Finance chiefs face pressure to get to grips with sustainability

By Sarah Murray for the Financial Times

Bird’s-eye view: satellite imaging that tracks environmental impact is growing in relevance for CFOs © PlanetScope

CFOs must weigh environmental impact alongside shareholder value when determining business priorities

If presented with bird’s-eye views of oceans, forests or deserts, many chief financial officers might struggle to connect them to financial planning or cash flow management. But with pressure for companies to demonstrate their sustainability credentials, satellite imaging and other technologies are becoming increasingly relevant to the work of the CFO.

The technologies are evolving at a rapid pace. Remote sensors and artificial intelligence tools now make it possible to track everything from water pollution and deforestation to “dark fleets” of vessels whose fishing practices breach environmental or human rights regulations.

These are issues to which finance functions must pay close attention, says André Haag, chief financial officer at Triodos Bank, an ethically focused Dutch financial institution.

“The CFO plays an important role in creating value, and that’s now much more than traditional financial value — it’s about sustainability and creating impact.”

Ultimately, technology will make measuring and managing all this much easier. With unprecedented amounts of data being generated, the application of AI and data analytics can enable far more accurate evaluations of companies’ environmental, social and governance (ESG) performance than was previously possible.

“For sustainability it’s phenomenal,” says Georg Kell, chairman of Arabesque, an ESG quantitative asset manager that uses AI and big data to assess the performance of globally listed companies. “Interpretive power is multiplied [by technology] in its ability to assess investment risks and opportunities.”

The pressure for CFOs to be able to understand and assess ESG-related risks and opportunities is coming from many quarters. Improving the company’s financial position is one incentive.

“CFOs have discovered that for debt financing, they can get preferential conditions if they choose green bonds” - Georg Kell

“They have discovered that for debt financing, whether through bonds or loans, they can get preferential conditions if they choose green or sustainability bonds,” says Mr Kell. “So it’s a market-led inducement that has brought many to this agenda.”

Meanwhile, more investors want to build portfolios that contain companies that are addressing issues such as human rights and climate change.

This means chief financial officers need to understand how to use technology and data to demonstrate their company’s ESG performance and communicate it — whether that be through reporting and disclosures or direct contact — to asset managers and investors such as pension funds and sovereign wealth funds.

The UK accounting watchdog is pushing for companies to provide investors with more information on climate risks © PlanetSc

A further driver is the shifting regulatory landscape. In the UK, for example, the Financial Reporting Council, the accounting watchdog, is pushing for companies to provide investors with more information on climate risks. And Mr Kell cites the ambitious package of policies known as the European Green Deal, as well as pledges by China, South Korea and Japan of becoming carbon-neutral economies.

“There’s wide agreement, especially after the Biden election, that we’re back to a race to the top on decarbonisation,” he says.

Beyond this, however, finance chiefs also need to respond to changes in corporate strategy, as chief executives recognise the risks and opportunities ESG presents to their companies.

“The financial return element has shifted this from being simply about sustainability in terms of the benefits conferred on the environment and society, to what impact this has on companies and their performance,” says Colin Mayer, professor of management studies at the University of Oxford’s Saïd Business School.

For finance chiefs, the shift will not be easy. For a start, they need to understand how money spent on new technologies will provide a return on investment. “Unless you can do that, it’s hard to fund and adopt those technologies,” says Ankur Agrawal, a partner in the strategy and corporate finance practice at McKinsey.

The focus on technology will also demand investments into new kinds of talent. “Whether it’s accounting tools, advanced analytics or natural language processing, you need a different set of finance professionals to work with those technologies,” says Mr Agrawal.

Technology alone will not enable CFOs to make the right decisions with respect to social and environmental impact. This, says Prof Mayer, is because tools such as AI and machine learning behave in the way humans design them to behave — whether that is prioritising profit and shareholder value, or ESG goals.
“The key is who is programming the AI algorithms and for what purpose,” he says. “It raises fundamental issues about whose interests [CFOs] are serving.”

Mr Haag argues that, as well as adopting new technologies, finance professionals need to make a cultural shift. “Most are in the traditional CFO role, maximising shareholder value and profit, and the new profile is shifting to a broader stakeholder model focused on establishing a sustainable economy,” he says.

