CADERNOS DO MERCADO DE VALORES MOBILIÁRIOS · 2020-07-27 · 7 CADERNOS DO MERCADO DE VALORES...

SESSÃO DE ABERTURA | GABRIELA FIGUEIREDO DIASPresidente do Conselho de Administração da CMVM

ORADOR PRINCIPAL | MÁRIO CENTENO – Ministro das Finanças do XXI Governo Constitucional

MESA REDONDA | “O QUE É SUSTENTÁVEL EM FINANÇAS?”

MESA REDONDA | “INVESTIR EM SUSTENTABILIDADE: O QUE GANHO COM ISSO?”

ORADOR PRINCIPAL | DIRK SCHOENMAKERInvestigador sénior, Bruegel; Professor de Banca e Finanças, Universidade Erasmus de Roterdão

MESA REDONDA | “À PROCURA DE INVESTIDORES RESPONSÁVEIS PARA RELAÇÕES DE LONGO PRAZO”

MESA REDONDA | “SUSTENTABILIDADE: REGULAR OU NÃO REGULAR?”

CADERNOSDO MERCADODE VALORESMOBILIÁRIOS

Nº 62

Nº 62


SUSTAINABLE FINANCE

THE ROAD AHEAD

CONFERÊNCIAANUAL CMVM 2018

Editorial

Sessão de Abertura | GABRIELA FIGUEIREDO DIASPresidente do Conselho de Administração da CMVM

Orador Principal | MÁRIO CENTENOMinistro das Finanças do XXI Governo Constitucional

Mesa Redonda | “O que é sustentável em Finanças?”

Moderador

RUI PERES JORGE Diretor, Gabinete de Comunicação, CMVM

Participantes

COLIN MAYER Cátedra Peter Moore de Estudos de Gestão,

Said Business School (Universidade de Oxford)

FILIPE SANTOS Professor Catedrático de Empreendedorismo Social,

Católica Lisbon School of Business and Economics

JOSÉ DE MATOS Consultor do Conselho de Administração, Banco de Portugal

PETER KERNAN Diretor Executivo, S&P Global

TÂNIA DUARTE Cofundadora e Diretora de Operações, Conduct, Culture,

People Research Foundation

UGO BASSI Diretor, Direção-Geral de Estabilidade Financeira, Serviços Financeiros

e União dos Mercados de Capitais (FISMA), Comissão Europeia

Mesa Redonda | “Investir em sustentabilidade: o que ganho com isso?”

Moderador FILIPE SANTOS Professor Catedrático de Empreendedorismo Social,

Católica Lisbon School of Business and Economics

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CADERNOS DO MERCADO DE VALORES MOBILIÁRIOS | Nº 62

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Participantes

ANTÓNIO MIGUEL Diretor Executivo, Maze; Laboratório de Investimento Social

JORGE MOREIRA DA SILVA Diretor, Direção de Cooperação

para o Desenvolvimento da OCDE

MARGARIDA COUTO Presidente GRACE - Grupo de Reflexão e Apoio à Cidadania Empresarial

PAUL TANG Membro do Parlamento Europeu, Aliança Progressista dos Socialistas e Democratas

WILL MARTINDALE Diretor de Políticas, UNPRI – Principles for Responsible Investment

Orador Principal | DIRK SCHOENMAKERInvestigador sénior, Bruegel; Professor de Banca e Finanças, Universidade Erasmus de Roterdão

Mesa Redonda | “À procura de investidores responsáveis para relações de longo prazo”

Moderador

RITA OLIVEIRA PINTO Diretora, Departamento Internacional

e de Política Regulatória, CMVM

Participantes

ANDRÉ FIGUEIREDO Sócio, PLMJ

ANTÓNIO CORREIA Partner, PricewaterhouseCoopers

CRISTINA CASALINHO CEO, Agência de Gestão da Tesouraria e da Dívida Pública

JOÃO WENGOROVIUS MENESES Secretário Geral, BCSD - Conselho Empresarial

para o Desenvolvimento Sustentável

NANDINI SUKUMAR CEO, World Federation of Exchanges

PAULO RODRIGUES DA SILVA CEO, Euronext Portugal

Mesa Redonda | “Sustentabilidade: Regular ou não Regular?”

