Finextra Research recently engaged with Antoni Ballabriga, the global head of responsible business at BBVA and co-chair of the global steering committee for the UN Environment Programme Finance Initiative (UNEP FI), to discuss the evolving landscape of sustainable finance in investment and lending.
Ballabriga emphasizes that the United Nations Sustainable Development Goals (SDGs) present banks with a strategic framework to integrate ethical, social, and governance (ESG) factors, offering insight into areas where financial institutions can enhance their roles and leverage technology for growth. “The UN SDGs represent the largest business opportunity for banks over the next decade, requiring investments of $5–7 trillion annually to fully realize these goals by 2030,” he states. He anticipates substantial disruptions across businesses and banking sectors, coupled with a significant shift in value across various industries.
BBVA has also developed a five-year strategy focused on climate finance and inclusion, aiming to provide sustainable technological solutions that facilitate the transition towards these goals. However, before advancing, stakeholders in financial markets must assess the European action plan and establish a taxonomy to define sustainability criteria.
Ballabriga notes that corporate disclosure is a crucial driver for reevaluating investments and greenhouse gas emissions, alongside regulatory frameworks. Enhanced access to comparable data is vital for investors, asset managers, and owners, indicating the necessity for standardized regulations to establish benchmarks.
### Emphasizing Technological Integration
During the European Banking Summit in October 2019, Ballabriga discussed the imperative of integrating digitalization with sustainability to unlock the full potential of the banking sector in supporting the SDGs and the Paris Agreement. This initiative, championed by the European Commission, has led to the establishment of the Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA).
He pointed out that digital identification, big data, and artificial intelligence can facilitate financial inclusion, while sustainable decision-making processes can be bolstered through data-driven advisory services and blockchain technology. “Utilizing sustainability-related data allows for the progressive integration of environmental and social risks into banking risk management policies,” Ballabriga explains. He believes that digitalization fosters ecosystems and partnerships, connecting new technologies and generating innovative business models where big data plays a vital role in addressing societal challenges.
In discussions with Finextra Research, he highlighted that the intersection of the Internet of Things (IoT) and blockchain could significantly enhance scalable sustainable investment initiatives, a movement supported by the Sustainable Digital Finance Alliance.
Notably, BBVA was the first bank to issue a structured green bond employing blockchain technology. This innovative approach saw the insurance firm MAPFRE invest €35 million in a six-year bond linked to the five-year euro swap rate.
Ballabriga asserts, “Blockchain can empower investors to become green asset owners. Some efforts are underway to connect data from assets that contribute to environmental improvements, which is crucial for mobilizing sustainable investment.”
Sustainable finance is integral to BBVA’s strategy, with the institution recently reaffirming its commitment to fostering a sustainable economy. As part of its dedication to the Paris Agreement, BBVA has implemented an internal carbon pricing mechanism and aims for carbon neutrality by 2020, aligning with statements made by chairman Carlos Torres Vila at COP25 in Madrid.
At the 2020 Davos summit, Vila emphasized the need for banks to factor in climate-related risks and opportunities within their investment strategies. “We are committed to financing and advising our clients through this environmental transition. We have limited time until 2030 and must allow businesses to adapt,” he remarked, encouraging a fair transition that ensures no entity is left behind. BBVA mobilized €30 billion in sustainable finance during 2018 and 2019, as highlighted by Vila at Davos 2020.
Finextra Research and ResponsibleRisk will focus on sustainable finance in investment and asset management at the upcoming SustainableFinance.Live Co-Creation Workshop on March 23, 2020. Interested parties are invited to register for the event, which will address the pressing demand for sustainability, the challenges ahead for sustainable investments, and collaborative strategies to meet the UN’s Sustainable Development Goals by 2030.