up with two documents this year that will help them. One is a paper that will introduce existing tools and methods for firms such as banks, asset managers and insurers to quantify financial risks from environmental and climate exposure. With such tools, financial institutions will be better able to “convince themselves to shift away from brown assets quickly, towards green assets”, he said.

“We estimated in one case study, that loans to coal-fired power companies may turn into a very risky financial asset because its non-performing loan ratio or potential default rate could go up by 20 per cent by 2030.”

Other speakers at the session included Dr Helena Wright, vice-president of Asia Sustainable Finance at the World Wide Fund for Nature (WWF), and Luanne Sieh, Malaysian bank CIMB’s head of group sustainability. 

Asked if more Southeast Asian banks, following in the footsteps of Singapore’s banks, would pull out of coal financing in the wake of the Covid-19 pandemic, Wright said: “I believe that trend will increase because we’re seeing that a lot of coal projects are also risky from a financial perspective as well as from an environmental perspective.”

Urging the sector to avoid the temptation to weaken ESG safeguards in favour of short-term gains, Wright said some banks have instead demonstrated leadership in green finance.

South Korea’s Kookmin bank recently raised US$500 million from a Covid-19 response sustainability bond, for instance. The bank said proceeds will be used to support small and medium companies affected by the pandemic, in accordance with its sustainable financing framework. 

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Principality CEO Julia-Ann Haines: ‘Improve diversity in financial services’

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Julie-Ann Haines joined the Principality in 2007 before becoming boss in 2020

Diversity in financial services must be improved, the new boss of Wales’ biggest building society has claimed.

Julie-Ann Haines is the first woman chief executive of the Principality in its 160-year history.

It has introduced blind shortlisting of candidates and ensured job adverts are inclusive. But Ms Haines wants more done by the industry.

“Financial services have got a long way to go,” she said.

“I recognise that I have a platform as the first female CEO to really make some changes, not just in my organisation, but to set the tone.”

“I think that there is a lot more work for Principality to do, and indeed the wider environment here in Wales, to make sure that we are adequately representing people, not just of gender but of diverse populations.”

Changes at the building society have resulted in more women in senior roles, including on the board, she said.

A recent Financial Conduct Authority report found just 17% of the most senior roles in the sector in the UK were held by women.

It also found there had been little improvement on that in 15 years.

The report said while there had been some advances at larger companies, there was a lack of women in senior roles at smaller firms.

And it raised concerns male-dominated firms engaged in more risk-taking.

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Ms Haines said there were practical changes the industry could make.

“Being the first female CEO gives you that licence to challenge and ask questions,” she said.

“To necessarily look beyond the skill sets that maybe have been valued in the past.

“Whether that is about recruitment, looking for apprenticeships, making sure that we are really searching far and wide.”

‘Promising news for future generations’

She said firms should be checking that they are using blind recruitment and breaking down barriers to create “fantastic opportunities” for people.

“For example, we have a financial services graduate scheme where we partner with other leading Welsh financial services organisations,” Ms Haines said.

“Why wouldn’t we want to look at particular schemes for ethnic minorities or for gender rather than just for graduates of any background or experience?”

Insurance company Admiral has just appointed its first female chief executive, Milena Mondini de Focatiis, which some see as another sign that the financial sector is changing.

Ms Mondini de Focatiis takes up the role next year.

Cerys Furlong, chief executive of gender equality charity Chwarae Teg, said: “It is welcome news that the under-representation of women in senior roles within the financial services sector is being recognised, and that moves are being made to tackle the problem.

“Our own research has shown that a lack of female role models in senior positions has a real impact on young women’s aspirations too, therefore the commitment shown by Principality is promising news for future generations, the sector and the economy in Wales.”

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B.C. forecasting $12.5B deficit due to COVID-19 pandemic

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The British Columbia government is forecasting a $12.5 billion deficit due to the COVID-19 pandemic, five months after the provincial budget featured a marginal surplus.

Speaking at a news conference on Tuesday, Finance Minister Carole James called the projected scenarios “staggering, but not without hope.”

“This could be the worst downturn experienced in our province in recent history,” she said.

The provincial budget for 2020, tabled just months before the COVID-19 pandemic forced widespread shutdowns, included a $227 million surplus for 2020-21.

Now, James said B.C.’s GDP is forecast to decrease by 5.4 per cent for 2020, while Canada’s is forecast to decrease by 6.6 per cent.

So far, $1.5 billion has been earmarked by the province for economic recovery measures. James said that so far, the government has provided $6.26 billion in financial aid to businesses and individuals.

The B.C. economy could grow back 3.1 per cent in 2021, according to the economic projections. But James said that current projections are based on a snapshot in time, with a huge number of unknowns, including the possibility of future outbreaks in B.C. or elsewhere, evolutions in public health responses, supports from government and central banks, and the development of a vaccine.

Sales, job numbers plummeted

The province has lost 235,000 since February. Unemployment numbers in June were up to 13 per cent, the highest numbers recorded since 1987.

James said while many jobs have bounced back as the province has continued with its gradual reopening, not all jobs will be recovered before the end of the year. Youth employment remains at 29 per cent, and data shows that men are re-entering the workforce at a far faster rate than women.

Data presented on Tuesday showed that retail sales fell by 24 per cent between February and April, with the biggest sales losses in clothing, sports, hobbies, books, music, furniture, gasoline, and motor vehicles and parts. Home sales plummeted by 45 per cent between February and May, with home prices dropping four per cent.

Possible risks like a second wave of infections or shifts in other jurisdictions that would affect B.C. exports mean the timeline for economic recovery is uncertain.

The B.C. government has already tabled legislation giving itself room for three years of deficits and James says that will be re-examined each year.

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Face masks will help UK’s ‘physical and financial’ recovery, says Health Secretary

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Working conditions could be leaving people exposed to coronavirus, Greater Manchester mayor Andy Burnham told a press conference today as he called for more clarity from the Government.

Giving a joint address with Steve Rotheram, metro mayor of the Liverpool City Region, Mr Burnham said that the Government should provide more information to local authorities on those who have tested positive for coronavirus.

Mr Burnham said that the Government was “at risk of not observing their own law” by not providing daily data, which identified patients, to councils, while calling for clarity on at what point the Government will intervene to implement local lockdowns.

The metro-mayor said a high number of cases in Rochdale may be linked to a warehousing operation which had been the “focus of some extra work with regards to testing”.

In the House of Commons today, Health Secretary Matt Hancock said that patient identifiable data is available to local authorities, and “we plan to publish more and more of this data as open data”, but noted that “there has to be a data protection agreement”.



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