Moderador

UGO BASSI Diretor, Direção-Geral de Estabilidade Financeira, Serviços Financeiros

e União dos Mercados de Capitais (FISMA), Comissão Europeia

Participantes

STEVEN MAIJOOR Presidente, Autoridade Europeia

dos Valores Mobiliários e dos Mercados (ESMA)

GABRIEL BERNARDINO Presidente, Autoridade Europeia

dos Seguros e Pensões Complementares de Reforma (EIOPA)

GABRIELA FIGUEIREDO DIAS Presidente, Comissão do Mercado

de Valores Mobiliários (CMVM)

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edição n.º 62 dos Cadernos do Mercado de Valores Mobiliários apresenta as comunicações efetuadas e os debates havidos no âmbito da Conferência Anual da CMVM 2018 dedicada ao tema das Finanças Sustentáveis. O programa da conferência Sustainable Finance: The Road Ahead inclui a apresentação de três oradores principais e o debate em quatro mesas redondas.

Na sessão de abertura, Gabriela Figueiredo Dias, Presidente do Conselho de Administração da CMVM, realça o contributo do debate com diferentes stakeholders das finanças sustentáveis para uma abordagem estruturada das oportunidades, dos riscos e do papel dos reguladores na transformação do sistema financeiro. Com efeito, o paradigma do investimento focado apenas no retorno e no risco financeiro está progressivamente a ser substituído por modelos que incluem também fatores de sustentabilidade (ambiental, social ou de governação) na tomada de decisão dos investidores, em paralelo com o retorno financeiro. Recentes desenvolvimentos no mercado português ilus-tram esta evolução, nomeadamente a emissão de obrigações ‘verdes’, a dis-ponibilização de relatórios de informação não financeira pelos emitentes e o registo pela CMVM em 2018 da primeira sociedade de empreendedorismo so-cial (que originou o primeiro fundo de empreendedorismo social português). Referindo o papel dos reguladores do sistema financeiro para a transformação em curso, Gabriela Figueiredo Dias considera que a sustentabilidade se ins-creve na interseção de dois pilares, a proteção dos investidores e o desenvol-vimento do mercado, e realça a importância da transmissão de informação rigorosa e credível ao mercado e da eliminação do risco de branqueamento de práticas negativas por via das finanças sustentáveis.

A sessão de abertura contou igualmente com a intervenção do Ministro das Finanças, Mário Centeno. Referindo que a temática do investimento sustentá-vel marca atualmente a agenda europeia, Mário Centeno alerta para as conse-quências negativas do adiamento da transição para uma economia com baixas emissões de carbono e destaca os custos económicos associados ao crescimen-to do número de eventos extremos e as repercussões sobre o sistema financei-ro, designadamente o setor segurador. Por outro lado, defende a necessidade

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de desenvolvimento de competências no setor financeiro para lidar com os novos riscos e para orientar o financiamento para investimentos sustentá-veis, de modo a tornar a economia mais verde e mais sustentável. Neste con-texto, salienta a importância do plano de ação para as finanças sustentáveis da Comissão Europeia no desenvolvimento da harmonização das definições do que são atividades sustentáveis, de modo a prevenir os riscos de utilização abusiva da marca “sustentável”. Mário Centeno destaca ainda a importância dos reguladores do setor financeiro na transição para uma economia susten-tável, concluindo que “devemos aspirar a tornar o investimento sustentável como o «novo normal» nos mercados”.

primeira mesa redonda procurou responder á questão “O que é sustentá-vel em finanças?”. Nela foi referido que o sistema financeiro deve conside-rar para além do retorno ajustado ao risco, os interesses e os valores de todos os stakeholders nas decisões de investimento. Negócios socialmente respon-sáveis e com propósitos claros geram mais valor para os acionistas e para a sociedade. A incorporação de fatores ESG influencia a notação de risco obti-da pelas sociedades cotadas na medida em que os riscos de crédito possuem um horizonte de avaliação de longo prazo. Na reflexão sobre a importância de cada fator ESG, o governo das sociedades (G) foi apontado como central para o processo de tomada de decisão com impacto na gestão dos restantes fato-res (E e S), tendo sido defendido que o decisor político deve promover uma mudança cultural usando o instrumento da transparência e deve abster-se de impor metas em áreas onde a escolha individual é imprescindível. Além dis-so, o debate destacou a importância de serem minimizados os riscos de green washing, tendo sido sublinhado o papel dos auditores internos e externos e das agências de notação de risco na criação de confiança nas informações de natureza não financeira que são divulgadas ao mercado.

