The locusts are coming

In the second quarter of 2020, pv magazine is turning its attention to the pertinent topic of green finance. The aim is to understand what is meant by the term, how to identify greenwashing, what you can do to get “green bond ready”, and where future investment opportunities lie.

Issue 03-2020

Deutsche Global Invest, a fictional company in the German TV series “Bad Banks”, tried to repair its tattered reputation by using sustainable financing startups to hide its dirty deeds. With the rise of green finance, we need to ensure that these kinds of activities do not go unquestioned in the real world.

Image: ZDF/ Fabrizio Maltese

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Investment banker A: “We need something innovative for our startup.”

Investment banker B: “It doesn’t suit us … We’re not environmentalists.”

Investment banker A: “But good businesspeople.”

Investment banker B: “The fintech ‘Green Wallet’ only invests in sustainable funds.”

Investment banker C: “Isn’t this topic old news?”

Investment banker B: “Sustainability is a fashionable calling card … But it’s risky.”

The top financial players in the second installment of the slick, fictional German TV series “Bad Banks” – which sees Germany’s largest bank, Deutsche Global Invest, struggle to reinvent itself after a crash that required a government bailout and left its public image in tatters – are using sustainable financing as a fig leaf to hide their dirty business plans.

The cultural reference is relevant here, not only because the topic of sustainability has reached a tipping point in recent months in the global public eye, but because at the same time there is still widespread greenwashing at all levels of business, and skepticism among those controlling global assets over its economic benefits.

Regarding the latter, recent figures indicate that the tide is turning, particularly when it comes to green finance, which is the focus of pv magazine’s Q2 2020 UP initiative quarterly theme.

In vogue

The Global Sustainable Investment Alliance has calculated that at least $30.7 trillion worth of funds are tied up in sustainable or green investments, representing growth of 34% from 2016. Meanwhile, in mid-2019, BloombergNEF calculated that the market for green bonds and loans has risen from almost nothing in 2012 to represent an around $250 billion market in 2018.

In total, over the last 12 years, green bonds have raised $788 billion of finance for clean energy investment (to account for around 77% of the market), while other sustainability-linked and social fundraising exercises have taken the sustainable lending market past the $1 trillion mark.

“Reaching the trillion dollar milestone is a key moment for the sustainable debt market,” said Angus McCrone, chief editor at BloombergNEF in October 2019. “If this market wasn’t already on the radar of major global investors, it will be now. This is just the beginning – while it took 12 years to find the first trillion dollars of sustainable debt capital it will take much less time to reach the second trillion.”

The subject is also timely given the plethora of substantial green finance announcements in recent times from various actors, including the European Commission’s ambitions to formalize its 2050 Green Deal proposal in a climate protection law by this March, with plans to trigger €1 trillion in investments. There was Australian retailer Woolworths’ move last April to become the first supermarket to issue green bonds, and Enel’s January unveiling of a €1 billion green bond – its third on the European market. The European Bank for Reconstruction and Development also unveiled an energy sector strategy pivot at the end of 2018, with plans to ramp up renewables investment, while moving away from coal and oil, on top of a €250 million green bond framework.

The locusts

“The locusts are coming,” declared the chief programmer of Bad Banks’ “Green Wallet” fintech company (described as a declaration of war against banks and corporations) as the Deutsche Global Invest players descended on their offices with the aim of buying them out. It appears that also in our world – where the term “green finance” is increasingly on the lips of many major players, not only in banking, but also in the energy and corporate realms – the locusts are coming. Someone has to make sure that they are not using fig leaves to carry on with business as usual. Instead, it is imperative to confirm that they are using their power to change the status quo and embrace true financial sustainability.

As part of pv magazine’s UP initiative, we are taking up this call, aiming to not only understand what the term green finance means, but also to look at how one can avoid greenwashing, and where future investment opportunities lie.

If you want to join UP, contact up@pv-magazine.com.

SMA is continuing to partner with pv magazine on the UP initiative, with the sustainable mission and vision aligning with the company’s values and activities both internally and as a part of its global operations. “At SMA, we deeply believe it is not only important to produce equipment for renewable energy generation, it is as important that we produce it in a sustainable way. Therefore, we support the UP campaign that shines a spotlight on sustainability within the industry. The campaign will show what we have achieved already, but also stimulate further changes in the industry.” SMA CEO Jürgen Reinert

 

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