Open Banking: Revolut and N26 enter S-Net
In the context of the implementation of the PSD 2 regulation (“Payment Services Directive 2”), Spuerkeess, as a leader in e-banking, was the first bank in...
Kim Schumacher is a Lecturer in Sustainable Finance and ESG at the Tokyo Institute of Technology. In addition, he is an Honorary Research Associate at the University of Oxford, and an Adjunct Lecturer at the University of Luxembourg. Prior, he worked as a consultant for the Luxembourg Ministry of the Environment, Climate and Sustainable Development and as a postdoctoral researcher in sustainable finance at the University of Oxford. He holds a PhD degree in Environmental Science from the University of Tokyo (2017) and Masters degree in Environmental Law and Policy from UC Berkeley (2012).
Kim Schumacher: Initially, I started to collaborate with Spuerkeess when organising a conference on climate risks and credits in late 2019. This marked the foundation for establishing a profound relationship around the integration of sustainable finance principles and ESG (environmental, social, governance) factors in everyday banking and investment operations. Over the course of the past two years, I conducted several analyses on what potential climate-related or environmental risks might affect Spuerkeess’ operations or portfolios and supported the development of several internal tools to assess and manage these risks in the most adequate way possible. In addition, I am providing advice and training on how to build internal capacities around the new and complex ESG-related challenges.
Kim Schumacher: Sustainable finance represents a fundamental paradigm shift in terms of how the financial and banking sectors will operate in the future. The double materiality concept captures the underlying principles quite well, in that sustainable finance aims at taking account of how ESG-related risks will affect the financial sector, but also how financial sector activities, including lending and investing, will impact the environment and society. As climate change and environmental degradation are continuing,
governments and companies are looking for ways to promote global sustainability. The financial sector plays a key role in providing funding to project and activities that promote ESG indicators and reduce climate-related and environmental risks. The latest trends in the area of sustainable finance revolve around more transparency around the negative impacts of economic activities on our climate and environment, promoting local and global sustainability, and the fight against greenwashing.
Kim Schumacher: Many companies and financial sector actors want to integrate ESG factors into their operations. Oftentimes, they rely on external ESG data providers to obtain ratings and scores on how companies are performing in terms of sustainability. However, these ratings have been shown to have still a number of flaws, notably in terms of data reliability. Therefore, financial regulators have stated that financial institutions should develop internal tools and build internal capacities to carry out their own analyses to the extent possible. This allows them to understand and verify external ESG ratings if necessary. Doing your own research, and having suitable internal tools to do so, can serve as a very useful second opinion to spot problematic external ESG data.
Kim Schumacher: Spuerkeess is performing quite well, both at the national and international level. Greenwashing has become a major issue in the area of sustainable finance, which one of the reasons why the EU is now creating stronger regulatory frameworks around ESG activities. Many financial institutions and ESG service providers have made overly optimistic claims that are often difficult to verify.
Spuerkeess went a different route insofar that instead of making many sustainability claims regarding its products or services in the area of ESG, it laid scientifically sound foundations for its ESG activities in the background. Now that many of these processes are producing concrete results and tools that adhere to the highest international standards, it can start to roll out products and services that are supported by solid internal ESG knowledge structures.
"Avoiding food with excessive packaging, reducing the usage of plastic wraps or aluminium foil are very efficient."Kim Schumacher, sustainability expert
Kim Schumacher: Daily consumables, ranging from food to common household items, represent one area where sustainability can be increased fairly easily. Avoiding food with excessive packaging, reducing the usage of plastic wraps or aluminium foil are very efficient. And then of course the classics such as avoiding unnecessary trips by car, using public transportation or bicycles, reducing excessive water use, recycling, or consuming less meat and more plant-based food.
Complementary to these steps are less obvious ones, for example, allowing partial wild growth in gardens, avoiding stone gardens, or planting more trees and shrubs for shade, are ways to reduce the need for cooling or irrigation in the summer and promote biodiversity in urban or residential areas.
Kim Schumacher: Luxembourg is actually not doing that well if observed within a European context. For example, in 2019 (the most recent year for which statistics are available), whereas overall CO2 emissions decreased on average in the EU, those in Luxembourg actually went up both in terms of GDP and per capita.
This means that Luxembourg per capita emissions reductions have pretty much stagnated since 2016, so population growth cannot be taken as an explanation for the latest growth. It will be interesting to see if the decision to render public transportation free nationwide and the completion of central portions of the Luxembourg city tramway will have any significant impact on per capita emissions figures in the future.
However, Luxembourg has the potential to become a leader in terms of climate change mitigation ambitions, both through scaling its sustainable finance sector while avoiding greenwashing risks, and by establishing the legal foundations for significant carbon emissions reductions in the near future. One example is the law that the Luxembourg parliament passed in December 2020, which states that Luxembourg aims to reduce its carbon emissions by 55% by 2030 and that it wants to achieve climate neutrality by 2050. Now, these ambitious targets need to be followed by tangible action.
Kim Schumacher: Pleasure.
About the blog:
There is an urgent need for rapid transition to Global Environmental Sustainability. Thanks to changemakers, progress is possible. "Why does it matter?" is a bi-monthly series that takes a quick look at the forefront of today's trends around sustainability. From May 2021 on, we aim to elucidate this important topic through the eyes of our experts.
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