A segunda mesa redonda discutiu o tema “Investir em sustentabilidade: o que ganho?” Os participantes do painel referiram que o investimento de im-pacto é uma das principais oportunidades económicas atuais e que a sobrevi-vência no mercado no futuro dependerá da incorporação dos fatores de sus-tentabilidade. A adoção de fatores de sustentabilidade permite dar resposta a uma preocupação crescente da geração millennial, que considera aspetos de sustentabilidade nas suas decisões de consumo e valoriza os investimen-tos de impacto. Neste quadro, foi defendida uma abordagem às questões da sustentabilidade top-down, i.e., a necessidade de envolvimento da gestão de topo para que a incorporação dos fatores ESG tenha sucesso. No painel foram igualmente discutidos os riscos de incumprimento das metas de desenvolvi-mento sustentável da ONU e de fragmentação geográfica. Adicionalmente, foi analisado o papel do regulador no alinhamento do mercado com os objetivos

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de desenvolvimento sustentável. Os participantes destacaram ainda os riscos de greenwashing e de socialwashing como uma ameaça para a credibilidade das políticas de sustentabilidade.

ambém Dirk Schoenmaker defende que o desenvolvimento sustentável im-plica a integração de três elementos (financeiro, social e ambiental), em três etapas: primeiramente é criado valor para o acionista de forma modificada (i.e., valor financeiro (F) > valor social (S) e valor ambiental (E)); de seguida, é criado valor para os stakeholders (F+S+E); finalmente, é criado um bem co-mum para sociedade (S e E > F). Apesar de considerar a dimensão ambiental muito importante, Dirk Schoenmaker defende que existem diversos desafios sociais relevantes a ter em conta. Na sua opinião, as empresas são atualmente motivadas a integrar os fatores ESG nos seus investimentos, como forma de antecipação de alterações regulatórias e tributárias, de minimização de riscos de reputação e de resposta a uma procura crescente (tanto das Organizações Não Governamentais (ONGs) como dos consumidores) por práticas empresa-riais sustentáveis. Considera que existem três elementos de uma abordagem de investimento sustentável: a perspetiva de longo prazo, a gestão ativa de portfolios concentrados e o diálogo entre os investidores e as empresas. Dirk Schoenmaker destacou ainda o papel da qualidade do governo societário, que considera ser uma variável intermédia para a obtenção dos resultados finan-ceiros, ambientais e sociais.

A terceira mesa redonda debruçou-se sobre o tema “À procura de investidores responsáveis para uma relação de longo prazo”. Os oradores foram consen-suais em olhar para a sustentabilidade como uma oportunidade para as em-presas e não como uma questão de conformidade jurídica ou de gestão de ris-cos. A existência de ferramentas, como uma taxonomia comum e métricas, e o compromisso organizacional são consideradas essenciais para o sucesso da integração dos fatores ESG. Um dos desafios das finanças sustentáveis para os emitentes está relacionado com os custos de reporte da informação não finan-ceira sobre fatores de sustentabilidade, tendo sido defendido que, atendendo à sua importância para uma correta aferição do respetivo valor, as empresas devem divulgar no seu relatório anual informação sobre aspetos tangíveis e intangíveis da sustentabilidade.

O quarto e último painel debruçou-se sobre o tema “Sustentabilidade: regular ou não regular?”, tendo os participantes considerado que o papel da regulação é fundamental na transição para um sistema financeiro mais sustentável. Um dos aspetos defendidos reside na importância da integração da sustentabili-dade e dos riscos que lhe são inerentes, de modo a garantir que a função tradi-cional dos mercados continua a ser desempenhada de forma apropriada e que

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as preferências dos investidores por produtos sustentáveis são respondidas. Duas questões necessitam de resposta no quotidiano dos mercados: Os emi-tentes refletem de forma apropriada os riscos de sustentabilidade quando di-vulgam os lucros? As agências de rating refletem esses risos nas notações que atribuem? Os participantes no painel destacaram a importância de disponi-bilização de informação relevante e completa aos investidores, como suporte das suas decisões sobre produtos financeiros sustentáveis.

