Allow me, first of all, to express my satisfaction at the very fact that we are holding this meeting here today, and that we have managed, for the first time, to bring together the entire Spanish financial system in pursuit of a common goal. It may sound clich\u00e9d to speak of a milestone, but it is clearly a historic achievement to have succeeded in uniting institutions with interests as legitimate as they are diverse around a shared purpose. And it has been sustainability\u2014specifically, the concept of sustainable finance\u2014that has brought together banks, savings banks, credit cooperatives, insurance companies, collective investment institutions and pension funds in this joint initiative, which has set itself the ambitious goal of driving Spain\u2019s transition towards a fairer, more sustainable and more environmentally respectful economy. <\/p>\n
In all honesty, I must say that it did not take us long to reach this agreement. From the outset, all participants welcomed with enthusiasm the project to create a Centre for Responsible and Sustainable Finance, among other reasons because the concept and practice of sustainability was not new to a large number of Spanish financial institutions, many of which are at the forefront of developments linked to responsible finance. But we wanted to take the industry a step further and decided to join the International Network of Financial Centres for Sustainability (FC4S), an initiative promoted by the United Nations Environment Programme, whose aim is to ensure a sufficient flow of private capital towards environmentally friendly investments. <\/p>\n
During the process of creating the Spanish centre, which is the twenty-seventh member of this United Nations international network, we considered what the focus and specific mission of this organisation should be, and we agreed that it should pay particular attention to small and medium-sized enterprises, which not only make up the bulk of Spain\u2019s industrial fabric, but are also the ones that may face the greatest difficulties and needs in making this transition to a low-carbon economy and, in particular, in adapting to the requirements set out in the future Climate Change Act and the European Commission\u2019s regulations in this area. The commitment to sustainability is not exclusive to large companies or to those in a particular sector, as all have important contributions to make. <\/p>\n
We want this centre to become a highly active forum in which all stakeholders can debate and find innovative financial and investment solutions for companies. But we also wish to use this platform to learn from experiences developed in other countries, disseminate each country\u2019s best practices and even launch joint initiatives through collaboration agreements with Europe\u2019s most relevant centres. In addition, Finresp offers to work actively with the authorities in the design and implementation of an effective regulatory framework that enables progress in the fight against climate change. <\/p>\n
In this section, I must necessarily refer to the National Sustainable Finance Action Plan announced last Tuesday by the Government as part of the Climate Emergency Declaration approved by the Council of Ministers. At Finresp, we welcome the initiative and offer our full and loyal cooperation to the new Executive of the Spanish financial system which, as can be seen, is open and eager to move forward along the path of responsible finance. The very creation of Finresp and the holding of these sessions are a clear demonstration of this willingness and readiness. <\/p>\n
Allow me to dwell a little longer on this aspect of public-private collaboration and on the need to move into action in an orderly manner and without delay, as this is the issue that concerns me most personally.<\/p>\n
As can be seen, the awareness-raising phase of this process can be considered complete. Millions of citizens\u2014as shown by surveys and the daily demonstrations of all kinds\u2014want this transformation of the economy and society to become a reality now. There are also many investors and companies for whom climate change has become a decisive factor in their strategies and long-term outlook. More than 10,000 companies worldwide have joined the 2030 Agenda: the United Nations Global Compact to bring the Sustainable Development Goals to the business sector. The Spanish network is the local network with the most participating entities, with more than 1,600 signatories to this commitment. It is boards of directors and management committees that are putting pressure on their respective companies to take action to mitigate climate change, but above all it is customers themselves and other stakeholders who are the main catalysts of this momentum. <\/p>\n
It is clear that awareness of this problem is changing rapidly, and we are on the verge of a profound transformation in both finance and the productive system in general. Precisely this very broad base of social support for the fight against climate change has become a vital lever\u2014an essential driving force\u2014for undertaking the complex changes required in our production models and in our way of life. <\/p>\n
