Understanding Responsible Investment podcast S2E1: What is Europe’s ambition for sustainable finance?
Full script:
Dorothée Chapuis: Hello and welcome to the second season of our podcast “Understanding Responsible Investment” , which come to grips with sustainable finance and its impact on our behaviour as investors. In this first episode, we’ll tell you about Europe’s ambition for sustainable finance. I'm Dorothée Chapuis, Head of CSR for Societe Generale Private Banking Europe. Today I am joined by Catherine Volkoff, TITLE at Societe Generale Private Banking. Welcome, Catherine! And thank you very much for coming to talk to us about Europe’s regulations on sustainable finance. Before we start, could you tell us about your role?
Catherine Volkoff: Thank you Dorothée for inviting me. Quite simply, my role is to make sure that private bankers and all the support functions perform their duties in compliance with regulations, and that clients are protected. For that, it is essential to fully understand the regulations we must observe which, as you know, Dorothée, are numerous and complex.
Dorothée Chapuis: So let’s talk about the European regulations on sustainable finance: what are the key features?
Catherine Volkoff: It’s quite a challenge to talk about such a broad topic in just a few minutes, but I’ll do my best! Let’s start with the aim of these regulations. They're are part of the wider programme called the “European Green Deal”. There’s not enough time to go into all the details, but this deal is essentially the European Commission’s roadmap for the environment, with an impact on many economic sectors, including the financial sector. The objective of these regulations is to redirect capital flows towards what are deemed sustainable investments, thereby financing “green” activities, which are activities that contribute significantly to mitigating climate change.
Dorothée Chapuis: Thank you Catherine, that's very clear. I guess the thinking among European regulators is that the more we invest in “green” activities, the more activities considered unsustainable will be disregarded — is that right?
Catherine Volkoff: Yes, that’s right. The idea is to give investors the information they need to invest in activities that meet their sustainability preferences — and with full transparency. Increasingly, investors want to be actors of change. This brings the regulators to the conclusion that, to meet this need, savings product providers will gradually move away from investments in unsustainable activities in favour of activities that are sustainable.
Dorothée Chapuis: Ultimately, the regulators’ reasoning is similar to what we saw with organic food: higher demand meant more organic products offered by distributors, thereby further developing organic farming.
Catherine Volkoff: Yes, it’s a close analogy. I would add that a number of conditions were met to make sustainable finance regulations a success. First, the regulators defined what exactly constitutes a “green” activity. Then they established the framework for real transparency on the sustainable characteristics of products. Finally, they required savings product providers, banks, and financial advisers alike to respect the sustainability preferences of their investors.
Dorothée Chapuis: Yes, that makes sense. And if I continue the analogy with organic food, you have to start with the specifications of what is an organic product. Only if those specifications are met can producers and distributors call their products “organic”, allowing the consumer to buy their organic product with complete confidence. The difference is that investing in a savings product is not as easy as going to the grocery shop or the supermarket!
Catherine Volkoff: Quite right, Dorothée! That’s why financial advisers are now required to explicitly ask their investor clients questions in order to define their preferences regarding sustainable finance.
Dorothée Chapuis: If I am an investor, what kind of questions will I be asked? Will I be asked if I want to invest in the environment or in social matters, for instance?
Catherine Volkoff: No, not exactly. Your private banker will need to collect your preferences on the following three approaches: the global sustainable investment approach, which doesn't have a particular theme in terms of sustainability ; the environmental sustainable approach, which favours “green” activities related to the environment only ; the third approach takes into account the negative effects of investment decisions on various sustainability factors. Of course, all proposed investments must respect your choices.
Dorothée Chapuis: Ah, I see. These preferences complete the investor’s profile. With that, a big thank you for introducing us to the topic of European sustainable finance.
Catherine Volkoff: My pleasure, Dorothée. See you soon.
Dorothée Chapuis: See you soon. In the next three episodes, we will dive deeper into the three approaches Catherine mentioned. You have been listening to the second episode of the second season of our series on sustainable investment. This podcast is brought to you by Societe Generale Private Banking. You’ll find it on Spotify and Apple Podcasts though our channel “#PrivateTalk by Societe Generale Private Banking”. Subscribe to be informed of the release of the next episode... and tell people about us! You'll find the full series on the Societe Generale Private Banking website at www.privatebanking.societegenerale.com. Until next time!
(1) The four other areas covered by “green” activities are: using sustainably and preserving water and natural resources, protecting and restoring biodiversity and ecosystems, preventing pollution, and transitioning to a circular economy.
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