Global banks call for flexible green finance approach

October 14, 2022

Banks should not replicate developed-markets sustainability frameworks when financing customers’ transition in emerging economies, according to international bank executives speaking at the Sibos conference Oct. 12.

“The emerging markets voice needs to be heard,” said Marisa Drew, chief sustainability officer at Standard Chartered PLC. “Right now, a lot of the sustainability regulation policies and taxonomies are written for the West, OECD countries.”

Emerging economies have “different starting points and potentially different timeframes” for transitioning, Drew said. Western countries, for example, have largely moved away from coal power, but it remains an important source of energy access in developing markets. “And we can’t vilify people for that,” Drew said.

“We have to say, it’s a different baseline. And so therefore, what is a greener path to net zero? It might be coal to gas, because that’s cleaner than coal. And let’s work your way down because, in some cases, it isn’t possible to jump straight to completely green,” Drew said.

Some 119 banks, more than two-thirds of which are headquartered in Europe or North America, have signed up for the Net-Zero Banking Alliance, committing to reach net-zero emissions by 2050 across their lending and investment portfolios.

Yet the rapid work to standardize sustainable finance through taxonomies and regulation has led to some concerns that emerging market companies will be excluded from such financing because of difficulties in meeting standards and data requirements adopted by international investors and lenders.