Beyond profit in green finance

Investors weigh earnings against ecology in ‘meaningful investments’

PARIS: Environment- friendly finance is blooming thanks to investors willing to weigh profits against ecology, but decisions about meaningful investments can be complex.

At first sight the idea of “green finance” as a vehicle to protect the environment or help businesses in their transition towards a more sustainable future seems non-controversial.

But in fact, green finance lumps together a dizzying array of options and a debate is raging over which ones are truly worthy of green investor money – and which aren’t.

What about, say, oil companies? No way, respond critics, pointing to the damage that the exploration and use of fossil fuel has done to the planet. But others say it would be ecologically responsible to help petroleum majors shift towards a

greener future by developing alternative energy sources.

Nuclear energy is another hot potato. The industry was once unanimously reviled as the arch enemy by the environmental movement, but some now admit that the absence of damaging greenhouse gases from nuclear power stations has given them pause.

A decade after the launch of the early green bonds – long-term bor- rowing for environmental projects – investors’ options have grown dramatically, but the share of green instruments in global finance is still small.

“Green bond issuance in 2018 so far have reached US$156.8bil (RM655bil), which is around 2% of the global bond market,” said Frederic Gabizon, head of Debt Capital Markets at HSBC France.

“This may seem marginal, but growth has been exponential since the start,” he said, adding that investors needed to take the long view given the slow pace of green infrastructure growth.

Pressure from civil society, governments and private citizens has prompted money professionals to look beyond purely financial motives as they respond to green investor interest, and to polish their image along the way.

It is true that green investments rarely outperform traditional placements in terms of short-term yields, but modern investors seem to be taking a broader view than just monetary returns.

“We’re seeing a new young generation of savers coming through now, who want slightly different things,” said Rob Hardy, head of EMEA corporate governance at JPMorgan.

“There is no point in earning a lot of money if you can’t breathe the air,” he said.

There is no binding global regulatory framework as yet for green finance, but most professionals apply the so-called “green bonds principles” issued by the International Capital Market Association to their own operations.

There is no point in earning a lot of money if you can’t breathe the air. Rob Hardy