Green Finance at Deloitte
Sustainability in banking and finance
Support in developing integrated sustainable finance strategies, incorporating ESG risks into risk management and the issuance of green bonds or other impact bonds.
Everyone’s talking about climate protection – and rightly so. We’ve quite simply been living way beyond our means over the past few years and in 2019, German Earth Overshoot Day was on 3 May. This day marks the point in the year when annual renewable resources across the globe would be depleted if the rest of the world lived like Germany’s population. We would need the equivalent of three earths to cover this sort of consumption sustainably.
We’re facing considerable challenges that equally affect the financial sector. Ultimately, however, the current situation also offers opportunities for banks and companies in the financial sector. They can really help to get the world population moving in the right direction.
Regulatory relevance of ESG risks
Financial supervisors are also increasingly focusing on sustainability and the way advancing climate change is tackled. Recently, BaFin devoted a whole issue of its BaFin Perspectives series to sustainability. The publication primarily deals with the treatment of ESG risks, including financial ones that arise from the necessary transformation of the entire economy towards a largely CO2-neutral recycling economy.
Issuance of green bonds and verification
In order to achieve the European Union’s climate targets, additional investments in sustainable, climate-friendly projects of around €180bn per year will be required by 2030. In particular, this can be done through climate-friendly green bonds.
In the past, the lack of clear requirements in the evaluation criteria for green bonds and limited transparency for investors were repeatedly quoted as obstacles of further market growth. Investors in such financial products need to be able to assess reliably whether the capital invested is actually put into environmentally friendly projects. This is where the market standards developed and documented over many years, such as the green bond Principles and the Climate Bonds Standard by the Climate Bonds Initiative (CBI), can provide help. The EU would also like to develop a new Standard, which would be available to issuers inside and outside the European Union as a voluntary quality label. The technical expert group commissioned to prepare this report will also be guided by the existing market standards mentioned above.
With our green bond team of experts, we act as CBI-approved verifiers, auditing pre-issuance and post-issuance requirements in accordance with the Climate Bonds Standard and preparing the reports required for CBI certification. We also draw up second party opinions on compliance with the green bond Principles. In the future, we will of course also check and assess compliance with the requirements of the planned EU green bond Standard.
Green Finance Advisory Services
We liaise with and work for our clients to develop sustainability principles and support integration into all areas of their companies in order to achieve an integrated sustainability strategy that is attuned to the business models concerned.
In this case, integrating ESG risks into risk management plays a decisive role and is an area where we can provide comprehensive support. The focus lies on the risks arising from the impact on the climate and the environment, which can be both non-financial and financial in nature. It’s to be expected that the supervisory and actual impact of these risks will rise sharply in the future.
We also advise clients for whom we’re not performing the role of a CBI-verifier before the issuance of green bonds on all matters relating to the structuring process, such as the creation of a green bond framework and the selection of the portfolio.
Further contributions to Green Finance: