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["ID"]=> int(21544) ["post_author"]=> string(1) "5" ["post_date"]=> string(19) "2019-10-31 08:58:21" ["post_date_gmt"]=> string(19) "2019-10-31 07:58:21" ["post_content"]=> string(2578) "

Berlin, 31.10.2019 – The German Sustainability Code (DNK) has been awarded the ISAR Honours 2019 by the United Nations Conference on Trade and Development (UNCTAD). The award ceremony took place on 30th October 2019 in Geneva at the annual session of ISAR (Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting).

This international award recognises initiatives that deliver an outstanding contribution to transparency regarding sustainability in businesses, particularly through enhancing the comparability and quality of companies’ reporting on sustainability issues. A Review Committee of distinguished international experts selects the award winners based on their effective encouragement and assistance for companies’ reporting on sustainability performance. The experts were impressed by the Sustainability Code’s user friendliness for both the reporting companies and the reports’ target audience. Readers can access and compare the reports by means of the Code’s free online database and external users can also conduct meta-analyses. A technical interface allows immediate usage of the published information in other evaluation systems. As an open source solution for ecological, social and governance (ESG) data, the Code therefore also contributes to Sustainable Finance.

For Yvonne Zwick, Deputy Secretary General and Head of the Sustainability Code Office, the Code’s users are a pillar of its success. “We are very grateful to accept the ISAR Honours 2019 Award on behalf of all the companies that comply with the Sustainability Code and thus promote standardised and focused sustainability reporting”, she commented. “We would like to thank the Review Committee for its positive evaluation of the Code. This award supports our ambition to establish the Code internationally – as a standard that is open to all and easy to use”, she added.

“The very foundations of our lives are under pressure as a result of the established production and consumption patterns of our time.” This statement does not come from an environmental association but has its source in the first position paper from the Federal Government’s Sustainable Finance Advisory Council, which took up its work in June. Sights are set high: the Federal Government wants Germany to assume a leading role for sustainable finance markets.

The Council is itself composed of representatives of banks, asset managers, Deutsche Börse AG, rating agencies, the industry, insurers, the scientific community, NGOs and public authorities. The German Council for Sustainable Development (RNE) is also represented as an observer – and has published a paper detailing its position with respect to the Federal Government’s sustainable finance strategy. At the third German Sustainable Finance Summit, the majority of the Council’s 38 experts made themselves available for a discussion panel with interested specialists for the first time. Below you will find a summary of the key discussion points.

“What do we mean by ‘sustainability risks’?”

This was the question Jörg Kukies, State Secretary at the Federal Ministry of Finance, asked rhetorically at the summit in Frankfurt. The idea behind the question being that unsustainable action on the part of businesses as a commercial risk for investors and their clients, i.e. you and I, should be made transparent and measurable. This seems to be beyond the sector’s current capabilities. “Many groan and ask if that means there will be still more regulations. Many are also scared away and worried about the work itself, as they don’t have any experience with the topics of ethics, sustainability or human rights,” says Silke Stremlau, assessing the mood in the finance sector. She represents the ethical-social business association Hannoversche Kassen, which offers company pension schemes. Kukies assuaged these worries, saying that no concrete new regulations were on the table, rather the aim were to expand existing guidelines in order to take up sustainability criteria in the risk categories used to date.

The German Federal Financial Authority (BaFin) recently published an official notice on this subject, which is open for consultation until 3 November, containing examples of such risks: such as if a pension fund invested in a chemicals company that did not operate sustainably. An abrupt change in market sentiment would lead to devaluations. This is a classic market risk that today already has to be accounted for. Or, for instance, following a flooding disaster, customers pull their assets from a local credit institution in order to finance repairs of the damage – a classic liquidity risk. Overall, the BaFin notice had brought “tears of joy” to the eyes of many in the sustainable finance sector, as it required of numerous classic players that they take up a concrete position with respect to sustainability, Stremlau commented. Other commentators held back as the notice did not apply to system-critical banks, as these were subject to the supervision of the European Central Bank.

Data, data, data

In addition to risks, Frank Pierschel, Head of the BaFin Banking Supervisory Division, pointed out that major opportunities also await in the form of investment in the economic transformation. Both aspects – risks and opportunities – require extensive data. Despite the EU requirement that large corporations prepare sustainability reports, the data is insufficient. The Council’s position paper assesses that “currently, there is no common understanding regarding the key ESG data that are to be provided by the real economy and financial sector and be evaluated by investors”. There were thus many questions posed at the summit in Frankfurt relating to this issue. One working group prepared a whole list of these questions: is the quality of data on sustainability performance adequate for guiding capital flows? Is the data even being prepared and applied? Do banks, insurers or other players have the software for processing such data? Simply including the full range of climate data in the accounting is quite a mountain of work, one participant remarked.

Another question was what incentive the business sector had to provide detailed figures on sustainability, which could possibly grant competitors significant glimpses into their operations. Many firms have access to affordable capital right now anyway as a result of the zero-interest phase: is the effort required to become attractive to sustainability-oriented investors even worth it? The journey seems long yet, as many companies still do not view social- and climate-related topics as part of their core corporate reporting, one participant noted. A further open question was how companies that are still part of the old “brown” economy could be rewarded for taking up the process of transformation. Here, too, classification is needed. For many of these issues, possible solutions are already proposed. Global sustainability standards could be derived from the recommendations of the Task Force on Climate-related Financial Disclosures.

Also regarding the question of so-called double materiality, there are differing views: according to one, companies must disclose how the climate crisis affects their operations. That alone is complicated, some participants noted. From the other perspective, companies should additionally provide reliable figures on how they themselves contribute to climate change or impact society positively or negatively. “Is that taking things too far?” one working group asked – and suggested a pragmatic approach of simply applying existing models, such as the United Nations’ Principles for Responsible Investment, and seeing what progress can be made. The RNE is itself currently working with the fintech start-up Arabesque S-Ray on an open data solution for ESG data (i.e. data on ecological, social and governance aspects of companies’ operations) based on the data that is available through the Sustainability Code (DNK).

Obligatory or voluntary?

Imagine if every financial product would in future carry an indicator as to what extent the companies or projects it finances are compatible with the international climate goals. A label such as that for refrigerators would be conceivable, a participant suggested. The question of whether or not financial actors should be obligated to provide such information – or do it on a voluntary basis – was a contentious one. The taxonomy, a uniform definition of what constitutes a sustainable financial product, currently being developed by the EU is applied on a voluntary basis. The Council has not yet made a decision on this matter. “Statutory regulations neither guarantee achievement of an intended impact nor are voluntary-basis approaches by definition without impact,” is the stance taken in the position paper.

Within the expert body, the need for a “systemic approach” was undisputed, commented Kristina Jeromin from Deutsche Börse AG, who sits on the new council. Sustainability should not just be limited to a small niche of the market. ‘Systemic’ should not be equated with an obligation to provide information on financial products’ sustainability. Rather, the summit concluded, it was about achieving a transformation of the financial system by leveraging the market’s own dynamics. Not more, but different, regulation was a sentiment frequently uttered. This enables a new narrative of how companies and financial market players can become future-proof by following the societal drive for more climate and environmental protection.

Leadership responsibility and the role of the Federal Government

Such a vision gives rise to a responsibility to be borne by corporate executives and policymakers. “The public sector has a key example to set in the transformation of the financial system and the real economy towards sustainability,” points out the Council’s position paper. In its own recommendations, the RNE goes a step further: “Sustainability must become the criterion for setting the national budget and therefore also the basis of assessment for both the budget committee and the audit offices.” Georg Schürmann, Managing Director of Triodos Bank Deutschland, called on policymakers to create clearer framework conditions: “We can only finance those things that actually develop in the real economy. We can’t finance wind farms if they aren’t being built, like in 2019,” he commented, emphasising how important it was for the real economy to be represented in the new council of experts.

The finance industry itself could also send clearer signals to the political sphere, added Karsten Löffler of the Frankfurt School of Finance & Management and Chairman of the Sustainable Finance Advisory Council, pointing to the Dutch finance industry, which had publicly taken up a position in clear support of the government’s climate protection policy. “It would send a strong signal if we were able to do that in Germany, too,” commented Löffler.

Matthias Kopp, responsible for sustainable finance at the WWF and a member of the Council, called for Germany to provide an impulse that would energise debate at European level – after all, Berlin would soon be holding the presidency of the Council of the European Union. “It would be my wish to see Germany progress from a reactive role to a constitutive one,” Löffler added. Silke Stremlau had a similar view: “My idea is that we show the Federal Government our support and say: we in the finance sector want a higher carbon tax; we want the SDGs [the global sustainability targets of the UN] to be a yardstick for future financing.” In the task of reaching this consensus, the Council would be beneficial.

The European and global levels of sustainable financial markets were uncontroversial at the summit. “It is a multilateral process where Europe has a true leadership role,” commented Pierre Ducret, President of the French organisation Finance for Tomorrow. Within the EU, however, it was said that certain countries would need to take the agenda forward. The Netherlands were predestined for this role, but the most important thing here was an old relationship that has long been a driver of European unity: “We need strong bilateral cooperation between Germany and France,” said Ducret.

" ["post_title"]=> string(48) "Sustainable finance markets taking concrete form" ["post_excerpt"]=> string(318) "For the finance sector, things are now getting serious: the Federal Government wants to make Germany a leader of sustainable finance and has commissioned a Sustainable Finance Advisory Council to prepare corresponding proposals. At the third German Sustainable Finance Summit, experts discussed a first position paper." ["post_status"]=> string(7) "publish" ["comment_status"]=> string(6) "closed" ["ping_status"]=> string(6) "closed" ["post_password"]=> string(0) "" ["post_name"]=> string(48) "sustainable-finance-markets-taking-concrete-form" ["to_ping"]=> string(0) "" ["pinged"]=> string(0) "" ["post_modified"]=> string(19) "2019-11-11 14:59:45" ["post_modified_gmt"]=> string(19) "2019-11-11 13:59:45" ["post_content_filtered"]=> string(0) "" ["post_parent"]=> int(0) ["guid"]=> string(85) "https://www.nachhaltigkeitsrat.de/aktuelles/nachhaltige-finanzmaerkte-werden-konkret/" ["menu_order"]=> int(0) ["post_type"]=> string(4) "post" ["post_mime_type"]=> string(0) "" ["comment_count"]=> string(1) "0" ["filter"]=> string(3) "raw" } [2]=> object(WP_Post)#3494 (24) { ["ID"]=> int(13317) ["post_author"]=> string(1) "5" ["post_date"]=> string(19) "2019-03-28 10:07:04" ["post_date_gmt"]=> string(19) "2019-03-28 09:07:04" ["post_content"]=> string(4638) "The German Federal Government intends to make Germany a leading financial hub for Sustainable Finance and will develop a strategy to this end. This was agreed in Berlin at the end of February by the State Secretaries’ Committee for Sustainable Development under the auspices of the Head of the Federal Chancellery, Helge Braun. The committee also resolved to establish a Sustainable Finance Advisory Council in order to expand dialogue between the Federal Government and the finance sector, the real economy, civil society and the scientific community. The committee members further ordered that the efficiency of green and sustainable German Federal Bonds be reviewed. With its Sustainable Finance resolution (PDF), the Federal Government is emphasising the importance of financial market stakeholders to take sustainability aspects into account in their decisions. The committee did not adopt a schedule for the development of a Sustainable Finance strategy. The Federal Ministry of Finance (BMF) and the Federal Ministry for the Environment (BMU) are currently working on a detailed concept to implement the resolution to create an advisory council. The German Council for Sustainable Development (RNE) has been advocating the incorporation of sustainability into the world of finance for years. As early as in 2006, it spoke of the potential leverage effect that the financial market could have on sustainable development. The Council highlighted the need for ambitious goals to be set with a recommendation statement issued before the committee meeting. In addition, the Council founded the Hub for Sustainable Finance (H4SF) as an open stakeholder platform and will continue organising the established H4SF round table formats until further notice. “The Federal Government’s resolution on Sustainable Finance deserves to be acknowledged as a positive commitment from the government,” says RNE Chairwoman Marlehn Thieme, commenting on the plans. Awareness of this topic within the government has evidently increased considerably, she believes, with the Ministry of Finance having played a crucial part in this development.

RNE Chairwoman calls for “clear signals to the market”

“I firmly believe that Sustainable Finance is already having an impact on industry and the economy, but it needs to become more standard on the market,” says Thieme. She argues that, in the light of Sustainable Development, the future viability of business models needs to be assessed differently than with the conventional evaluation frameworks. The RNE Chairwoman called for clear signals to be sent to the market in asset investment as well as in borrowing: “The review of sustainable German Federal Bonds and the establishment of the new advisory council should lead to a decision this year that gives the market the stimulus it needs.” The State Secretaries’ Committee for Sustainable Development is the central steering body of Germany’s National Sustainable Development Strategy. All federal ministries are represented in the committee by their state secretaries. In addition to the ministries’ state secretaries, the committee meeting was attended by the following external experts: RNE Chairwoman Marlehn Thieme, Vice-President of the Deutsche Bundesbank Sabine Mauderer, KfW CEO Günther Bräunig, Michael Schmidt, member of the management board at Deka Investment GmbH and member of the European Commission’s High-Level Expert Group on Sustainable Finance, and Kai Whittaker, member of the German Bundestag and member of the Parliamentary Advisory Council on Sustainable Development." ["post_title"]=> string(55) "Germany to assume a leading role in Sustainable Finance" ["post_excerpt"]=> string(298) "This is the decision reached by the State Secretaries’ Committee for Sustainable Development at the end of February. It also announced the creation of a Sustainable Finance Advisory Council. Moreover, green and sustainable German Federal Bonds are to be reviewed with respect to their efficiency." ["post_status"]=> string(7) "publish" ["comment_status"]=> string(6) "closed" ["ping_status"]=> string(6) "closed" ["post_password"]=> string(0) "" ["post_name"]=> string(55) "germany-to-assume-a-leading-role-in-sustainable-finance" ["to_ping"]=> string(0) "" ["pinged"]=> string(0) "" ["post_modified"]=> string(19) "2019-03-28 10:07:04" ["post_modified_gmt"]=> string(19) "2019-03-28 09:07:04" ["post_content_filtered"]=> string(0) "" ["post_parent"]=> int(0) ["guid"]=> string(42) "https://www.nachhaltigkeitsrat.de/?p=13317" ["menu_order"]=> int(0) ["post_type"]=> string(4) "post" ["post_mime_type"]=> string(0) "" ["comment_count"]=> string(1) "0" ["filter"]=> string(3) "raw" } [3]=> object(WP_Post)#3495 (24) { ["ID"]=> int(11396) ["post_author"]=> string(1) "5" ["post_date"]=> string(19) "2018-10-16 13:23:38" ["post_date_gmt"]=> string(19) "2018-10-16 11:23:38" ["post_content"]=> string(10771) "Conferences on the topic of sustainable finance always have one thing in common – they begin with the observation that this is a niche industry and that globally only a tiny fraction of finance flows are based on more than just short-term returns. So, too, began the second German Sustainable Finance Summit, kicked off in Frankfurt with a critical analysis by Joachim Faber, Chairman of the Supervisory Board of Deutsche Börse AG. “We continue to do a great deal of talking, but little is actually achieved. The discussions are not very impact-oriented,” said Faber as a criticism both of the policymakers and his own industry, which he argues is not showing much movement. According to Faber, many papers on the topic, including those from business circles, are planned simply as soapbox speeches and lack actual goals for achieving greater sustainability. However, the tide appears to slowly be turning. For the second time, the Hub for Sustainable Finance, which was founded by Deutsche Börse AG and the German Council for Sustainable Development (RNE), hosted a German Sustainable Finance Summit – with twice as many delegates from the field of politics, the finance sector, science and civil society as last year. There appears to be a reason for this high degree of interest: Alexander Bassen, Professor of Capital Markets and Management at the University of Hamburg and Council member, spoke of a “regulatory sword of Damocles”.

EU action plan results in action

Bassen spoke about the European Commission’s March 2018 action plan on financing sustainable growth, the aim of which is to see to it that the EU implements the Paris Agreement and the United Nations’ 2030 Agenda. This was followed in May by the introduction of a set of measures for implementation of the action plan. Two aspects of the Brussels proposals were discussed in depth at the conference in Frankfurt: Taxonomy: One of these is that all EU member states are to agree on a common definition of sustainable economic activity in the interests of the environment – the technical term for this is taxonomy. This can subsequently serve as the basis for a common EU-wide label for sustainable investments, possibly along the lines of the organic food certification mark. According to the Commission’s current proposal, this classification system would apply to all financial market players wishing to offer green, sustainable, environmental or similarly labelled financial products. A group of experts has been working on this since June. The taxonomy will initially only cover environmental criteria for sustainability, not social and governance criteria. A hearing of experts will be held in this regard in Brussels on 18 October. At the conference, Martin Koch, Policy Officer within the European Commission’s DG FISMA, explained that the Commission’s aim was to prevent the EU market for green, environmental and sustainable finance products from becoming fragmented and that a clear framework was needed, especially for cross-border investments. The planned taxonomy was discussed in depth by the Summit’s participants. Criticism was voiced of the fact that the taxonomy would only apply to explicitly green financial products. As such, the classification would not affect anyone not wishing to label a fund, an insurance policy or some other financial product as sustainable, green, environmental or any such term. In addition, it only applies to financial products, not companies. An enterprise could therefore invest in coal but still launch a financial product to finance wind farms which is labelled as being green. Molly Scott Cato, a member of the European Parliament for the Green Party of England and Wales, said that the taxonomy was a breakthrough that should be feted. “But there is no black-list, and that’s definitely not green. Without this, the taxonomy isn’t terribly useful,” she said in criticism. Koch defended the taxonomy, stating that it had six clear fundamental environmental principles. Green investments would have to be of benefit to at least one of these, such as climate protection, and may not be detrimental to any of them, for example protection of the oceans. Levin Holle, Director General for Financial Markets Policy within Germany’s Federal Ministry of Finance (BMF), said the taxonomy was very important, but warned against being too hasty: “If we get the taxonomy even slightly wrong, we run a great risk of sending a lot in the wrong direction,” he said. Disclosure requirements: According to Holle, there are two other aspects of the EU reforms which are more pressing for the Federal Ministry of Finance in view of the EU elections in just six months’ time, namely the so-called low-carbon benchmarks and the requirements regarding the disclosure of sustainability aspects. The former are uniform EU-wide benchmarks for the environmental damage caused by the economic activities that investors invest in – investors could then use these benchmarks to make their investments more environmentally friendly. In addition, there are uniform benchmarks for rating the positive impact of investments in climate protection – these are called positive-carbon benchmarks. The disclosure requirements were the subject of intense debate at the conference. Unlike the taxonomy, these would apply not only to green financial products, but to the financial market as a whole. The European Commission presented a proposal for these in May. The regulation lays the foundations for environmental, social and governance aspects – the ESG criteria for short – being placed at the heart of the financial system. Its purpose is also to make Europe’s economy greener and more resilient and to establish a circular economy, according to the European Commission’s proposal. The plan is for a number of existing directives and regulations to be amended. All financial market players who manage money for their clients in anything from risk capital funds to pension insurance policies will then be obliged to take ESG criteria into account in all of their investment decisions. They will be required to regularly report to their clients on how they do this. They will also be required to always disclose to their clients the effect that sustainability aspects will have on the value of an investment. “Taking sustainability criteria into consideration is part and parcel of analysing the opportunities and risks of financial undertakings,” said BMF representative Holle. This is founded on the lesson learned that businesses or portfolios that consider ESG criteria achieve the same return but with fewer risks. “What I think is lacking is the finance sector seeing this more as a business opportunity,” said Chairman of the Deutsche Börse AG Supervisory Board Faber. Together with climate protection and the UN’s 2030 Agenda, this so-called risk-adjusted return on sustainable investments is the second reason why the European Commission is expediting the topic – it believes that a financial system which takes ESG criteria into account is more stable because it involves fewer risks. One of the criticisms levelled at the disclosure requirements during the conference was that having to incorporate ESG criteria into risk management would not make a financial activity automatically more sustainable. Many of the attendees were also still entirely in the dark as to how the new requirements would be incorporated at a practical level into the day-to-day activities of, for example, a portfolio manager.

Expertise, primacy of the policymakers and education

The EU reforms weren’t the only topic discussed at the Summit. The speakers’ and attendees’ key messages included the following:

The field of politics needs to have primacy over the markets: The policymakers must ensure that the new principles and transparency with regard to sustainability matters are actually observed in the world of finance. Additionally, they must not back away from what has already been decided: “The most important political battle in the years to come will be to get politicians across the spectrum to stick to the goals of the Paris Agreement,” said Molly Scott Cato.
Establishing role models: Public institutions and the policymakers must actively practise the values and see sustainability as a top priority. Marlehn Thieme, Chairwoman of the German Council for Sustainable Development, called for the policymakers to not only regulate the financial markets, but also act as role models themselves in the case of government investments.
Developing expertise: There is a lack of basic knowledge of sustainable business practice in many areas, be it in vocational training, university studies, career experience, or on supervisory boards and within federal institutions. There is therefore a need for further education and new textbooks. For example, Ralf Frank, Managing Director and Secretary-General of the German Association for Financial Analysis and Asset Management (DVFA), took a look at various training programmes for investment professionals as part of a study. “The topics of ESG and sustainability didn’t feature in any of the textbooks,” he criticised.

Documentation of the Summit’s findings will be published on the website of the Hub for Sustainable Finance in the next few weeks. Michael Schmidt, Head of Asset Servicing and Alternative Investments at Deka Investment, summed up what was certainly the key finding of the Summit as follows: “The circle has got bigger. The stone thrown into the water by the EU is throwing ripples and is now impacting more than just those who are enthusiastic about sustainability,” he said." ["post_title"]=> string(56) "Brussels adds momentum to sustainable finance in Germany" ["post_excerpt"]=> string(202) "The second German Sustainable Finance Summit showed that sustainable finance has shaken off its niche existence and is now a topic here in Germany too. Reforms at the EU level are the key driving force." ["post_status"]=> string(7) "publish" ["comment_status"]=> string(6) "closed" ["ping_status"]=> string(6) "closed" ["post_password"]=> string(0) "" ["post_name"]=> string(56) "brussels-adds-momentum-to-sustainable-finance-in-germany" ["to_ping"]=> string(0) "" ["pinged"]=> string(0) "" ["post_modified"]=> string(19) "2018-10-16 13:23:38" ["post_modified_gmt"]=> string(19) "2018-10-16 11:23:38" ["post_content_filtered"]=> string(0) "" ["post_parent"]=> int(0) ["guid"]=> string(42) "https://www.nachhaltigkeitsrat.de/?p=11396" ["menu_order"]=> int(0) ["post_type"]=> string(4) "post" ["post_mime_type"]=> string(0) "" ["comment_count"]=> string(1) "0" ["filter"]=> string(3) "raw" } [4]=> object(WP_Post)#3496 (24) { ["ID"]=> int(8302) ["post_author"]=> string(1) "5" ["post_date"]=> string(19) "2017-11-03 12:30:29" ["post_date_gmt"]=> string(19) "2017-11-03 11:30:29" ["post_content"]=> string(12647) "In the run-up to the conference, the organisations responsible for the Hub for Sustainable Finance outlined in ten recommendations what it would be concerning itself with on a content level. This served to focus the discussion. In six rounds of discussions, the some 200 participants developed ideas and suggestions that can take practical application and quality in the sustainable finance sector forward. The participants were united in their view of the topic’s urgency. “All of you sitting here know where the obstacles to sustainable finance lie, where the limits to your business models are and what is preventing you from scaling up your activities,” affirmed Marlehn Thieme, Chairwoman of the German Sustainability Council (RNE), at the beginning of the Summit. “Join us now in working together to take a decisive step forward in rebuilding our financial system!” she appealed to the audience. A selection of the most important ideas and discussion contributions is presented below: Idea 1: introduce a “green supporting factor” in financial market oversight The idea was put forward by the French banking association in 2016 with the aim of making it easier to mobilise capital for the worldwide energy transition. The green supporting factor could also be expanded to other sustainable projects as needed, however. In order to effectively assess factors with an impact on risks and opportunities, Klaus Tiedeken, member of the Management Board of Kreissparkasse Köln, argued in favour of applying the German Sustainability Code, which can be used for much more than just public reporting. Gerald Podobnik, Global Head of Capital Solutions of Deutsche Bank, gave the French idea more concrete form: banking regulations prescribe that banks maintain certain capital reserves in line with the risks associated with various types of investment as security should the investment default. This also applies when banks invest in solar parks or wind farms, for instance. The green supporting factor would allow banks to maintain lower reserves for investments related to the energy transition – because they are contributing to minimising the risks of climate change and thus to stabilising the financial system. The financial market oversight would have to be the body to introduce such a factor as it decides on the capital requirements for the various types of investment. Idea 2: change accounting regulations Christian Thimann, Chairman of the European Commission High-Level Expert Group on Sustainable Finance and member of the Management Board of insurer AXA, made the suggestion that accounting regulations be amended to favour sustainable investments. “Financial regulations in recent years were mainly