What makes a “green” bond green? What makes an economic activity sustainable? And what information should a company disclose about how climate change could impact its business – and how its business impacts the climate? These are some of the questions the European Union is keen to find answers to, with the help of a panel of experts. SSFC talked to one of them: SEB’s Marie Baumgarts.
Marie Baumgarts, Head of Sustainability at SEB, is one of 35 experts from across the European Union gathered in the Technical Expert Group on Sustainable Finance (TEG) set up by the European Commission. Baumgarts spent the second half of 2018 as part of a TEG subgroup developing metrics for climate-related disclosures. They recently published recommendations for an update of the European Commission’s non-binding guidelines on non-financial disclosure. SSFC asked Baumgarts how happy she was with the outcome.
Marie Baumgarts: I am very content. Hopefully, we have contributed one piece of the puzzle towards more transparency in the market.
SSFC: Members of the TEG came from across the financial sector, for example banking and investment, insurance and utilities. What were some of the fault lines in your discussions?
Marie Baumgarts: There was a very nice and constructive atmosphere in our discussions, and we got along well. But we also had very open debates, particularly around some areas. There was the question of how to look at a company’s impact, for example, where we spent a lot of time. It was important to focus on both dimensions of impact: what consequences climate change may have on a company’s business model, and the impact a company itself is having on climate change through its value chain.
Disclosures can be powerful
SSFC: One aim of the TEG’s work – according to a presentation to stakeholders in Brussels in October 2018 – was to “unlock the power of disclosures”. What is it that makes disclosures powerful?
Marie Baumgarts: One goal of the EU action plan on sustainable finance is to re-orient capital flows towards greater sustainability. However, historically we have not measured the impact of money and can therefore at this stage not assess whether capital flows are working towards achieving the goals of the Paris Agreement. With better disclosures, that’s something I think we will be able to see. If we have better and more complete data, that is to say transparency, we can easier assess what impact money is having with regard to climate change, and that would also make it easier for stakeholders such as regulators and investors to take this information into account.