The Spanish financial sector is also fully aware of the challenges it faces and of the fundamental role it must play in the fight against climate change. Banks, savings banks, credit cooperatives, insurers and collective investment institutions are ready to be actors in that change. Or, to use a recent expression by the Deputy Governor of the Bank of Spain, Margarita Delgado, we financial agents are \u201cfacilitators of change\u201d. Nothing could be more accurate. But why does the financial sector take on such relevance in this context? It seems obvious that a substantial element in achieving these goals will be financing. Billions of euros will be required (\u20ac180 billion annually in the EU alone over the next decade) to make this transition to a low-carbon economy a reality. However, it will not be easy to channel those investments into new projects and productive sectors, as it will require a sound assessment of the risks associated with climate change and how environmental policy will affect supply, prices and costs, and demand\u2014that is, the entire economy. <\/p>\n
Financial institutions, and banks in particular, are accustomed to risk management. But the climate change challenge in terms of risk is different in nature, mainly due to the uncertainties associated with it, the lack of historical data to serve as a guide, and the long time horizons that must be used to estimate its impact. These risks may be physical in nature\u2014that is, the impact that climate change itself may have on financial risks\u2014but there are also transition risks, stemming from the shift in the production model towards a more sustainable one. <\/p>\n
The assessment of these risks should consider, for example, the possibility of an abrupt shift in that transition, which would cause entire industries and asset classes to suddenly lose their value. There may be several possible origins of such an unexpected change: the evolution of the climate itself; technological innovations that allow faster progress towards more sustainable economic models; regulations issued by the authorities and the public sector; or a change in consumer preferences. Mapping these risks\u2014which sector will be affected, when that impact will occur and what its magnitude will be\u2014is, at present, impossible to know. <\/p>\n
The primary energy sector will probably be the first to feel the impact, but second- and third-round effects will affect many other sectors, such as transport, logistics, the automotive industry, the chemical industry, or any other that is energy-intensive. Of all this, we only know that the impact will not be zero, but we know very little about when they will be affected and to what extent. For this reason, it is crucial that all these changes are carried out gradually, to prevent unnecessary increases in energy costs and to allow the emergence and deployment of new technologies. <\/p>\n
This uncertainty about climate change itself and about the risks linked to the transition is causing great concern among companies and investors, and there are already many voices calling for more decisive action by the authorities to bring order to this entire process. The European Commission itself, through its Vice-President Frans Timmermans, lamented a few days ago that the political class was doing very little to prepare citizens for what he described as a tectonic shift. Not to mention Larry Flink, CEO of the world\u2019s largest asset management company, BlackRock, who in his latest letter to investors pointed to the scale and scope of government action on climate change as one of the most important issues in this process, as it will define the speed at which we move towards a low-carbon economy. In his view\u2014which I fully share\u2014this challenge cannot be resolved without a coordinated international response from governments aligned with the objectives of the Paris Agreement. <\/p>\n
Governments and the private sector must work together to carry out a transition that is orderly and equitable. We cannot leave behind the less advantaged segments of society, economic sectors or entire countries while we move forward towards a more sustainable\u2014and in theory fairer\u2014society, because we would be doing exactly the opposite of what we intend. In short, it is vitally important that the authorities begin to bring order to this entire transformation project, in which private initiative is being very active, in order to reduce, as far as possible, the uncertainty inherent in this process, or to ensure that government actions do not at least increase confusion. As I have said on other occasions, it is ultimately a matter of not adding artificial uncertainty to the structural uncertainty of climate change. <\/p>\n
But it is important that we move from inspiration to action and define what we are talking about. For example, it is surprising that, despite the prominence of the fight against climate change on the political agenda, we still do not have a clear definition of what is green. This terminology is widely used by all of us, but for the time being there is no clear and unambiguous international definition of what should be called green. In other words, we do not have taxonomies or definitions that we can use. We need a common language, indicators and a standardised working methodology that can provide predictability for both issuers and recipients of financing, as well as for investors. It would therefore be interesting to have, soon, a definition of what is green, and also a \u201cgreen\u201d tax framework, in order to harness the full potential of the European fund intended for the ecological transition, with an amount close to \u20ac100 billion, as announced. Participation in this fund will also require closer public-private cooperation in our country. <\/p>\n