This inevitably expands the role of the finance function. “Technology and decarbonisation are here to stay,” says Arabesque’s Mr Kell. “CFOs need a more holistic understanding of the market system, and not just of the narrow field of finance.”

Copyright The Financial Times Limited 2020. All rights reserved.

New Book Reflects on the State of Responsible Investing

by Filipe Wallin Albuquerque for Nordsip

Stockholm (NordSIP) – As more and more investors seek to understand and navigate the world of sustainable investments, the demand for reliable manuals and guides to assist them in the process continues to increase. On September 24, NordSIP had the privilege of attending the presentation of “Sustainable Investing – A Path to a New Horizon”, a book that collects the views of experienced academics as well as executives from both the corporate as well as the investment world reflecting on the current state of sustainable investing and its future prospects.

The book is edited by Herman Brill, Director of the Office of Investment Management at the United Nations Joint Staff Pension Fund (UNJSPF), Georg Kell (Pictured) Chairman of Arabesque, an ESG Quant fund manager and Andreas Rasche, Professor of Business in Society at the Centre for Sustainability at Copenhagen Business School (CBS). According to Kell, who led the launch presentation, the volume collects views on the changing context of sustainable investing, rethinking sustainable finance and leadership and sustainable investment and the roles of technology and data.

“We aim for this book to be a resource for interested practitioners, but we also aim to produce something that can be used in the classroom,” Rasche commented at the start of the book launch.

In his foreword, Mark Carney, who served as the Governor of the Bank of Canada from 2008 until 2013 and the Governor of the Bank of England from 2013 to 2020, praises the timely relevance of the book. “This book demonstrates steps finance professionals can take to build a virtuous circle of better management of climate risks by banks and insurers, better pricing of transition risks and opportunities by investors, better decisions by policymakers, and ultimately a smoother transition to a net zero-carbon economy for all. It represents an important advance towards building the skills needed to bring us to a new horizon that is both more sustainable and more prosperous.”

The contributors highlight three main insights from the volume. On the one hand, conditions for market success have been changing at an accelerating pace, both in terms of policy, as well as regulation, which impacts both businesses as well as their investors.  Next, the book shows that there is an emerging consensus that technology, digitalisation, artificial intelligence and machine learning are key drivers for the future of sustainable investing and are shaping the way ESG factors are used. Lastly, the book also agrees that sustainable investing promotes business resilience. However, because the book was submitted in March 2020, it does not specifically consider the implications of COVID-19.

The book launch counted with contributions from PRI CEO Fiona Reynolds, Metter Morsing, Head of Principles for Responsible Management (PRIME), Martin Reeves, Chairman of BCG Henderson Institute and Omar Selim, Founder and CEO of Arabesque Group.

“It’s a great honour to contribute to this great book. We have learned so much about sustainability. But as fields progress, they also fragment. I see this book as a synthesis of the governance perspective as well as the strategy, investor and the measurement perspective. It’s important to navigate,” says Reeves. “Our contribution is in the field of corporate strategy, which is evolving very fast due to sustainability pressures but also because technology is moving very fast. Our focus is on sustainability and sustainable competitive advantage. They sound the same, but in recent years they have not had very much to do with each other, which are not but should become the same thing. Of course, for truly powerful self-interested sustainable strategies, they need to become the same thing. In recent years businesses have discovered that a successful strategy is dynamic. It needs to be more biological and adaptable. They are serial and more focused on temporary advantage than static. They are more collaborative and going beyond the borders of the company.”

The book goes beyond standard economic theory approaches to sustainable investing and emphasizes that capitalism founded on more real-world (complex) economics and cooperation can strengthen ESG integration. Aimed at both investment professionals and academics, this book gives the reader access to more practitioner-relevant information and it also discusses implementation issues. The reader will gain insights into how “mainstream” financial actors relate to sustainable investing.

“I attempted to convey an investment perspective in my contribution,” Selim says.“My assumption is that finance will be significantly disrupted,” he adds, before explaining that sustainability and AI will be the main sources of this disruption. “Don’t be surprised if the biggest banks in five years are Google, Facebook or Amazon.”

