Sustainable financing ‘critical’ to reaching net zero, experts warn

Sustainable finance is ‘critical’ for reaching net zero, leaders in the industry have warned. Speaking on stage at Cop27’s Saudi Green Initiative, was Tony Cripps, CEO and Managing Director, SABB, Richard Lacaille, EVP and global head of ESG, and Cheng Lin, head of international cooperation, Beijing Institute of Finance and Sustainability. Tony Cripps emphasised the importance of regulators and government working together with financiers to push sustainable finance forward.Speaking on the panel, Mr Cripps said when he arrived in Saudi Arabia 18 months ago he was able to partner with regulators and government a framework for sustainable finance, including a taxonomy to define what is green and what isn’t. Richard Lacaille added that ‘blended finance’ was also key in moving sustainable finance forward. He urged the importance of both private and public capital working together to add ‘supercharge’ sustainable finance.’The key is to have the policy money taking the risks the private sector doesn’t understand or want to take,’ Mr Lacaille said.’That’s not saying public money giving private profit, I think that’s a criticism many levy. It’s just recognizing that private capital is optimised to do certain things but certainly not other things.The panel spoke at the SGI summit’The art of blended finance is not that public institutions take a little bit of a slice of all the parts of the capital, they should really take the parts of the capital stack that others can’t and thereby supercharge the system.’Mr Cripps also highlighted the growth sustainable finance has seen in the last 15 years, adding that it is already in the top 10 areas of investment for ESG.He said transition financing is ‘critical’ to get to net zero adding that it would be impossible without financing the new technology.Mr Cripps recalled his time in Singapore working in agriculture where the palm oil industry was a key focus seven to eight years ago. Because of land degradation and deforestation and the way palm oil land was cleared through fire, the industry partnered with banks, government and NGOs to create a framework for responsible palm oil production which enabled banks to commit to financing that transition.Mr Cripps said we are now in a similar position with oil and gas and the industry needs to start financing ‘through renewables’ to see transition happen in the next 30-40 years.Looking to the future Cheng Lin said that a key element sustainable financing was ‘derisking’ investment for funders. ‘Within both the G20, China and many economies, derisking is very important. There is a growing interest in discussing this topic,’ Mr Lin said. Find out more about the MGI summit and SGI forum here: greeninitiatives.gov.sa