Não faltam, pois, motivos para uma leitura atenta deste número dos Cadernos.

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Artigos

SESSÃO DE ABERTURA | GABRIELA FIGUEIREDO DIASPresidente do Conselho de Administração da CMVM

ORADOR PRINCIPAL | MÁRIO CENTENOMinistro das Finanças do XXI Governo Constitucional

MESA REDONDA | “O QUE É SUSTENTÁVEL EM FINANÇAS?”

MESA REDONDA | “INVESTIR EM SUSTENTABILIDADE: O QUE GANHO COM ISSO?”

ORADOR PRINCIPAL | DIRK SCHOENMAKERInvestigador sénior, Bruegel; Professor de Banca e Finanças, Universidade Erasmus de Roterdão

ORADOR PRINCIPAL | “À PROCURA DE INVESTIDORES RESPONSÁVEISPARA RELAÇÕES DE LONGO PRAZO”

MESA REDONDA | “SUSTENTABILIDADE: REGULAR OU NÃO REGULAR?”



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GABRIELA FIGUEIREDO DIAS

Sessãode abertura

Presidente do Conselho de Administração, CMVM



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Gabriela Figueiredo Dias, Presidente do Conselho de Administração, CMVM.


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SESSÃO DE ABERTURA

Exmas Senhoras e Exmos Senhores,

É com muito gosto que me dirijo a esta grande audiência, na abertura da Conferência Anual da CMVM, dedicada ao tema das Finanças Sustentáveis, na qual temos o privilégio de reunir alguns dos maiores especialistas nesta ma-téria, representando diversos países, setores, abordagens e instituições.

Registo, com enorme agrado, a forma entusiasta como foi recebido o desafio da CMVM para esta iniciativa, bem como a diversidade desta magnífica audiência. Nela estão representados os nossos stakeholders mais próximos, mas também organizações e pessoas que, mesmo sem ligação ao sistema financeiro, se sen-tiram chamadas pelo tema e para o debate.

O grande objetivo deste evento é o de lançar uma discussão aberta e de qualida-de, garantida pelo mérito dos nossos oradores e moderadores, sobre o tema da sustentabilidade e das suas manifestações no sistema financeiro.

A escolha deste tema para a nossa Conferência Anual assenta numa perceção muito marcada de que, constituindo uma oportunidade de transformação do sistema financeiro, o tema da sustentabilidade apresenta também um risco re-levante de superficialidade, opacidade e oportunismo. Por isso consideramos importante discuti-lo, com vista ao levantamento desses riscos e oportunida-des, bem como à adequada definição do papel do regulador na sua incorpora-ção, contribuindo para a abordagem estruturada que o tema exige.

Foram significativas as convulsões e transformações que a regulação e os mercados financeiros conheceram nos últimos anos. Dez anos após a eclo-são da crise e tantos eventos e mutações depois, fecha-se um ciclo – e abre-se uma dúvida sobre o futuro dos mercados e uma oportunidade para começar a escrevê-lo.

Em breve o sistema financeiro será conduzido por e para uma nova geração, an-siosa, em termos individuais e coletivos, com as limitações dos instrumentos clássicos de poupança e dos modelos públicos de proteção social de longo pra-zo e intensamente comprometida com valores de sustentabilidade e com ten-dência para valorizar, em todas as suas escolhas, opções verdes ou de impacto social.

Para uma parte crescente dos investidores, o retorno do investimento do seu tempo, trabalho ou dinheiro mede-se pela repercussão financeira, mas tam-bém pelo impacto social, ambiental, cultural, considerado em si mesmo ou como alavanca do esperado retorno financeiro, o que permite integrar estes

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objetivos no dever fiduciário dos gestores sem o desviar do dever central de criação de valor para os acionistas.