For more information on the book, please consult Amazon.

F.A.Z.-Institut ehrt auf der Responsible Leadership Conference 2020 Unternehmen und Akteure

Frankfurter Rundschau

Dirk Beichert BusinessPhoto © obs/F.A.Z.-Institut/Dirk Beichert

Jeder, der auf Responsible Leadership Conference 2020 Preise erhielt, zeichnet sich durch verantwortungsvolles und nachhaltiges Handeln in der Krise aus.

Frankfurt am Main (ots)

Unter dem Motto „Wie Unternehmen in den Zeiten nach der aktuellen Krise wirtschaftlichen Erfolg, Nachhaltigkeit und Verantwortung zusammenbringen“ fand am 15. und 16. September 2020 die Responsible Leadership Conference zum 9. Mal in Folge statt. Insgesamt haben sich über 400 Teilnehmer aus einer Vielzahl von Nationen zu der in diesem Jahr als Digitalevent durchgeführten Konferenz eingeloggt. 

Eingeladen hatten das F.A.Z.-Institut und die F.A.Z., um gemeinsam mit renommierten Rednern und hochkarätigen Teilnehmern über Fragen des Zusammenspiels von nachhaltigem Handeln und geschäftlichem Erfolg in Zeiten der Krise und darüber hinaus zu diskutieren. Wissenschaftlich wurde die Konferenz durch Prof. Dr. Dr. h.c. Schwalbach (Gründer der Veranstaltung und emeritierter Professor der Humboldt Universität zu Berlin) und Prof. Dr. Schmidpeter (Dr. Jürgen Meyer Stiftungslehrstuhl für Wirtschaftsethik und CSR an der CBS, Köln) begleitet. 

Im Rahmen der Auftaktveranstaltung mit Preisverleihung am Vorabend wurden folgende Auszeichnungen an vorbildlich agierende Unternehmen und Akteure verliehen: „Exzellente Nachhaltigkeit“, „Helden der Krise“, „Green Ranking Champion“ und zum Höhepunkt des Abends der „Lifetime Achievement CSR Award“. Letzterer würdigte das Lebenswerk von Georg Kell, Gründerdirektor des Global Compact der Vereinten Nationen, Vorsitzender des Vermögensverwalters Arabesque und Sprecher des VW Nachhaltigkeitsbeirats. 

Exzellente Nachhaltigkeit 

Mit der Auszeichnung „Exzellente Nachhaltigkeit“ erhielt Schneider Electric eine Ehrung seines nachhaltigen Handelns. 

Die Auszeichnung „Exzellente Nachhaltigkeit“ ist das Ergebnis einer Social-Listening-Analyse, im Rahmen derer das IMWF - Institut für Management- und Wirtschaftsforschung im Auftrag des F.A.Z.-Instituts die Nachhaltigkeitsreputation von 21.000 Unternehmen auf Basis von 61,4 Mio. Aussagen im deutschsprachigen Internet in Bezug auf deren ökologische, ökonomische und soziale Nachhaltigkeit untersucht hatte. 

Schneider Electric bietet Energie- und Automatisierungslösungen an und verspricht dabei seinen Kunden Effizienz und Nachhaltigkeit. Nachhaltigkeit ist damit Teil des Geschäftsmodells und des Mehrwerts, den die Firma verspricht: „Wir helfen unseren Kunden, ihre Umweltleistung zu verbessern.“ 

Helden in der Krise 

Die Deutsche Telekom, die Aktion Deutschland hilft und der Sportler Jan Frodeno wurden als „Helden in der Krise“ geehrt. Sie stehen exemplarisch für viele tausend weitere Unternehmen, Institutionen und Einzelpersonen, die sich in Zeiten der Coronakrise durch beispielhaftes und engagiertes Verhalten hervorgetan haben. 