In this area of the need for certainty, one observes with some concern that, in the brainstorming<\/em> on climate change, there is more storm than ideas. In other words, the speed of the debate and the desire for action are far ahead of the knowledge we have of the problem. We need to shed light on this transition process, because everyone\u2014companies, banking institutions, insurance companies, investors and the general public\u2014needs a clearer view of how the authorities are managing sustainability-related issues. <\/p>\n The challenges related to climate change will require broad political and social consensus, including intergenerational consensus. Let us consider that a public strategy to fight climate change should remain in force in its main lines over the next twenty or thirty years. A period in which young millennials<\/em>, who today are driving this change with their actions and demands, will be joining the world of business and politics, and will be the ones responsible for giving it a definitive push. <\/p>\n Public authorities must also facilitate the social dialogue that leads to a new social contract associated with the sustainable economy of the future. We must not deceive ourselves: the transition to a more sustainable economic model entails costs that will have to be shared among the different strata of society. That is why it is essential to use the leverage of broad social support for the fight against climate change to define a fair and proportional distribution of costs. And to accept that profound changes in our lifestyle will be necessary if we want to converge towards more sustainable development models. <\/p>\n Finally, I would like to refer to the financial sector. We do not need further motivation, as we fully understand the urgency of the challenge we face and the consequences that would follow from failure in the fight against climate change. But at the same time, we sometimes feel that there is too much one-sidedness in the demands made of us, without recognising the limitations in the knowledge that we all have\u2014public sector and private sector alike\u2014both of the impact of climate change and of the measures that must be put in place to combat it. <\/p>\n Every financial institution depends on customer demand, whether to finance specific projects, invest their savings in certain products, or cover future contingencies through insurance. Our business is driven by demand (demand-driven<\/em>, to use the English term). In a way, the balance sheet of financial institutions reflects the decisions made by households and companies over recent decades. In other words, it is a mirror of the economic and social model we have created as citizens. In a somewhat different version, but one that is based on the same mistaken view of financial activity, financial institutions\u2014banks\u2014are reproached for not financing the fight against climate change. These criticisms ignore something as basic as the fact that banks do not determine\u2014neither yesterday, nor today, nor tomorrow\u2014how the economy is financed: they simply respond to and assess their customers\u2019 credit requests. Therefore, they do not decide the destination of their loans, as that decision is made by their customers. No matter how prepared the supply of credit may be to meet the challenges of climate change, if demand does not adapt to these new needs, it will be of no use. <\/p>\n All of us, therefore, will have to redirect and incentivise credit demand towards the changes we are being asked to make and, when that happens, Spanish financial institutions\u2014I assure you\u2014will be there to meet that demand appropriately. And not only that. Our institutions are already working to incorporate climate risk into their decision-making and the assessment of their portfolios, which will undoubtedly allow the composition of these to gradually shift towards more environmentally friendly investments. But the financial sector cannot undertake this enormous effort alone. All sectors, particularly the most polluting, must be involved in this transition, while the authorities, for their part, must remove obstacles and uncertainties by laying the legal foundations for this transformation. Only in that context will the sector be able to fulfil its role as a facilitator of change. <\/p>\n In conclusion, I would only like to insist that we must accelerate change through decisive action, but without haste or improvisation that could jeopardise financial stability or lead to the exclusion of social segments, economic sectors or entire geographic areas. To do so, we need consistent and clear parameters, with well-established metrics, that provide transparency and credibility to the actions of companies and governments and thus allow us to move forward with the greatest possible certainty, without creating unfair disadvantages or undermining competition rules. As I have already said, inaction can only lead us to incur costs\u2014the costs of paralysis between two production models\u2014without obtaining any benefit from either the old world we are leaving behind or the new one we are heading towards. For all these reasons, let us start moving now. Let us not waste another minute. <\/p>\n