O paradigma do investimento focado apenas em retorno financeiro parece es-tar em crise, sendo possível a sua substituição por modelos ajustados às novas solicitações dos investidores. As limitações do modelo e dos instrumentos tra-dicionais, por um lado, e a inquietação crescente sobre a insuficiência dos ins-trumentos disponíveis de poupança e proteção social, por outro, determinam uma solicitação crescente, dirigida aos responsáveis pelas políticas e agentes do mercado, de conceção de novos modelos que acomodem as preocupações de sustentabilidade dos investidores que hoje buscam um novo sentido para o investimento.

Esta tendência foi já assimilada pelos maiores investidores institucionais, como começam a confirmar alguns dados de mercado.

O volume de emissões de obrigações verdes atingiu cerca de 140 mil milhões de euros em 2017, aumentando 14 vezes desde 2013. Os desinvestimentos em ati-vos intensivos em carbono ascenderam a 5 biliões de euros por ano. E estima-se que os ativos sob gestão que incluem algum tipo de princípio de preocupação ambiental, social ou de governação, estará já próximo dos 100 biliões de euros. Como bem notou no ano passado Christian Thimann, o coordenador do gru-po de peritos alto nível sobre Finanças Sustentáveis promovido pela Comissão Europeia, a sustentabilidade desafia ideias feitas. É que investimentos de longo prazo, menos líquidos, podem ser mais desejáveis, se for considerado o valor social que geram; os mercados nem sempre geram o melhor preço, em particu-lar se adotarem como horizontes de decisão períodos que ainda não consideram os efeitos positivos da sustentabilidade; e a avaliação da eficiência pode ser en-ganadora, se forem excluídos ou mal medidos os fatores que devem ser ponde-rados quando pensamos na sociedade como um todo.

Esta tendência determinou também, como em tantos outros casos, uma reação pelo lado da oferta: o desenvolvimento de instrumentos de investimento de im-pacto é disso reflexo, do mesmo modo que se tornou urgente a implementação de mais exigentes modelos de governação, ao serviço de objetivos de longo pra-zo e de retoma da confiança dos investidores e aforradores.

Assim, o ceticismo que ainda exista deve ser substituído pela adesão a um novo paradigma de investimento, quer pelos agentes económicos, quer pelos regu-ladores, bem como pelo compromisso de todos os stakeholders para com este novo mercado, orientado para objetivos de sustentabilidade, inclusividade e

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bem-estar social, em paralelo à procura de retorno financeiro.

A construção de um sistema ajustado a estes desafios, orientado, entre outros, para objetivos supra individuais, dependerá, porém, de outras transformações estruturais e culturais, incluindo nos comportamentos dos investidores, das instituições e dos reguladores.

São, pois, percetíveis as estreitas relações entre sustentabilidade e sistema fi-nanceiro, bem como a existência de um papel de relevo dos reguladores do mercado nesta transformação.

Desde logo, vale a pena olhar com atenção para os impactos que o desígnio da sustentabilidade está já a produzir no mercado e no respetivo quadro regulató-rio e de supervisão.

A disponibilização de instrumentos de investimento inovadores, que permitem aliar um propósito social ou ambiental ao objetivo de rendibilidade para o in-vestidor, são disso exemplo. Obrigações verdes; empréstimos verdes, obriga-ções de impacto, fundos de investimento social, fenómenos de blended finance, entre outros, representam instrumentos que visam impactos positivos em do-mínios como a preservação ambiental, a proteção social, o acesso à saúde ou a escolaridade. Estes fenómenos são já uma realidade, especialmente expressiva em alguns mercados, mas presente também em Portugal, ainda que de forma ténue e não obstante um ceticismo relevante. A título de exemplo, assinalam-se emissões de obrigações verdes por emitentes nacionais, a disponibilização, pe-los emitentes, de relatórios de informação não financeira ou de sustentabilida-de sobre o posicionamento da sua atividade perante fatores ambientais, sociais e de governance ou o registo na CMVM da primeira sociedade de empreendedo-rismo social que deu já início à constituição do primeiro fundo de empreende-dorismo social português.

