It is hard to deny that we are facing a moment of urgency. Global temperatures are rising, natural disasters are increasing and the gap between rich and poor is bigger than ever before. The search for fairer economic growth should be a priority for individuals, businesses and countries. None of them can win in a world that loses.

Acting sustainably and having a positive social and economic impact as an international banking group is essential in terms of corporate social responsibility, as well as business opportunity and access to new markets. To do so effectively, clients, employees and various stakeholders have to be taken on board.

The sustainable finance sector is currently gaining momentum. We have never had so many Socially Responsible Investment (SRI) products on the market and such an appetite for sustainable investing. Today, we see an unprecedented number of innovative sustainable projects developing and in need of sustainable finance in the real economy. BNP Paribas Wealth Management counted €8.5 billion in assets under management in SRI funds at the end-2016, a nearly 100% increase from 2010.

What are the forces pushing sustainable finance forward and how can we leverage them even more? Why are there still so many obstacles? As a millennial myself and a project leader in the Corporate Social Responsibility department of a large financial institution, I have observed three main factors that are driving this momentum.

The business argument “doing well by doing good”

According to UNEP Finance, at least $1.5 trillion in annual climate financing is needed to meet the target of less than a two-degree rise in global warming per year. This is a challenge but also a business opportunity for asset managers and private banks. For instance, the BNP Paribas Group has already taken action as an accelerator for the energy transition, promising to invest €100 million in innovative startups by 2020 and boosting its total funding of renewable energies from €9.3 billion in 2016 to €15 billion by 2020[1].

There is also the risk management factor. Over time, we put in place a system that takes into account Environment – Social – Governance (ESG) criteria as a framework for policies in sensitive environmental and social sectors, such as agriculture, mining and energy. It enables us to assess our clients and evaluate the policies that govern our lending.

The partnership argument: “Innovative PPPs”

Business as usual – along with regulations, lending and investment policies – often makes it difficult to leverage responsible finance. Nevertheless, incentivized solutions already exist. For instance, we realized in Luxembourg that it was possible to innovate and create impact through partnerships with public and private actors. Innovative funds, such as the Forestry and Climate Change Fund and the Luxembourg Microfinance and Development Fund, have introduced a first loss absorption system through the class A shares subscribed by the Luxembourg government, which in turn mobilizes private and institutional investors.

Huge incentives to mobilize private debt for impact projects include guarantees that take into account part of the risk, such as the European Investment Fund’s EaSI guarantee for social enterprises and microenterprises, as well as InnovFin for innovative startups. Another very recent example is the agreement between BNP Paribas and UN Environment signed at the One Planet Summit to establish Sustainable Finance Facilities in emerging countries with a target capital funding amount of US$10 billion by 2025. The aim is to support smallholder projects related to renewable energy access, agroforestry, water access and responsible agriculture among other sustainable activities[2].

The demand argument: “millennial investments”

Typically defined as those born between the early 1980s and the early 2000s, millennials value purpose-driven investments. According to Merrill Lynch, 85% of millennials want to invest with purpose, a trend that is increasing year by year. One commonly quoted reason is that millennials are better informed and more willing to screen their investment options. BNP Paribas Wealth Management has also identified an emerging group of “Millennipreneurs” – entrepreneurs under 35 who often invest most of their investable assets in SRIs and expressly seek positive impacts in their businesses, their investments and their lives[3].

In Luxembourg alone, BGL BNP Paribas offers more than 100 socially responsible investment funds, ranging from thematic funds – all labeled LuxFlag, such as the Parvest Funds on Water, Food, Climate Change and Environment – to more general SRI funds, such as the BNP Paribas Human Development.

At the end of 2017, BGL BNP Paribas’s financing activities in Luxembourg contributed €600 million in lending that directly contribute to achieving the UN sustainable development goals. That is already a major impact and the start of a long and inspiring road ahead.

Catherine Wurth, Project Leader CSR Accelerator

About BGL BNP Paribas

BGL BNP Paribas (www.bgl.lu) is one of the largest banks in Luxembourg and part of the BNP Paribas Group. It offers an especially wide range of financial products and bancassurance solutions to individuals, professionals, private banking clients and businesses. In 2017, the international magazine Euromoney named BGL BNP Paribas “Best Bank in Luxembourg” for the second year in a row.

[1] http://www.bnpparibas.lu/fr/2017/10/11/bnp-paribas-accelere-en-faveur-de-la-transition-energetique-et-prend-de-nouvelles-mesures/

[2] https://group.bnpparibas/en/press-release/united-nations-environment-programme-un-environment-bnp-paribas-partnering-bring-private-capital-sustainable-projects-emerging-countries

[3] 2018 BNP Paribas Global Entrepreneur Report

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