Mit der Aktion „Helden in der Krise“ möchten sich die Initiatoren, das F.A.Z.-Institut und IMWF - Institut für Management- und Wirtschaftsforschung sowie deren Förderer, Hansgrohe, Beekeeper, Signal Iduna und news aktuell, bei den Helfern direkt bedanken. Basierend auf einer Social Listening Analyse wurden dazu Unternehmen, Institutionen und Einzelpersonen in Bezug auf ihr Engagement in Zeiten der Krisen untersucht. Dabei konnten mehr als 1.000 Akteure in der Krise ermittelt werden. Auf der Responsible Leadership Conference wurden nun drei Akteure exemplarisch geehrt, die sich durch ihr bedonders starkes Engagement hervorgetan haben. 

Als Spitzensportler beschloss Jan Frodeno einen Ironman in seinen „eigenen vier Wänden“ zu absolvieren und nutzte den sportlichen Einsatz, um Spenden in Höhe von rund 200.000 Euro für die Corona-Hilfe zu sammeln. Solidarisches Engagement beweist auch das Hilfsbündnis Aktion Deutschland Hilft in Form einer sehr breiten Unterstützung im In- und Ausland - angefangen von der Zuwendung zu Pflegeheimbewohnern in der Isolation über die Versorgung in Not Geratener bis hin zum Lieferservice für Risikogruppen, die ihr Zuhause nicht verlassen sollten. Auch die Deutsche Telekom zeichnet sich durch vorbildliches Verhalten in der Krise aus und hat durch zahlreiche Aktivitäten zur Verbesserung der Situation beigetragen. 

Green Ranking Champion 

Microsoft wurde auf der Responsible Leadership Konferenz als „Green Ranking Champion“ geehrt. Das Unternehmen schnitt in über 60 internationalen Nachhaltigkeitsrankings am besten ab. 

Erhoben wurde die Studie durch das auf Rankings- und Awards-Management spezialisierte Beratungsunternehmen R.A.T.E. in Kooperation mit dem F.A.Z.-Institut und basiert auf einer quantitativen Analyse der 60 bedeutendsten industrieübergreifenden Nachhaltigkeitsrankings weltweit. Neben der globalen Multi-Ebene werden zusätzlich die wichtigsten lokalen Nachhaltigkeitsrankings der zehn größten Volkswirtschaften in die Analyse einbezogen. 

Der diesjährige Green-Ranking-Champion-Gewinner Microsoft zeigte eine besonders hohe Präsenz und Visibilität in den Nachhaltigkeits-Rankings. In vier wichtigen Rankings landete das Unternehmen auf der Top-Platzierung, beispielsweise ist es seit über zehn Jahren auf der Liste der ethischsten Unternehmen der Welt von Ethisphere und wurde zum sechsten Mal in Folge auf der A-Liste des Carbon Disclosure Projects geführt. Auch für die Zukunft setzt sich Microsoft herausfordernde und inspirierende Ziele und möchte u. a. bis 2030 mehr CO2 aus der Atmosphäre binden als es mit seinen Aktivitäten verursacht. 

Lifetime Achievement CSR Award 

Zum Höhepunkt des Abends wurde der Arabesque Chairman und Gründungsdirektor des Global Compacts der Vereinten Nationen Georg Kell für sein Lebenswerk gewürdigt und mit dem Lifetime Achievement CSR Award ausgezeichnet. Der Preis ehrt herausragende Wissenschaftler und Praktiker für ihren Beitrag zur Entwicklung und Gestaltung der gesellschaftlichen Verantwortung von Unternehmen. 

Anlässlich der Preisverleihung hob Professor Dr. Dr. h. c. Joachim Schwalbach, Initiator der CSR-Konferenzreihe und des Preises, Georg Kell als die führende Autorität für die Integration von Umwelt-, Sozial- und Governance-Faktoren (ESG) in unternehmerische Entscheidungen hervor. 