É de notar também a assunção ativa de responsabilidades no domínio da sus-tentabilidade por empresas, com expectável tradução nos níveis de incentivo, motivação e reputação e, consequentemente, na produtividade e rendibilidade da empresa. A consideração de tais elementos não é reflexo da desconsideração do propósito de maximização do valor para os investidores, é antes elemento sem o qual esta dificilmente será hoje possível.

Igualmente consistente tem sido a exigência colocada por investidores indivi-duais aos gestores de ativos para a escolha de investimentos sustentáveis que ofereçam uma garantia de combinação de propósito e rendibilidade, impondo assim um cuidado adicional na fundamentação das decisões de investimento.

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A transformação das próprias bolsas para integrar estas tendências e se adap-tarem aos novos instrumentos e critérios de investimento reflete a mesma ca-pacidade de antecipação.

A pressão do contexto para a sustentabilidade em geral e as transformações que essa pressão está a operar no mercado financeiro convocaram já os policy makers e os reguladores para intervenções a diversos níveis e formatos.

Não obstante algumas iniciativas tímidas anteriores, o Acordo de Paris sobre Alterações Climáticas e os Objetivos de Desenvolvimento Sustentável das Nações Unidas, ambos de 2015 conferiram um destaque inédito ao tema da sustentabi-lidade. Desde então têm vindo a multiplicar-se análises e propostas, pela mão das organizações multilaterais (Banco Mundial, OCDE, FSB), das organizações representativas do mercado, (WFW, ICMA) e dos reguladores (IOSCO, ESMA). A nível internacional existe já um conjunto de medidas de hard e soft law, que atuam sobre o sistema financeiro e sobre as quais ouvirão hoje certamente falar.

Na dimensão regulatória, é imperativo destacar a intervenção da Comissão Europeia nesta matéria, impondo a observância de regras uniformes na Europa sobre a informação não-financeira das empresas de grande dimensão, que es-tão já a ser objeto da supervisão da CMVM após a sua adoção em Portugal. É ainda de destacar a proposta mais recente de três Regulamentos Europeus que visam disciplinar, entre outros aspetos, a divulgação pelos investidores insti-tucionais de informação sobre o modo como os riscos ambientais, sociais e de governo são considerados no processo e decisão de investir, e em cuja discussão a CMVM, em conjunto com o Governo, se encontra envolvida.

Estamos já, pois, a ser chamados a intervir, enquanto reguladores e superviso-res, através da participação empenhada na construção do direito europeu nes-ta matéria e da sua incorporação e implementação a nível nacional, incluindo na supervisão. Com a missão principal, nesta fase, de eliminar o risco de bran-queamento de práticas negativas por via das finanças sustentáveis e assegurar que a informação que chega ao mercado nesta matéria é rigorosa e credível.

Mas há mais:

• A disponibilização de novos instrumentos de investimento de impacto, por exemplo sob a forma de fundos de investimento social, pressupõe, para assegurar credibilidade e utilidade, a sua regulação e supervisão de qualidade;

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• A pressão dos clientes sobre os investidores institucionais para escolhas sustentáveis nos seus investimentos impõe uma monitorização cuidado-sa dessas escolhas à luz das políticas de investimento anunciadas e de cri-térios prudenciais;

• Dependendo dos modelos e setores de negócio, os impactos ambientais e sociais na atividade de algumas empresas cotadas podem gerar deve-res de divulgação de informação privilegiada ao mercado e supervisão associada;

• A governação societária ligada a objetivos de sustentabilidade de longo prazo convoca a nossa intervenção, enquanto garantes da transparência e do correto funcionamento do mercado e das instituições financeiras, para a proteção dos investidores e a prevenção do risco sistémico.

Perante a evidência de que a sustentabilidade e as preocupações a ela associadas afetam a economia, o alheamento dos responsáveis pelas políticas e dos regu-ladores não é uma opção.

É, por isso, imperativo para a CMVM compreender e integrar nos seus objetivos estratégicos o que nesta matéria está a acontecer, para podermos cumprir o de-ver de assegurar a integridade e o bom funcionamento dos mercados.

O alegado dilema do regulador do mercado entre a proteção dos investidores e o contributo para o desenvolvimento do mercado constitui um falso dilema em torno de uma falsa incompatibilidade. É evidente que a prossecução de cada um destes objetivos de missão exige um rigoroso alinhamento e coordenação en-tre ambos. Ambos constituem objetivos de primeira linha para o regulador dos mercados e os pilares centrais da sua missão.