strongly aimed at achieving short-term stabilisation,” explained Thimann. Accounting practice among companies is currently dominated by the mark-to-market method, whereby the value of an investment is determined for a given valuation date and entered correspondingly in the balance sheet. However, this is often in conflict with the idea that sustainable investments require a longer time horizon to become profitable. Different accounting regulations could weight this long-term potential of sustainable investments higher and thus allow them to positively influence the balance sheet. “How can we allow players to give out more long-term credits? How can we oblige them to control long-term risks with reasonable proportionality?” Thimann commented, summarising the key challenge. Idea 3: supervisory boards must have sustainability qualifications Patricia Geibel-Conrad, member of the Supervisory Board of Hochtief AG, argued that the qualifications of supervisory boards should be a starting point. The members of such boards needed to be sensitive to the topic of climate change and have basic knowledge of sustainable development, for instance. Such minimum requirements have long since entered public debate in the Anglo-American context as well as topics like diversity. Geibel-Conrad added that such qualifications for supervisory and management boards were among other things to be discussed at the next World Economic Forum in January 2018 in Davos. In the US, the discussion is centred around the key idea of “proxy access”. This rule gives even smaller-volume shareholders of corporations the opportunity to nominate candidates to board positions – and thereby strengthen representation of the topic of climate change, for instance. Idea 4: integrate sustainability report and group management report The topic of integrated reporting, meaning company reporting with an integrated management and sustainability report, was discussed at many different points. Currently, the two reports are usually published separately. As explained by Dieter W. Horst, expert for sustainable finance at PricewaterhouseCoopers, this means for companies that their key systems and processes are not yet tailored to the topic of sustainability. At 80 per cent of companies, the finance and accounting teams that prepare these key financial indicators comprise a few dozen or even a hundred people. The sustainability department on the other hand sometimes consists of a single individual or perhaps a handful of staff. Kristina Jeromin, Head of Group Sustainability at Deutsche Börse AG, also sees enhancing focus on materiality and the integrated perspective in reporting as a solution to this problem. Idea 5: re-evaluate EU-wide CSR reporting obligation Which indicators from a sustainability report are so important that a shareholder would say: I will or I will not buy this stock? This was the question posed by Ralf Frank, Secretary General and Managing Director of the German Association of Financial Analysts and Asset Management Professionals (DVFA). The root of this question is the new EU requirement that as of the financial year 2017 large companies must publish sustainability or corporate social responsibility reports (CSR reports for short). “The main point of interest will be which indicators lastly are so important that they have relevance with respect to the management report and thus for an understanding of the course of business,” explained Frank. Dieter W. Horst of PricewaterhouseCoopers believes that the CSR reporting obligation could possibly also show that there are no sustainability indicators which are so important that they need to be included in the management report – this would mean the new reporting obligation has missed the mark entirely. Several speakers therefore proposed that the CSR reporting obligation be reviewed next year. Should the indicators determined as a result of the obligation not have relevance for companies’ annual reports and management reports, the regulation would need to be revised. Idea 6: climate risks could become relevant for banking oversight Germany’s central bank is considering including the risks of climate change for the finance sector in its supervisory oversight for banks, as presented by Joachim Wuermeling, member of the Management Board of the Deutsche Bundesbank. Two aspects are the main focus: firstly, hurricanes and storms can have direct impact on the financial situation of banks and insurers. Should extreme weather situations increase, the risks would also rise and eventually become uninsurable. On top of this, according to Wuermeling, transitory risks on the path to becoming a low-carbon economy are a factor: many fossil fuels that are currently listed as assets in companies’ balance sheets cannot be consumed as a result of the climate targets. “One thing is clear: the sooner we become active, the less pressure there will be to act later,” comments Wuermeling. This is why the Bundesbank is expanding its analysis capabilities and striving to achieve a better understanding of climate risks and their impact on financial market institutions. Going forward, climate risks may possibly be taken into account in banking oversight. Idea 7: the users need to have a voice Anja Mikus, CEO/CIO of the foundation Fund for the Financing of Nuclear Waste Disposal, called for those who make investment decisions on a daily basis to be better integrated into the discussion on a sustainable finance sector. As she sees it, the problem is that there is no uniform definition of what exactly sustainability in the investment process means. “How is a portfolio manager to treat it? How does sustainability enter into the investment process?” she asked. This question can only be answered if a portfolio manager is sitting at the table too. This would also help reduce scepticism among many managers as to whether sustainable investments can actually yield substantial returns. Studies have shown they can, however, “studies don’t help – actual practice is the deciding factor,” added