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FOCUS 71: Can Economies Go Green?

Eliza Ng, Head of Corporate Client Coverage for South East Asia at Societe Generale, explains how the financial institution is a positive catalyst for climate change. 

As sustainable finance is quite a broad term, could you please explain what it means and how does it operate? What is its impact on a green economy? 

The notion of "sustainability" refers to the consideration of a company's environmental and social commitments in the pursuit of its corporate objectives. The corporate sustainability agenda is becoming a strategic, long term growth rationale and is, consequently, of rising importance in the financing strategy of corporates.  

The emergence of financing solutions with a corporate sustainability agenda include: 

• Green/Social/Sustainable Bonds - a product by which corporates could tap the international capital markets to raise funding. 

• Green or Sustainability Linked Loans - a product which involves banks providing financing to corporates through the loan product.  

There is a key difference between “Green” and “Sustainable” bonds or loans which relates to the usage of proceeds. Green bond or green loan proceeds are typically dedicated to the financing of a specific “Green” project. Sustainable bonds and sustainability linked loans are usually used to finance general corporate purpose expenditures.  

The similarity between “Green” and “Sustainable” bonds or loans are predefined eligibility criteria or green/social objectives that corporate borrowers would have to commit to during the life of the bond or loan.  

The Loan Markets Association in March 2018 published the Green Loan Principles to provide market participants with a framework of market standards and guidelines. A year later, LMA published the Sustainability Linked Loan Principles to further develop the principles of lending in the green and sustainable space.  

With these concerted efforts by leading financial institutions, such as Societe Generale, to develop the sustainable finance agenda, corporates and counterparties now have easier access to the funding required to finance a greener economy.  

Where do you see the role of financial institutions with regards to the environment and mitigating climate change? 

In recent years, the growth of sustainable investment and financing has outpaced that of the rest of the market.   

Financial institutions are a key stakeholder towards the transition to a low carbon future. By supporting the sustainability agenda and incorporating clear corporate social responsibility (CSR) ambitions into their corporate strategy, financial institutions could further support companies as they transition towards the adoption of sustainability practices in their corporate objectives. Investment in sustainable practices improve the long term returns of the businesses, while meeting the demands of investors, regulators and other stakeholders.  

Highly supportive of this transition to a fairer and greener economy, Societe Generale is supporting our clients’ needs as they tackle environmental and social challenges. Hence, we were a pioneer in the creation of the United Nation’s Positive Impact Finance initiative (learn more here) which seeks to foster the business and financial ecosystem that we need to achieve a sustainable world. Societe Generale is now the Co-Chair of the initiative. 

What is Societe Generale's strategy for making sustainable finance more viable for companies and individuals? 

Alongside our clients, our staff is extremely motivated to address these challenges as they want to play a positive role, individually and collectively, in achieving the United Nation’s 17 Sustainable Development Goals and contribute to a sustainable future. In addition, Societe Generale has set ambitious new targets to commit to raising €120 billion for energy transition between 2019 and 2023; progressively reducing to zero, our exposure to the thermal coal sector, at the latest in 2030 for companies with thermal coal assets located in EU or OECD countries; and we have signed the Poseidon Principles which promote a low carbon future for the global shipping industry earlier in 2019.  

A strong proof of our ongoing efforts and decisive actions taken on climate-related issues, the 2019 Dow Jones Sustainability Indices (DJSI) published by RobecoSAM has ranked Societe Generale at 1st place worldwide on the environmental dimension (learn more here). 

 

_{^{Interview with Eliza Ng, Head of Corporate Client Coverage for South East Asia at Society Generale , for FOCUS #71. To read more articles from this issue, download your digital copy here}}