Paris Region at the forefront of sustainable finance

Paris financial centre has become a unique hub in terms of socially responsible investment (SRI) Systematically integrating governance, ethical and social criteria in a traceable way. In fact, it is currently engaged in the development of cutting-edge financial tools and regulatory measures for promoting a socially fair ecological transition, combating climate change, and protecting biodiversity.

Every year, key players in the world of Finance come together in Paris for the “Climate Finance Day” to take stock of the sector’s progress at the international level, put forth new innovative ideas and commit to developing a more sustainable finance.  704 sustainable funds were registered in France at the end of 2019 with sustainable investments representing nearly half of the total assets managed in France.

With Paris becoming number one for green bonds, there is a lot of promising perspectives in terms of sustainable finance. The choppy markets of 2020’s first quarter have not dented appetite for green bonds. With €10 billion financings, Société du Grand Paris is the largest corporate green bond issuer in Europe thanks to the  “Grand Paris Express” project, which will add 200 km of new tracks to the existing Metro network and is expected to make a major contribution towards the reduction of greenhouse gas emissions. Besides, this infrastructure is fostering inclusive growth and creating jobs.

Towards a greater integration of the CSR dimension

On 13th May 2020, Finance for Tomorrow held an insightful webinar with Jerome Verdiell, Chief Strategy Officer of abCSR, A fintech providing tools to measure the extra-financial criteria of SMEs and Philippe Taffin, Chief Investment Officer, Aviva France. The webinar was insightful in so far as the extra-financial rating and CSR (Corporate, Social Responsibility) indicators generated from the company’s accounting and tax data offered the means to create lasting ties with stakeholders (customers, employees, suppliers). Aviva is a world leader in life insurance, with total assets of €100 billion in France and an investment strategy based on 2 pillars: responsible investment and innovation.

For long-term investors, CSR is at the heart of asset management choices. It is in the best interest of entrepreneurs to launch a CSR continuous improvement plan, to differentiate on its CSR performance, to mobilize its staff around meaningful projects. Asset managers must integrate all the risks linked to the climate, to the social impacts on their staff and on its community and on the planet. We noticed that during the COVID 19 crisis, listed companies with a high CSR rating were better valued financially.

Today, when investing in a SME, one needs to find a balance between financial performance and extra-financial reporting. The measurement tools provided by the fintech abCSR are key to benchmark a company to its peers for its extra financial quality. Each time Aviva invests in a SME, the CSR policy is analyzed to evaluate risks at a time t and in the long term. Investors already integrate the risk premium linked to the extra-financial performance.

More sustainable finance commitments

Paris Region insurers, bankers and asset managers can be drivers of the environmental transition, both through innovation in terms of investment in vehicles, through proactive dialogue with businesses and through a strengthened voting policy at a general meeting on environmental issues. For example, AXA set a target to reach €12 billion in green investments by 2020 (green bonds, infrastructure debt & equity, impact investments, real estate, and commercial real estate loans) and is also a proactive player in the field of “Impact Investing”  (funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return). The Group has recently launched its third Impact Fund, which focuses on climate & biodiversity. Finally, AXA has excluded insurance of the following sectors:  coal and oil sands, controversial weapons, and tobacco.

By and large, what really sticks out today is the drive to mitigate the impacts of funding practices and ensure an ESG (Environmental, Social and Governance) dimension is integrated into our policies but also into Finance. The transition to a more sustainable and resilient economy represents a central element of the post-COVID19 economic rebound strategy. No doubt that the Paris region will be a full contributor to implementing the EU’s Green Deal and its renewed strategy on sustainable finance. Paris Region’s financial center already holds all the right assets in terms of talents, innovation, infrastructure and a thriving Financial ecosystem.