Mikus. Idea 8: big data can help, but the “can” needs to be qualified Big data, artificial intelligence and learning machines will change the financial industry for the better and can help with regard to sustainability as well. This was the thesis of Konrad Sippel, Head of the Deutsche Börse Content Lab. “When it comes to the availability of information and the ability to quantitatively evaluate it in order to explain why sustainability makes sense, more data and improved analysis will be needed,” he says. Other discussion participants suggested that more data does not necessarily equal better data. It always depends on why the data is being collected and the data’s quality. The future of the Hub for Sustainable Finance The first task of the H4SF going forward will be to catch up. The financial sector and investors in Germany are lagging behind their European and even global peers. Because it is not the case in Germany that statutory obligations and requirements are quite simply decreed, the initiators will have to help themselves. Via the H4SF, they aim to make discussion on this topic more clearly heard in Germany. The great popularity of the event and the participants’ high willingness to engage in discussion are confirmation for the initiators that the initiative for a more sustainable finance sector should be taken forward. The aims of the H4SF are to be discussed with the federal government and parliament at the earliest possible opportunity. As Günther Bachmann, Secretary General of the Sustainability Council, made clear in the final panel in this context, the significance of results of the European discussion will need to be debated for Germany. Additional discussion events with expert participation are planned for 2018. With the pioneers of sustainable finance continuing to be encouraged and bolstered, it is now the turn of the mainstream to be won over for the topic of sustainable finance. Günther Bachmann went on to describe how, in future, professional investors should make decisions not solely on the basis of financial indicators, but also make sustainability a factor in assessing risk and opportunity and thus include it in their investment decisions. Federal action would then take comparable considerations into account. Through the event, the Steering Committee and the Council for Sustainable Development were given a great deal of cause for thought that will now be taken on board in shaping the Hub. A recording of the Summit covering all items on the programme in full will be available for a period of six months at www.h4sf.de. Updates and concrete next steps will be communicated on the project website and in the Council’s newsletter." ["post_title"]=> string(108) "Germany’s first Sustainable Finance Summit: new contributions to discourse on a sustainable finance sector" ["post_excerpt"]=> string(379) "The Hub for Sustainable Finance has concluded its first public convening. Representatives of the finance sector, supervisory authorities, civil society, the sciences and the political arena discussed how the financial system can become more sustainable. Here, you can read a selection of key contributions to the discussion – and about what the Hub will be doing going forward." ["post_status"]=> string(7) "publish" ["comment_status"]=> string(6) "closed" ["ping_status"]=> string(6) "closed" ["post_password"]=> string(0) "" ["post_name"]=> string(41) "germanys-first-sustainable-finance-summit" ["to_ping"]=> string(0) "" ["pinged"]=> string(0) "" ["post_modified"]=> string(19) "2018-04-11 17:07:55" ["post_modified_gmt"]=> string(19) "2018-04-11 15:07:55" ["post_content_filtered"]=> string(0) "" ["post_parent"]=> int(0) ["guid"]=> string(49) "https://www.nachhaltigkeitsrat.de/aktuelles/4341/" ["menu_order"]=> int(0) ["post_type"]=> string(4) "post" ["post_mime_type"]=> string(0) "" ["comment_count"]=> string(1) "0" ["filter"]=> string(3) "raw" } [5]=> object(WP_Post)#3988 (24) { ["ID"]=> int(8279) ["post_author"]=> string(1) "5" ["post_date"]=> string(19) "2017-10-06 10:42:36" ["post_date_gmt"]=> string(19) "2017-10-06 08:42:36" ["post_content"]=> string(8569) "Environmental and climate protection, fair pay throughout the supply chain, respect for human rights in production countries: ecological and social criteria are already part of decision-making processes for many business professionals and financial backers. On the financial markets, however, the topic still does not carry much significance, For example the volume of assets under management currently listed on the sustainability index of Deutsche Börse totals just 12.5 million euros. How can we promote the development of sustainable finance? To take on this challenge, Deutsche Börse AG and the German Council for Sustainable Development (RNE) have joined forces in strategic collaboration. Starting immediately, the Hub for Sustainable Finance (H4SF) will be a place of discussion and forward-looking ideation, in particular aimed at cultivating discourse between the business sector, the financial market and societal stakeholders. “In Germany especially, the role of the capital market from a sustainability perspective has not yet been given enough consideration,” comments Council member Alexander Bassen, professor at the University of Hamburg for business management and capital markets studies and member of the H4SF Steering Committee. In his view, the actors themselves on these markets have an important lever at their disposal. Together with other members of the Steering Committee of the Hub for Sustainable Finance, Bassen has now prepared ten recommendations for sustainable finance, which the Steering Committee presented in Berlin on 27 September. The paper was based on the interim report of the High-Level Expert Group on Sustainable Finance of the European Commission, the PRI Roadmap for Germany, the living document Sustainable Finance by the Council for Sustainable Development, which the Council has been updating since March, the goals of the Accelerating Sustainable Finance Initiative