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The long lever of finance

D.he realization may sound banal and may seem cynical to some in view of the effects of the corona pandemic: But in the economy it has been shown time and again that crises have also ensured that lessons are learned from them and systems are improved. The most recent example of this is the global financial crisis in 2008. It originated in a complex banking network and rules that were too weak. The crisis hit the global economy in the marrow, but a lot has happened since then: banks have to show significantly more equity with which they can buffer losses in crises. The supervision is stricter, ailing banks can be wound up according to a fixed set of rules.

Philipp Nimmermann believes that dealing with the financial crisis can also help to cope with the consequences of the corona. Nimmermann is State Secretary in the Hessian Ministry of Economic Affairs and said on Monday at the opening of “Fair Finance Week” that since the crisis the financial markets have learned to deal better with complex risks, be it with a view to liquidity and equity, be it with a view to climate risks. Today, Nimmermann wishes, the banks could use this knowledge to balance with the real economy how to deal with future risks, for example caused by a pandemic.

The key to this could be sustainability, believes the State Secretary, “it is the broadest concept for making our society and our economy more resilient”. The Corona crisis has shown that sustainability as a holistic approach with its economic, climatic and social aspects can help to be better prepared for future crises. “Suddenly in the Corona crisis we are talking again about supply chains, working conditions in meat factories, flexibility and home office.” All of these aspects could be regulated with sustainable corporate management, said Nimmermann.

Counterpart to the “Euro Finance Week” conference series

The Fair Finance Week sees itself as a counterpart to the “Euro Finance Week” series of congresses, which will take place next week in Frankfurt. Whereby: It has long been shown that the established banks are also increasingly addressing the issue of sustainability. In the fight against the climate crisis and in order to achieve the UN sustainability goals, five panels of the Fair Finance Week will discuss what contribution the financial sector can make. “The leverage of the financial sector is great when it accompanies the real economy in its transformation into a sustainable economy,” believes Georg Schürmann, Managing Director at Triodos Bank, which sees itself as a sustainability bank. Banks must actively accompany their customers and support them in positioning themselves as sustainably as possible. “In this way, the competitiveness and resilience of the financed companies are strengthened and the sustainability and default risks at the banks are reduced,” says Schürmann. In other words, because business models that, for example, are not climate-friendly or do not comply with the principles of modern corporate governance, could no longer work in the future, banks must have an interest in getting their customers to take sustainable paths.

The same applies to investments, both by financial players and by small investors, although many investors still assume that sustainable investments and high return expectations are mutually exclusive, although numerous studies have since shown the opposite. The fact that many people are not aware of this is a big problem, says Frank Pierschel, who is responsible for sustainability risks at Bafin. “It cannot be that people are neither informed about the real climate threats nor about the financial products that can help to achieve climate goals,” criticizes Pierschel. It is therefore time to invest in financial education to change this situation, he says.

Meanwhile, consumer pressure is growing on the financial industry. Studies show that more and more customers expect their bank to receive financial returns as well as social returns for investments, because sectors such as the coal industry are specifically left out of investments. “We shape the future with financial decisions,” says Silvia Winkler, managing director of the cooperative sustainability bank Oikocredit for Hessen. And Frank Pierschel believes that sustainable investments already have an advantage: “Every euro that is not invested in sustainability today will be lost in ten to 15 years.”

The Fair Finance Week is organized by a network of companies that includes the Evangelische Bank, GLS Bank, Triodos Bank and Oikocredit Hessen-Pfalz. Further information on the events can be found at www.fair-finance-frankfurt.de.

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