Georg Kell betonte in seiner Dankesrede: „Ich bin sehr dankbar für diese großartige Auszeichnung. Ich bin fest davon überzeugt, dass die Kapitalmärkte der Schlüssel zur nachhaltigen Entwicklung sind, und der Schwerpunkt meiner Arbeit liegt darin, sie so weit wie möglich zu befähigen. Dies erfordert ein Engagement von Unternehmen, Investoren und der öffentlichen Hand.“ 

Ein spannendes Programm mit hochkarätigen Rednern und topaktuellen Themen kennzeichnete auch den zweiten Tag der Responsible Leadership Conference. Die Teilnehmer profitierten von einer Vielzahl von Inspirationen und Best Practice Beispielen. Insgesamt hat die Konferenz gezeigt, dass Nachhaltigkeit weiter an Bedeutung gewinnt und den Unternehmen eine immer größere Verantwortung zugewiesen wird. 

Mehr Informationen und die Aufzeichnungen zur Responsible Leadership Conference 2020 finden Sie unter: https://www.responsibleleadership.de/

Positioning portfolios for a shift to sustainable capitalism

By Elena Johansson, Expert Investor

Book review: Reaching a new horizon by embracing change and long-term investing

Investors have embarked on a paradigm shift, argues Sustainable Investing: A Path to a New Horizon – and that is the transition to a more sustainable financial and corporate system.

Published tomorrow by Routledge, with a foreword by former Bank of England and Bank of Canada governor and current UN special envoy on climate action and finance Mark Carney, the book sets out to help people build sustainable investment skills, and seeks to change outdated mindsets and economic theories that have blocked financial market participants from embracing sustainability.

Given the need to create a climate-resilient financial system that finances net zero carbon by 2050, Carney writes: “A more sustainable financial system is being built. But the task is large, the window of opportunity is short, and the risks are existential.

“Firms that align their business models with the transition will be rewarded handsomely. Those that fail will cease to exist.”

Comprising contributions from numerous leading sustainable professionals from the corporate and investment worlds, the book is written and edited by Herman Bril, director of the office of investment management at the United Nations Joint Staff Pension Fund; Georg Kell, founder and former executive director of the United Nations Global Compact and chairman of Arabesque; and Andreas Rasche, professor of business in society at the Centre for Corporate Sustainability at Copenhagen Business School.

Kell explains to Expert Investor that responsible business and sustainable investing are now converging, adding: “We thought it was time to write a new book that postulates this systemic change.”

The books seeks to help decision-makers to find confidence in modernising and transforming and not stick to the old dogmas, he explains.

Balancing short and long term 

Sustainable Investing offers answers on how to simultaneously manage the short and the long term while considering evolving environmental, social and governance (ESG) factors.

Short-term incentives, such as fossil fuel subsidies, pose barriers to companies and investors who set out on a path to sustainable, long-term change. Balancing such short-term incentives while securing long-term profitability and positive investment returns is key.

Kell highlights the risk of stranded assets that investors are facing in the transition. “It’s basically the risk of being stranded with an old model, with assets that are depreciating rapidly,” he says.

“The combination of climate imperatives, carbon pricing and consumer preferences make such technology shifts [from environmental and social imperatives] much faster. If you’re not ready and well-positioned for the future, you may end up with the wrong technology and then you are locked in the wrong pathway.”

‘Future-fit mindsets’

To avoid being overthrown by the shift, believes Kell, investors must open their minds to change.

“We still are vested in the old way of thinking and much of our training and education is based on that – the efficient market hypothesis, price signals, everything.

“What is needed, however, is a big transformation from industrial-era mindsets to future-fit ones. Basically, change management has become very important – along with the willingness to embrace change,” he says.

According to Sustainable Investing, there is growing evidence that companies which invest for the longer term outperform those that focus on the short term – yet not every company is able to set out on a path to a sustainable transition.

“Unfortunately, in the real world, for very large corporations that have an established brand, it’s very hard to reinvent themselves,” says Kell.

“They need a shock. They need a crisis or they need really outstanding leadership that has the courage and the support of the shareholders to reinvent themselves.”

As an example, he cites Volkswagen’s Diesel crisis, which led to an investment of more than €30bn in e-mobility. “Out of the Diesel crisis, they were willing to change the fundamentals. They committed to major investments in e-mobility because of the crisis,” he continues.

While still catching up with Tesla, VW is now well-positioned in the e-mobility race, he says.

Sustainable shift

Investors place a premium on companies with “future-proof investment strategies”, Kell argues.