of Deutsche Börse and the recommendations of the Task Force on Climate-related Financial Disclosures of the Financial Stability Board. Federal government should facilitate and call for sustainable investment In the view of the experts, the time has come for policymakers to make good on their obligation. They have an important role to play in generating formative impulses, and as the paper states early on, the government has not fulfilled this role sufficiently. In the opinion of the authors, the financial sector and its due responsibility are under-represented in the German Sustainable Development Strategy. Vice versa, on the part of financial market stakeholders, a sector-specific discussion of their contribution to achieving sustainable development goals is also said to be lacking. Bassen calls on the future federal government to embed the topic in the Sustainable Development Strategy. This would bolster productive exchange between the capital market and politics, in the Council member’s opinion. The political framework for a more sustainable financial system plays a decisive role. This was emphasised as well by Kristina Jeromin, Head of Group Sustainability of Deutsche Börse. “Sustainable finance is increasingly moving into the public’s frame of awareness. But if we take a look at the reality, such investing is unfortunately very far from being daily practice,” explains Jeromin. Sustainable products and services are certainly valuable and a good thing. “But the market also has to use them.” In the Hub for Sustainable Finance, concrete tools are to be developed as well as examining and promoting aspects of regulation and coordination of policymaking and the business sector. “The fundamental understanding of sustainability aspects as important indicators for risks must evolve to see that they also offer business models opportunities,” adds Jeromin. “These aren’t obstacles to market access, but rather should be natural components of entrepreneurship and investment strategy.” Sustainability criteria not hindrance for investment Steering Committee member Michael Schmidt also sees this push and the recommendations for action as very necessary. Schmidt is an expert on finance, Managing Director of Deka Investment and member of the High-Level Expert Group on Sustainable Finance of the European Commission. In EU comparison in particular, Germany lags behind its peers with respect to the topic of sustainable finance, explains Schmidt. While nations like the United Kingdom or France have numerous representatives that participate in the European Commission’s group of experts, Schmidt is the only representative from Germany. “Too many financial market players still see sustainability criteria as a constraint on achieving their goals – entirely without justification,” says Schmidt. Rather, it both yields returns and is part of the fiduciary duty to take sustainability into account explicitly and systematically in the so-called magic triangle of returns, risk and liquidity. With the Sustainable Development Goals (SDGs), the world community has committed itself to fighting poverty, protecting the environment and placing sustainability aspects squarely in the focus of all areas of life and all decision-making. For Dustin Neuneyer, Head of Continental Europe of PRI Principles for Responsible Investment, the primary question is whether or not the financial sector can implement the UN’s Sustainable Development Goals – even in Germany. In the past 11 years, more than 1,800 supporters have signed the PRI Initiative, a project originally initiated by the United Nations, meaning around half of the worldwide monies available are covered. At the same time, however, this does not mean that half of all investing is carried out in line with sustainability criteria. Neuneyer confirms as well that Germany is still “underdeveloped” when it comes to sustainable finance. That is in part a result of the German penchant for thoroughness. “People want a solution that’s 100% perfect,” says Neuneyer. “But the world is complex and you have to have the courage to get started and accept partial solutions.” Debate on advancing sustainable finance agenda There is truly no lack of examples that illustrate just how urgently engagement on the part of lenders and companies is needed in order to advance sustainable business practice. The diesel scandal with its falsified emissions reports is one and the 2010 fire on the Deepwater Horizon drilling platform is another. The resulting oil spill had devastating consequences for the ocean’s ecosystem. What should the next step be following these ten recommendations for sustainable finance? What groundwork needs to first be laid? The members of the Hub for Sustainable Finance will be discussing their ideas further on 23 October. At the German Sustainable Finance Summit in Frankfurt, representatives of politics, business and finance experts, investors and scientists will come together. The event is being held under the aegis of the German Federal Ministry of Finance. The Secretary of Commerce of the state of Hesse, Tarek Al-Wazir, will be in attendance to welcome the guests with the opening words. The aim of the event is to highlight the most important aspects for the agenda for sustainable finance in Germany and to generate awareness of it among policymakers. Due to the high degree of interest, the event is already fully booked up. A live stream of the event will be available on 23.10.17 from 9 a.m. to 6 p.m. for all interested parties at www.h4sf.de." ["post_title"]=> string(45) "How to advance sustainable finance in Germany" ["post_excerpt"]=> string(348) "Sustainability criteria do not yet receive enough consideration from investors, companies or lenders. The RNE, Deutsche Börse AG and the financial experts on the Steering Committee of the Hub for Sustainable Finance have presented ten recommendations for a more sustainable financial system. The future federal government, too, has a role to play." 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