On the 4th of October 2024, Sustainable Finance Lab held a Symposium challenging the speed of the transition in the financial sector. The event featured high-profile speakers such as Frank Elderson (ECB), Joanne Kellerman (Single Resolution Board), Karen Maas (Open Universiteit & SFL), and Alexander Barkawi (Council on Economic Policies). More than 250 representatives from financial institutions, government and NGOs attended this event, marking both a great send-off of its former Director Rens van Tilburg and a new chapter for Sustainable Finance Lab under the leadership of Brenda Kramer.
Peter Blom kicked-off with an introductory talk, reflecting on the speed, depth and direction of the transition. Subsequently, Frank Elderson gave a keynote on the transition in finance and how laboratories can provide an ideal environment to facilitate “Eureka” moments. For a written version, click here. One of these “Eureka” moments was the insight that climate and nature-related risks are a source of financial risk, and are part of the mandates of central banks and supervisors. SFL has also stressed this insight in recent publications. Elderson warned that the ECB would start fining institutions who do not adequately address climate and nature-related risk.
Elderson noted two interesting future avenues, also argued for by SFL for years. Firstly, increasing the share of EU supranational bonds in its total bond holdings can be contemplated to minimise potential climate and nature-related risks, under certain conditions. SFL published a report on how central banks and supervisors can act on nature-related risks earlier this year. Secondly, when there is a monetary policy need to reconsider TLTROs for banks in the future, there are compelling reasons to seriously consider greening these TLTROs. The observant reader might think of the Sustainable Finance Lab’s new policy paper on the possibility of a Green interest rate.
In the panel discussion, the panellist reflected on the keynote speech and on the input of the other panellists. From it followed that steering on impact is a sign that finance is changing, but it is still too little. Moreover, the many islands in terms of data and best practices are a strong impetus for greater knowledge sharing. “Eureka” is not yet commonplace.
Matters such as climate change and biodiversity are still insufficiently part of financial models. People also still must be convinced, and ever improving metrics is only going to get us so far. As future impact of climate and nature-related crises will become increasingly profound, it is increasingly likely central banks and supervisors will need to incorporate more uncertainty in its strategies.
Rens van Tilburg reflected on the discussion and sustainable finance. A transition incorporates chaos, emergence, experimentation and stabilisation to move from the old to the new. Finance determines installation and deployment of new technologies and system by allocating capital and addressing risk. A move from an unsustainable economy to a sustainable one requires transition, and an adjustment in thinking. A recent SFL report outlines the policy option of green Special Drawing Rights for international climate finance. SFL also published a report on an altered global financial architecture to increase climate finance in emerging and developing countries. Rens’ reflections ended with a symbolic passing of the baton to our present executive director Brenda Kramer. In new SFL-tradition, the baton was replaced with a split tally stick, a medieval way to record bilateral exchange and debts. What better way to discuss finance in transition!
To close off, Dirk Schoenmaker tied together various insights from the symposium and 13 years of SFL, driving home the importance of the allocation power of the financial system. We decide what we finance and we should not shy away from this power.
SFL wishes Rens all the best for his future endeavours and is happy to write that his engagement with SFL will continue as a member.
