“Learning by doing” – this phrase was used not only once at the European Sustainable Finance Summit, which this year only took place online due to the Corona crisis. The conference focused on the contribution the financial industry can make to a sustainable future. “We’re running out of time,” said Kristina Jeromin from the German government’s Sustainable Finance Advisory Board at the conference. You have to enter the market with practicable approaches in order to be able to respond quickly to the challenges. But you don’t have time to design the perfect solution on the drawing board. It is a “learning by doing”.
Christian Sewing, head of Deutsche Bank, also spoke at the conference of “learning by doing” – but in a different context and at a different speed. A gradual transformation of the economy towards more sustainability is needed, said Sewing. He stressed, “We have to stay competitive.” He also referred to the financing of coal and oil. If you simply exclude the old part of the economy, you cannot guarantee transformation. Banks would have to play a role in this. ESG – the abbreviation stands for the dimensions of sustainability, environmental protection (Ecological), social responsibility (Social), principles of good corporate management (Governance) – must become indispensable.
“Personally, I believe that ESG ratings will be as important as credit ratings from rating agencies in five years’ time.” Above all, it is important to convince your own organization, in this case Deutsche Bank, that sustainability must become the new standard . That must become part of the flesh and blood. Honestly, according to Sewing, the topic of ESG was not initiated by the bank itself around three years ago, but by wealthy customers who inherited their parents’ portfolios and were looking for other investments. “We are dealing with a new generation that wants to support a different form of economy.”
For the change to a sustainable economy, investments are needed, said Finance Minister Olaf Scholz (SPD) at the conference, from the public as well as the private sector. This is a great opportunity for the financial sector. In addition, sustainability risks are also financial risks, according to Scholz.
Kristina Jeromin from the Sustainable Finance Advisory Board also emphasized that financial market players did not act because “they are all do-gooders”. But because they see effects in their risk portfolios – that is a rational assessment. They want a sustainable value chain, also because they want to earn money in 50 years.
Failure to act causes far higher costs than actions and investments against climate change, said former World Bank chief economist Nicholas Stern. The consequences are immense and affect everyone. Investments today are not so “terribly expensive”, if you look at it overall, Stern said. You have to be flexible. Also because you are constantly learning on the way to a more sustainable future.