He points out that one reason for why Tesla has the highest valuation in the automotive industry is that investors have bought into its strategy of electricity-powered transportation.

“It’s a totally radical shift for a very important industry,” he says. “And we can now see that shift happening across all sectors.”

On the subject of sustainable investment strategies, Kell says he favours a ‘soft’ divestment approach, which overweights winners in strategies and enables the real economy to adapt.

“We cannot just write off entire sectors,” he explains. “It would cause unemployment and social upheaval. We need socially acceptable transition pathways.”

While the direction of the sustainability journey looks clear, however, the end-destination is less so. “Maybe there will never be an end-destination,” says Kell.

“Maybe it will be a case of permanent change management – that’s my feeling. There are so many more disruptions ahead of us – climate disruptions, civil unrest, mass migration, humanitarian crisis situations – we had better get prepared.”

Sustainable Investing – A Path to a New Horizon (Routledge, £29.99 in paperback) will be published on 25 September 2020. You can find out more information here

How can we mobilize finance to build back a resilient, sustainable post-Covid economy?

Eco-Business

Singapore — In the wake of a pandemic-induced regional economic downturn, financial institutions are vital to building a more resilient, sustainable future for Asia, said business and finance leaders at this year’s Unlocking capital for sustainability

The annual conference was held virtually for the first time, enabling participants in multiple countries to convene online. More than 100 senior bankers and investors, finance and business leaders gathered to discuss how the finance industry can contribute to long-term economic recovery by aligning their investment decisions with the Sustainable Development Goals (SDGs). 

This third edition of the forum is organised by Eco-Business, a Singapore-headquartered media organisation dedicated to sustainable development, in partnership with United Nations Environment Programme (UN Environment Programme). 

“This year’s forum comes at a critical time as countries all over the world are grappling with the ongoing coronavirus pandemic while trying to jumpstart their stalled economies. Amid this recovery, we must look at how to tie these fiscal stimulus measures and recovery policies to positive sustainable development outcomes,” said Eco-Business’s Managing Director, Jessica Cheam. 

She added: “Covid-19 has revealed how important environmental, social and governance (ESG) and sustainability issues are to the health and well-being of people and the planet. So the key question we will discuss throughout this conference is: How do we guide finance and business to build back better?” 

While the coronavirus pandemic has wreaked economic havoc and pushed some industries to the brink, it has also created opportunities and incentives for sustainable financing, said leaders from multilateral agencies and the finance sector at the event. 

They highlighted the numerous investment opportunities in sustainable development in the region, particularly in resource management, green infrastructure, and renewable energy, among others. 

“Players in the financial industry have a crucial role to play in supporting economic activity that enhances rather than damages the environment, sustains rather than erodes livelihoods, and contributes to, rather than undermines, economic stability,” said Yeoh El Lynn, Head of Ethics, Prudential Assurance Company Singapore, which has committed S$200 million of total assets under management into ESG-related products by 2021. 

“To fulfil this role, sustainable finance and responsible investment has become not only a prerequisite, but a staple for the resilience and stability of the financial industry,” said Yeoh. 

The UN predicts that the pandemic will have a severe impact on the achievement of the SDGs by 2030, particularly in less developed countries.  

According to UN projections, the Covid-19 pandemic is expected to shrink the world economy by 3.2 per cent in 2020, resulting in the loss of $8.5 trillion in global output.  

The collaboration of international financial institutions, governments, international organisations, and the private sector is crucial to ensure that these systems are able to withstand future economic shocks caused by environmental and public health risks. By aligning with the SDGs, companies and organisations can mitigate these risks to aid long-term profitability. 

At the event, regional non-profit organisation Fair Finance Asia also launched a new study, The Asian Web: Tracking Regional Financial Flows, which is aimed at encouraging key stakeholders to track and assess whether financial institutions operating in the region are banking on our shared commitments towards a sustainable future.. 

Bernadette Victorio, Regional Programme Lead, Fair Finance Asia, who spoke at the event, said: “Asian financial institutions have the potential to be key levers of change by encouraging responsible business practices through their financing and investment activities. However, the change needs to begin within their own institutions.”  

