International webinar "Green Finance", 26 June 2020, Zoom
On 26th June, Russia-OECD Center RANEPA together with VEB.RF held a meeting with Mireille Martini, a leading expert on green finance at the Organization for Economic Cooperation and Development (OECD), and Mikhail Babenko, Director of the WWF Green economy program. The meeting was devoted to the development of green and sustainable finance. In particular, experts discussed the issues of methodological support for sustainable investments and their performance assessment.
Antonina Levashenko, Head of the Russia-OECD Center RANEPA, greeted the methodological work of the OECD and emphasized the importance of ensuring not only green, but sustainable finance in general. The expert presented a broad overview of practices and facts that confirm the high investment attractiveness and effectiveness of sustainable projects. Today, 80% of institutional investors plan to work with sustainable companies by 2036. In 2019, the green bond market reached an adjusted 260 bn USD. If the trend keeps on, by 2030 sustainable financing will save up to 23 trln USD through risk mitigation. While for large companies it is easier to get high ESG ratings, small sustainable companies can also benefit from higher investment returns compared to those of unsustainable companies.
The standards of responsible business conduct promoted by the OECD cover social, economic and managerial issues in addition to widespread environmental issues. Both national and regional development institutions (for example, the European Bank for Reconstruction and Development) and national investment funds (the Norwegian Sovereign Fund) are expanding the scope of requirements for funded projects. The expert underlined that even green projects are not always sustainable. For example, the NGO Business&Human Rights Resource Center published a review on human rights in the wind energy sector: green companies do not always manage to respect the rights of local communities and indigenous peoples.
According to the expert, the need to integrate RBC standards in green projects is due not only to increased demand from investors, but rather to the possibility of using a pragmatic tool to level risks and prevent costly consequences. It is estimated that companies can save up to 10% of annual revenues by preventing labor lawsuits and other conflicts resulting in compensation payments. The network of 49 National Contact Points established in accordance with the OECD Recommendation for multinational enterprises assists companies in resolving disputes about violations of RBC standards. Since 2011, 36% of conflicts have resulted in an agreement, and 33% of cases have resulted in changes to company policies. The expert noted the increasing support of governments in promotion of RBC standards. France, the United Kingdom, and the Netherlands have already adopted laws on the liability of companies for the sustainability of their subsidiaries anywhere in the world.
Ivan Yermokhin, expert of the Russia-OECD Center RANEPA, also noted the role of civil society and NGOs in the effective implementation of sustainable financing. The expert gave an example of how a number of NGOs addressed the Climate Bond Initiative with a request to review standards in the field of hydropower due to violations of human rights and other standards.
Mireille Martini, leading expert on green finance at the OECD, spoke about the participation of the OECD in the development of national Taxonomies for sustainable finance in the EU, China, Japan, France, and the Netherlands. In this field the OECD cooperates with the Coalition of Finance Ministers for Climate Action (CFCA), the International Organization of Securities Commissions (IOSCO). The OECD is also an observer to the Network of Central banks and supervisors for Greening the financial System (NGFS) and a participant of the EU Technical Group, which developed the EU Taxonomy for sustainable finance .
The expert shared the results of a comparative study of the national taxonomies. While countries strive to develop a harmonized approach to understanding sustainable investment, taxonomies differ in their approaches to defining basic terms, sustainable finance objectives, and covered sectors. The expert stressed that the development of legal instruments such as taxonomies allows to solve a number of tasks:
1) increasing investor confidence and avoiding the risks of greenwashing;
2) ensuring labelling of sustainable finance, as the EU green bond standard;
3) increasing the visibility of green financial instruments;
4) developing policy instruments to support sustainable finance, and
5) increasing market integrity.
The expert also gave some recommendations of the OECD on taxonomies design with the example of the EU Taxonomy recently adopted by the European Parliament. By design of taxonomy a balance of requirements should be observed: for example, in the EU Taxonomy, achieving 6 environmental objectives is implemented on the basis of the formula "significant contribution to achieving one objective and not causing significant harm to 5 other objectives" (1 substantial contribution + 5 DNSH).
Mikhail Babenko, the Head of Green economy program at WWF Russia, shared his expert opinion on the role of development institutions in shaping a sustainable economy. Development institutions promote information transparency, ESG risk assessment, and the formation of sectoral strategies. The expert highlighted that information transparency contributes to saving and sustainable use of public funds, mainly formed by taxpayers. In addition, the availability and openness of information increases the confidence of stakeholders. The expert welcomed the practice of those gas pipeline projects which also present the results of the ESG assessment in public reports.
At the end of the meeting, the experts expressed hope that the developed methods and recommendations would be able to bring sustainable results in practice.
Presentation of the Russia-OECD Center RANEPA is available at: https://yadi.sk/i/y2HhgUendaUJ7w
Presentation of WWF Russia is available at: https://yadi.sk/i/ijvRPna8X_cNdw
Presentation of the OECD expert is available at: https://yadi.sk/i/WPXBFGgzJjVr9g