I was one of the lucky ones.
Apparently there were over 300 people on the waiting list for the LMA's inaugural sustainable finance conference which took place yesterday in London. The main auditorium was full, as was the relay room showing the conference live on a screen. I think this tells the story of the interest in this important area, and fully justifies the decision by Gemma Lawrence-Pardew (Head of Sustainability at the LMA) and her team to have a separate conference dedicated to sustainable finance.
For those of you who didn't get a place, I thought it would be useful to set out a few of my key takeaways from this excellent conference:
- Need for regulation: It feels like most market participants are really doing their best in this field, but this is a market which continues to develop rapidly, and there is a desire for regulation to solve some of the issues that arise in practice. What was OK yesterday might not be OK today. Regulatory intervention in Europe in particular has helped to shape the market, and we look forward to seeing how initiatives like the International Sustainability Standards Board will provide some global consistency to the market in non-financial reporting.
- The role of industry bodies: Industry bodies like the LMA have a key role to play in helping to record and promote best practice in this market. The LMA projects to deliver (hopefully in Q1 2023) a transition finance handbook and sustainability-linked loan drafting riders will be greatly appreciated by the market.
- Transparency v privacy: A theme which came up again and again was the need for transparency in various contexts, including in relation to companies setting KPIs and SPTs for their sustainability-linked loans. However, unlike the bond market which is generally public, the syndicated loan market is private, so there's a tension between the need for transparency and the general desire for privacy, which makes benchmarking KPIs between peers difficult. It is hoped that borrowers will publish more granular details of the KPIs and SPTs in future to help guide the market.
- Data: The need to get more and better ESG data on companies and their supply chains is critical, including for banks who are likely to need this information for their own reporting requirements. There's increasingly a demand for really granular data, rather than relying on headline ESG scores. Related to this is a requirement to validate ESG data by third party assurance providers.
- Greenwashing: Never far from any of the discussions was the spectre of greenwashing: companies saying one thing, and doing another. While sustainable finance offers great opportunities, it is not without risk. In particular, there's been a huge growth of litigation in this space, as well as negative PR for institutions which get things wrong.