Green finance. Analysis of the market dynamics through the eyes of the experts

Rafael Torres, Co-Founder and Managing Director of Luxe Capital Americas: “For the hospitality business and from the investment point of view, few years ago green finance focus was put on sustainability issues but not from the perspective of the initial base of the investment. Now, in America and few European countries, the focus is put on how to conduct the right process to do the right investment and being greener and more profitable in terms not only of P&L, but also tax incentives, bonus density, permitting process and loans (it is often that the delivery of an authorization/loan depends on the existence of a green policy [if you don’t some banks are very rigorous and demand to comply with a green policy before you can access to finance], technical assistant, net meeting, public campaigns, etc. (…) Green finance has become the number one priority for investments.”

“Green finance provides a new vision, a new way of living which makes necessary to have a proper advisor with the required expertise to be up-to-date about the new rules for the benefit of the development of the green investment project.”

“Opportunities that green finance provide are huge. For example, some tour operators and travel agents don’t book hotels that don’t have a sustainability or green investment plan. Nine out of ten travelers choosing Tui as their operator book a sustainability room (…). All future offers need to provide the right vision on green sustainability and green investment and most of the countries will be on the same page about green finance in the following years.”

Kateryna Federova, ESG Policy expert and layer of CBA: “Real estate has been hugely influenced by green finance, which is a structured financial activity created to insure a bad environmental situation. Environment is crucial for real state. Green finance comprises high number of investment products and projects encouraging the development of a sustainable economy and has had a great impact in real state for example through investments in renewable energy and real state transformation. Real estate management companies have an integrated approach which influences all the stages and steps that they need to cover in the investment policy. Starting from the creation of new products to the evaluation, due diligence, requalification, and maintenance up to the investment phase have changed or influenced in some way. We can truly say that green finance has changed a lot the real estate sector.”

“One of the most important challenges related to real estate is to rethink the strategy of the investment and the building process, because you have to respect a lot of requirements (local habitat, environmental aspects of the location in which you are interested to build). In the case of SMEs, one big challenge they are facing is to invest in sustainability to increase the competitiveness of the market service. At this stage, to invest in sustainability you really need to believe in it, because the driver comes from a strong ethical point of view and it won’t be a very fast sort of investment, but a medium-long term investment, but of course it helps the reputational situation of the company. It is also important to spread the message among your supply chain actors that green finance is really booming, that you respect, comply with and believe in green finance because it is the future.”

“Green finance challenges and opportunities are interconnected. Within ESG (environmental, social and governance) requirements there are two aspects (diversity and inclusion) than are challenges for companies but also opportunities. And because the drivers of the change towards a new model of doing business comes from investors, comply with investors’ interests and priorities can be a great opportunity to properties management companies.”

“To implement green finance in real estate one crucial tool is to have a clear ESG strategy that facilitates the due diligence process of the asset and the consideration of the many environmental, social and governance aspects (energy consumption, materials and energy used, controversial tenants –if apply–, community development, inclusion diversion, data protection policy, etc.) (…) There are long-shot benefit companies committed to create public sustainable benefits in addition to generate profit for the company and B-Corps get a certificate of the scope of work they try to fulfill.”

David Álvarez, Executive Director of Ecoacsa: “As we help companies to define their strategies and start working with green finance, from a technical point of view green finance is a way to re-direct investment flows towards new targets linked to neutral economy in terms of carbon emissions and aligned with the European Green Deal, but also with the aim of protecting biodiversity (…). Green finance is a way to re-orient investment flows to an environmental-positive economy.”

“Challenges differ depending on if you are dealing with corporate, a bank, an equity fund or a fund manager. Green finance is a new way of seeing finance. For the last years there has been a big transformation of the finance sector which is changing many practicalities traditionally used and are driving to a new model. Banks, corporates insurer actors or funds are going to need new skills to deal with this new model because there will be new requirements in terms of compliance and expertise and knowledge to identify, measure and value their environmental-related risks and opportunities and how to report and disclose information associated to these risks and opportunities. Green finance regulation will change the behavior of the different finance stakeholders.”

“Risks and opportunities are two sides of the same coin. Sustainability is a must, and it is not fully implemented at a behavioral level in companies, in particular SMEs. But this situation will change in the coming years. In the last 5-10 years there has been an increasing number of funds and investors interested in green bonds and sustainability loans. The rate of these products has grown about 15%-20% annually with a high return rate. Green finance also provides new opportunities to access to different sources of finance at cheaper rate and it opens new channels to access to finance.”

“There are many tools according to the green finance goal you aim to achieve. For investors, a key aspect is to know if the activity or project in which they are investing is sustainable, and for corporates it is important to know if their operations are sustainable or not. To assess these aspects the best tool in the market is the UE Taxonomy regulation, which was published and adopted last year focusing in first place in identifying which activities contribute to climate change mitigation and adaptation objectives. During the coming years, the Taxonomy will also be focused in other environmental aspects such us water, pollution, and biodiversity. It is also very important for investors to consider risks associated to their investments. In this regard, few years ago it was launched the Task Force for Climate-related Financial Disclosures (TCFD) to help companies assess how does the climate change impact their EP&L in economic terms (…), and last week took place the launch of the new Tasks Force on Nature- related Financial Disclosures (TNFD), which the next two years will be working in the development of a framework to support business and finance to disclose information not only related to climate change but to soil, water, biodiversity and pollution.”

Alessandro Orsi, Director of Green Building Factory: “Green finance represents another way to focus on our sectors. We’ve applying sustainability to building and real estate for more than 10 years and we see that green finance ask to implement similar calculations that we have been doing for green buildings but at corporate level.”  

In the context of the Paris Agreement, the Green Deal, the EU Taxonomy and other commitments, the bottom line is that sustainability is not an option anymore. Since we’ve working in sustainability for a long time, at the beginning it was a matter of advertisement feedback, an image enhancement issue, something that comes back but it is not mandatory. But now the market and the market segments which we are developing in the society across the last decades were not considering sustainability at all. There were people interested in sustainability, but at the beginning it was a wish, an ethical move rather than mandatory. Now this is different because sustainability is not an option. The real challenge is to change the way of doing business on the go, because the banking and financial systems are way too settle in order to reset it from scratch. The key challenges are to be able to change the way of doing investments on the go without losing sustainability potential nor clients.”

“Green finance maybe is ’THE’ driver. Until now there hasn’t been a strong enough driver to move the change in the rest of sectors. So, when the finance sector, which is the one funding the others, is involved in this new vision it is a good opportunity to go green, to go sustainable at least once and for all and to value things from their value not depending on their price. We buy a product depending on the cost of its production, not taking into consideration the cost of the object.”