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Sir Roger Gifford – speech to International Bankers’ Dinner

(full text of speech)

Ladies and gentlemen,

It’s an honour to speak with you tonight on behalf of the Lord Mayor, and I applaud the foresight of today’s organisers for arranging that the International Bankers should dine on leap Monday, ensuring we are all in credit for the next few hours.

Though we may be in the black today, however, 2016 has so far been coloured red; buffeted by volatility, and enthralled by bearish sentiments. In these conditions, the scrutiny applied to short-term trends can be overwhelming – yet risk is rarely averted overnight, and the youth of the International Bankers company belies the history and long-established lessons of our profession; that extracting value often requires patience, and that hard-won integrity shines through gloom. The third of these historic lessons has always been to follow trade winds, and amid the heightened uncertainty of recent years one idea has developed clear momentum – that financiers must play the lead role in addressing climate change.

Environmental concerns are no longer the preserve of CSR programmes and NGO rallies; they are at the top of political and regulatory agenda, from the G20’s Green Finance Study Group to the FSB’s carbon disclosure task force. In the past twelve months, both President Xi and Prime Minister Modi have heralded landmark green deals from this very hall; Ban Ki-moon has challenged investors to double their investment in the low-carbon economy; and in January Stuart Gulliver spoke of the “business imperative” that institutions fully immerse themselves in green finance. Nor are these simply high-minded appeals to action. The green bond sector witnessed record issuance last year in a market now worth over USD 100 billion globally; retail investors across the UK have invested a cumulative GBP 2 billion via green crowdfunding platforms; and global asset managers have noted a remarkable shift in client sentiment away from the exclusion of high-carbon assets from their portfolios toward the inclusion of low-carbon products.

The green finance sector is developing both top-down and bottom-up, and nothing about it is complicated. Green bonds are structured no differently to any vanilla issuance; their proceeds must simply invest in eligible green projects, and their environmental impact be assessed and approved by a credible third party – that’s it. But the market is distinct for its integrity; for the transparency and accreditation standards it demands, and for the confidence it inspires in investors. Green markets are not only profitable; they are inherently good at supporting “global economic and social welfare” and demonstrating our industry’s “integrity, transparency and accountability” – the very principles that this livery company endorses.

Like most good ideas these days, green finance originated in Scandinavia – but it is no financial fad. Rather it might define twenty-first century capital markets and drive the transition toward a low-carbon economy. It can help meet the increasingly ethical demands placed upon modern finance, and – if it retains its integrity through enhanced transparency and accreditation procedures – it might facilitate a revolution in the public understand of what financial markets are capable of.

By raising capital for green projects, investing savings in low-carbon infrastructure and facilitating implementation of the national carbon reduction plans (or INDCs) agreed in Paris, global capital markets represent a key tool in the race to significantly reduce carbon emissions and raise resource efficiency. The dealflow this might capture is enormous, encompassing everything from the EU’s Energy Union to UK housebuilding and the work of the self-labelled “clean, lean and green” Asian Infrastructure Investment Bank. New York’s Metropolitan Transportation Authority last week [w/c 15 Feb] issued the US’ largest certified green bond, and the UK’s Green Investment Bank has already mobilised total capital in excess of GBP 10 billion. Corporates, too, have low-carbon commitments to finance, and active investors will increasingly require PLCs to do more than just fulfil carbon reporting requirements. Put simply, if the two-degree target is to be taken seriously, global capital markets will be tasked with the heavy lifting.

In doing so, however, market practitioners are not alone; certainly not here in London. As many of you will be aware, the City of London Corporation has built a reputation in recent years for its championing of emerging sectors, from legal services and Islamic finance to renminbi internationalisation. All have been a success, and this is a record we hope to continue with our recently announced Green Finance Initiative. Developed in partnership with HM Treasury and the Department of Energy and Climate Change, the initiative will pool international expertise in this area in order to: promote the market’s development; advocate for specific regulatory and policy changes; and provide public and market leadership on issues relating to green impediments and opportunities.

Convening policymakers and market practitioners is what we do best, both here in London and overseas, but it is events like tonight’s’ that will make the difference. All of you in this room have a part to play in advancing the green finance sector; in structuring transparent, independently accredited green issuances; in empowering investors to build carbon-conscious portfolios; and in backing new technologies and low-carbon infrastructure projects. Away from the recent tumult tonight provides an opportunity to reassess our horizons, and as chair of the Green Finance Initiative I hope to impress upon you both mine and the City’s firm belief that green finance represents one of the best prospects for our industry.

Earlier I mentioned the historic lessons that bankers might draw upon, and I’m afraid I’ve spent the last ten minutes ignoring the main one – that if you’ve found a new way of making money, damn well don’t tell anyone else about it. But Paris witnessed a landmark in climate change diplomacy, and the challenge now lies with us – with London’s international bankers – to facilitate the attainment of global ambitions. In recent years we have perhaps been too cautious, too withdrawn to admit it, but global capital markets retain the capacity to enact fundamental economic change, from “nation to nation” and from city to city; and that it precisely what green finance might do.

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