FINANCE | 11.24.2020
Margarita Delgado (Central Bank of Spain): “More and more companies are incorporating ESG criteria in their decisions and actions”
“Sustainable finance is here to stay” — these are perhaps some of the most repeated words by speakers at the first MAPFRE Sustainable Finance Observatory forum.
As the forum reached its climax, Margarita Delgado—Deputy Governor of the Central Bank of Spain—made it very clear that sustainable finance is no mere fad or trend. She went on to explain that “More and more companies are incorporating these criteria (ESG) in their decisions and actions” For example, leading global fund managers have recently singled out sustainability as a key criterion for investment selection. This is because portfolios with integrated sustainability criteria are able to provide better risk-adjusted profitability, because companies that follow these criteria are more likely to thrive in the medium-term.
As a sign of the increasing importance that this theme has gained, Delgado drew attention to the fact that—in the little more than two years that she has served as Deputy Governor—a significant number of her public interventions have centered around so-called ‘green’ or ‘sustainable’ finance. The Deputy Governor of Spain’s central authority for banking supervision dedicated a part of her speech to the need for impact measurements. With regard to environmental sustainability, for example, it will take time to establish measurements for the multitude of different footprints created (carbon, water, environmental, etc.). In both the social and industrial spheres, it is becoming increasingly common to evaluate the social impact or value of a particular activity, alongside the economic and industrial implications of regulatory changes.
The Deputy Governor affirmed that for true transparency these measurements are fundamental, therefore it is essential that such information be collated. She indicated that “in the absence of this information, we are unable to compare alternative investments. As are we unable to make comparisons between different options for consumption, economic activity and financing.”
She highlighted that the aim of transforming the economy, environment and society could only be achieved through the collective efforts of families, companies and investors and that such a collective effort would be difficult to bring about with a lack of reliable information. Noting that there was still a long way to go in this area, Delgado pointed out that the growing pressure from credit companies, investors and clients for more transparency and information was a good sign. She also noted the importance of Europe having firmly committed to this objective within its regulations.
In this regard, she drew attention to two initiatives that are currently in progress. One of these initiatives comes from the University of Harvard and aims to develop a new “accounting framework” that reflects the social and environmental performance of each company alongside traditional financial performance. The initiative hopes to bring about a “paradigm shift” for businesses. The second initiative she cited is that on September 30, the IFRS Foundation, which sets international accounting standards for more than 140 countries, launched a public consultation into the development of global ‘sustainability’ standards to go alongside financial reports. In her concluding remarks, Delgado stressed that the eventual creation of global sustainability standards would not lead to the redundancy of accounting standards that are currently in use. She said that these accounting standards would—without a doubt—remain fundamental for the evaluation of solvency in companies and banks.