The weather phenomena we are observing around the world show that the harmful effects of climate change have already reached some regions of the planet. The combination of different atmospheric phenomena reinforces itself, creating a bleak outlook. Australia is a real example where the confluence of ocean currents, wind direction and dry land has resulted in a devastating scenario in that country. <\/p>\n
The intensity of climate change is reshaping, from a political, economic and social perspective, the way in which the problems arising from it are addressed. The world of finance cannot remain on the sidelines of this transformation either. On the contrary, integrating sustainability criteria into the financial system plays a key role in achieving the goals agreed in the United Nations Sustainable Development Goals and the Paris climate agreement. <\/p>\n
Sustainable finance aims to integrate environmental, social and governance (ESG) criteria into the management of financial services and, therefore, decisions on investment, financing and capital allocation must align with compliance with these parameters. For banking institutions, this challenge is not new. In fact, the sector has for years been committed to developing environmental and social measures: promoting equality, financial inclusion, education and the creation of opportunities. But it now has to step up, since the productive and social transformation required by the fight against climate change entails substantial financing needs. The sector is thus called upon to become a key catalyst for change, particularly in a region such as Europe, where nearly 70% of economic activity is financed by banks. <\/p>\n
In this way, sustainable finance helps\u2014and will do so even more in the future\u2014companies to move from carbon-intensive activities to the use of environmentally friendly energy, as well as to develop the new sources of energy, technology and infrastructure needed for a cleaner future. All of this means that the financial sector must expand its capabilities in line with the requirements of different stakeholders<\/em>, transparently integrating sustainability criteria into its risk management systems, strategies and business models. <\/p>\n Consequently, financial institutions, as market participants, play an important role in this entire process, but they are not the only players and, in that sense, it is advisable for other areas to work together. The partnership between the public administration and the private sector, between the different productive sectors and the financial industry, or between the real economy and civil society, is essential for the role of banking as a catalyst to be developed effectively. <\/p>\n The need to include all stakeholders in this process, both public and private, for the necessary transformation of the economy towards a sustainable model was one of the objectives of the United Nations Climate Change Conference (COP25) held in Madrid at the end of 2019. On the occasion of this climate summit, almost the entire Spanish banking sector signed the Spanish Banking Agreement on Climate Action and its commitment to align with the Paris Agreements to strengthen its responsibility in the fight against climate change. <\/p>\n Ultimately, the challenge we face must focus on how to manage a complex transition period, in which the emergency is beginning to be felt in some regions of the planet, without leaving anyone behind. To this end, an appropriate design of incentives by the public administration and a stable regulatory framework will undoubtedly encourage the financial system to channel, exponentially, the resources needed to address this inexorable productive and social transformation. <\/p>\n