Other highlights from the event included a keynote address by United Nations Assistant Secretary-General for Economic Development and Chief Economist, Elliott Harris, plenary discussions about the regulation of sustainable finance, the role of Asian banks in the energy transition, corporate leadership in ESG integration, and investing in the circular economy. 

In advance of the publication of his book, Sustainable Investing: A Path to a New Horizon, founding Executive Director of the UN Global Compact Georg Kell gave a special address at the conference.  

The book, which features contributions from a number of global thought-leaders, academics, and practitioners, details the rise of sustainable investing and corporate sustainability and outlines the transformation needed to accelerate change. 

Kell observed: “The idea and practice of corporate sustainability is no longer a niche movement. ESG represents the next growth frontier in asset management, and the integration of sustainability factors in investment decisions is impacting global markets on a large scale. However, the continued shift to sustainable investing and its implementation will require leadership, a culture of innovation, and effective engagement with all stakeholders.”  

Kofi Annan Interview

2017 Interview with Kofi Annan on Channel 4:

Global Threats Need Global Responses

Volkswagen presents Green Finance Framework

Wolfsburg – WEBWIRE – Thursday, March 5, 2020

• Document defines framework for sustainable financial instruments

• Funds to target environmentally compatible projects such as e-mobility

• Regular reporting and independent auditing create transparency

• Group CFO Frank Witter: “The Green Finance Framework consistently links our corporate objective of carbon neutrality in 2050 with our financing strategy.”

• Sustainability Council Spokesman Georg Kell: “It is a most welcome development that Volkswagen will use the power of finance to accelerate investments that will lead to reductions of greenhouse gas emissions.”

With the Green Finance Framework (GFF), the Volkswagen Group today presented further guidelines for sustainable financial instruments. In future, it will therefore be possible for investors to invest in a targeted fashion in sustainability projects of the Volkswagen Group such as e-mobility. A new corporate body, the Green Finance Committee, will select appropriate projects and can adapt the GFF to reflect changing requirements. Furthermore, regular reporting will ensure transparency in the use of funds. The objective is to ensure independent external verification of the use of funds.

Frank Witter, Member of the Group Board of Management responsible for Finance and IT, said: “In order to become one of the world’s leading providers of sustainable mobility, significant investments will be needed. The Green Finance Framework consistently links our corporate objective of carbon neutrality in 2050 with our financing strategy. This way, we will be able to diversify our investor basis and offer existing investors further investment alternatives.”

Georg Kell, Spokesman of the Volkswagen Group Sustainability Council, said: “As climate risks are increasingly urgent, it is a most welcome development that Volkswagen will use the power of finance to accelerate investments that will lead to reductions of greenhouse gas emissions.”

The GFF covers the following types of financing: green bonds, green Schuldscheindarlehen, green private placements and green loans. From the beginning, two types of sustainability projects will be integrated in the GFF: electric vehicles based on the modular electric drive toolkit (MEB) and charging infrastructure. In future, other categories may be added to the GFF.

With the Green Finance Committee, a new corporate body for the GFF has been established. The committee is responsible for the selection and assessment of appropriate sustainability projects including monitoring the use of funds for the designated projects. In addition, the committee will be able to adapt the GFF to changing requirements and to add new projects to the portfolio.

For Volkswagen’s GFF, Sustainalytics, a renowned independent rating institute, has given a second party opinion in order to verify compliance with the Green Bond Principles of the International Capital Market Association (ICMA) and the Green Loan Principles of the Loan Market Association (LMA). Volkswagen also aims to secure certification by the Climate Bonds Initiative (CBI) for the financial instruments to be issued within the GFF.

Volkswagen will report at least once per year on the projects financed within the GFF. Reports are also to be issued on the environmental impact of the projects funded.

In 2018, the Volkswagen Group was the first automaker to commit to the Paris climate goals. Last year, the Group presented its new environmental mission statement “goTOzero”. The aim of the mission statement is to operate the company as environmentally compatible as possible and to achieve a neutral CO2 balance by 2050. The four main areas of activity under the mission statement are climate change, resources, air quality and environmental compliance.