Not so long ago, when public opinion questioned the existence of climate change and the very act of recycling was viewed with suspicion, the idea of sustainability and the economy going hand in hand sounded, to say the least, like a pipe dream. However, today’s reality is quite different: sustainable and responsible investment has grown in recent years to reach 35 trillion dollars. This is a sign that sustainable finance is not only profitable for the planet, but also for businesses.
With this in mind, Harmon’s Capital Letters forum brought together experts from various sectors to examine the Green Paper on Sustainable Finance just a few hours after the publication of the order announcing the creation of the Sustainable Finance Council, one of its key measures. The aim: to analyse the key points of the document and explore the challenges it presents by ‘putting words to the numbers’, as the forum’s slogan puts it.
The Green Paper on Sustainable Finance is a strategic project approved by the Spanish Government – the draft of which was published in September last year – whose main aim is to drive and guide the adaptation of businesses and financial institutions to the European framework for sustainable finance in order to promote the transition to a carbon-neutral economy. Furthermore, it will enable the relationship between the economy and sustainability – and between the government and business – to be strengthened even further.

Looking after the planet pays off
Organisations such as the International Monetary Fund (IMF) predict that, although policies to mitigate global warming may entail short-term economic costs, these are minimal compared with the benefits of taking timely action. This was a point highlighted by Ana Puente, Deputy Director-General for Sustainable and Digital Finance at the Ministry of Economy, Trade and Enterprise, at the start of her speech: “Failing to act on climate change has long-term consequences that are economically unsustainable. We cannot afford the impact of a disorderly transition.”
Ana Puente (Ministry of Economy): “Failing to act on climate change has long-term consequences that are economically unsustainable”
As a roadmap to prevent this from happening, the Green Paper identifies three key players in addressing this challenge: the public sector, the business sector and the financial system, and it adopts “an approach that is both ambitious and realistic”, in the words of the Deputy Director-General.
Furthermore, the draft sets out three objectives: to promote the adaptation of the financial and business sectors through measures such as the creation of a ‘sandbox’ (a regulated environment where companies can develop and evaluate innovative sustainability projects under the supervision of the relevant authorities) and a repository for the disclosure of sustainability information; to channel savings and investment towards sustainability by promoting green products and the Treasury’s green bond programme; and to foster public-private collaboration through the establishment of the Sustainable Finance Council.

Pulling together is essential to reach our destination
The implementation of the CSRD (Corporate Sustainability Reporting Directive) and the application of the NEIS (European Sustainability Reporting Standards) in 2024 leave no room for doubt: the EU is going green. In this context, the Green Paper approved in Spain marks a new milestone in the region in the field of sustainable finance. David González, the EIF’s (European Investment Fund) representative for Spain and Portugal, praised the market’s performance and also shared a statistic: “Spain is the leading country in terms of demand from financial institutions seeking to secure guarantees from the European Investment Fund in order to provide sustainable finance.” Since it began operations in 1996, this organisation has supported nearly 400,000 Spanish SMEs and has worked through 170 financial institutions.

Enrique Tombas (Suma Capital): “The transition will be much easier if it is driven by conviction rather than imposed”

As for the measures set out in the document, one of the most widely discussed was the creation of the Sustainable Finance Council. This governance body acts as a forum for collaboration between public and private stakeholders, including representatives from public administrations, supervisory bodies, the financial sector, the private sector, the third sector and independent experts. Its main functions include promoting and monitoring the actions proposed in the Green Paper, analysing the challenges relating to the regulatory framework for sustainable finance, and facilitating discussions on issues such as decarbonisation, the circular economy and the protection of biodiversity.

As announced in the Official State Gazette (BOE), the body will comprise twenty non-ex officio, renewable members and thirteen ex officio members. “We need to strike a balance so that it is effective in decision-making and so that all stakeholders are represented, because it must be pluralistic and inclusive,” explained Pedro Cadarso, ESG Risk Adviser at the AEB (Spanish Banking Association).

For his part, Enrique Tombas, chairman of Suma Capital, added that consumers should be part of the body’s discussions: “The transition will be much easier if it is driven by conviction rather than imposition, and this happens when business owners realise that their customers want sustainable products.”

Andrea González, chief executive of Spainsif, explained the vital role that associations such as the one she heads – comprising various stakeholders from the sustainable finance ecosystem – can play on the Council: “The Council’s flexibility mechanism is a complete and resounding success. The more multi-stakeholder the umbrella organisations are, the better we will be able to fulfil the role of conveying the views of the many sectors represented in sustainable finance.”

Outstanding challenges
Among other measures in the Green Paper is the creation of a sandbox in which, for example, financial institutions will be able to propose methodologies for analysing climate risks or identify data gaps. Its practicality was highlighted by the AEB’s ESG Risk Adviser: “We see it as a very useful platform for learning about the taxonomy and believe it can be of great benefit in reducing ambiguity and addressing the lack of clarity and consistency in certain regulations.”

For Andrea González, director of Spainsif, it is necessary to promote, in parallel, “non-fiscal incentives for financial education or the market”

However, the need to create a more favourable tax framework that encourages investment in sustainability was highlighted. To this end, it was proposed that tax deductions, credits or exemptions be introduced to facilitate investment in renewable energy, support the circular economy or decarbonise production processes. “This would be very welcome, but as it is an area where progress is difficult to achieve, we have begun to consider Plan Bs: non-fiscal incentives for financial education or the market, via specific products,” argued the director of Spainsif.

Mónica Malo, Director of Sustainability at CECA and CECABANK, agreed with González, adding: “In the banking sector, we are clear that, to stimulate this appetite, it is necessary to resort to tax incentives. We clearly have a very important role to play, but it is true that there are a number of other levers that can be brought to bear to invigorate the ecosystem.”

It is undeniable that the document represents a positive effort on the part of the government to develop the financial sector’s role in the green transition, as well as to harmonise practices between the public and private sectors. However, like almost any guide, it has areas for improvement. Pedro Cadarso emphasised that “it has been very well received in the banking sector”, but that they believe “it is necessary to allocate responsibilities appropriately amongst public administrations, the productive sectors and the financial sector”.

This was a point on which Mónica Malo agreed, adding that “it is a very broad framework that requires many follow-up measures”. The Director of Sustainability at CECA and CECABANK felt that there was a need for more specific working groups, as well as for shared leadership and responsibility amongst the various stakeholders, not just the banking sector.

Despite its limitations, the Green Paper on Sustainable Finance proved to be an excellent framework for moving towards a sustainable ecological transition, and this Capital Letters event helped to shed light on some of its more technical aspects, always using clear language. Because for the marriage between sustainability and the economy to thrive, it is essential that they listen to and understand one another.

Article from Ethic magazine. Read article