O tema da sustentabilidade inscreve-se, em suma, na intersecção desses dois pilares, como pressuposto de cumprimento adequado da missão da CMVM. Na nossa condição de entidade pública, projetada para o serviço público e para a criação de valor para a comunidade, a nossa missão cumpre-se, atuando onde pudermos contribuir de forma mais relevante para o bem-estar global da co-munidade, obrigando-nos a antecipar os desenvolvimentos do mercado onde intervimos e as necessidades dos seus agentes.

Porque não sabemos tudo, sentimos a necessidade de lançar este debate no

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nosso mercado, abrangendo toda a comunidade. Por isso, além desta confe-rência, a CMVM lançará muito em breve uma consulta pública sobre este tema, alargada a todos os interessados, convidando desde já todos os presentes a par-ticipar. Dessa consulta pretendemos extrair conhecimento sobre aquilo que já temos em matéria de finanças sustentáveis, os riscos associados, as oportuni-dades que podemos ajudar a criar, as expetativas dos cidadãos e das instituições e sobretudo, sobre aquilo que a comunidade espera, e não espera, da CMVM en-quanto regulador dos mercados.

É isso que pretendemos aqui fazer hoje, começando, já de seguida, com uma in-tervenção do Sr. Ministro das Finanças, que nos irá trazer a sua perspetiva sobre esta matéria. Obrigado a todos. Desejo-vos um excelente dia de reflexão.

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OradorPrincipal

Ministro das Finanças do XXI Governo Constitucional

MÁRIO CENTENO



Mário Centeno, Ministro das Finanças do XXI Governo Constitucional.

20 Voltar ao índice cmvm.pt

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Senhora Presidente da CMVM, Dr.ª Gabriela Figueiredo Dias, Ilustres oradores e convidados, Minhas senhoras e meus senhores,

uero, em primeiro lugar, felicitar a Comissão do Mercado de Valores Mobiliários, na pessoa da sua Presidente, pela organização desta Conferência, bem como pelo amável convite que me dirigiram para aqui estar a falar-vos sobre investi-mento sustentável.

Ainda há não muito tempo, o investimento sustentável era um assunto exclusi-vo de um pequeno grupo de especialistas. Atualmente, marca a agenda europeia em diversas matérias e em diferentes fóruns. Os governos de países de todo o mundo escolheram um caminho mais sustentável para o nosso planeta e para as nossas economias, tendo como referência o Acordo de Paris e a Agenda 2030 para o Desenvolvimento Sustentável, das Nações Unidas. Aí foram estabelecidos 17 objetivos ambiciosos com vista à erradicação da pobre-za e ao desenvolvimento económico, social e ambiental à escala global até 2030.

Alcançar estes objetivos, em direção a uma economia europeia mais sustentá-vel, exige, todavia, investimentos significativos, mobilizando financiamento e uma alteração dos processos de decisão.

Por vezes, reduzimos a sustentabilidade a questões ambientais e às alterações climáticas, mas a sustentabilidade tem um universo muito maior.

A sustentabilidade inclui fatores sociais, como a redução de desigualdades e a promoção da coesão social. É um desafio para qualquer Estado-Membro da União Europeia. Contudo, é um desafio para o qual as empresas e os investido-res têm também um contributo importante a dar.

Todos conhecemos, desde o início do século, exemplos de más práticas de go-vernação de empresas que custaram muitos sacrifícios a investidores, a traba-lhadores e a todos os contribuintes.

A sustentabilidade abrange ainda elementos de governação, como a promoção de estruturas de governação saudáveis, relações laborais justas e o cumprimen-to das obrigações fiscais.

O ambiente continua a ser a dimensão mais visível da sustentabilidade, dado o impacto do aquecimento global na frequência e na severidade das catástrofes naturais. Entre 2007 e 2016, os custos económicos de eventos meteorológicos

Q

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extremos subiram cerca de 86%. Só em 2017, estima-se que esses custos te-nham atingido 117 mil milhões de euros.

adiamento da transição para uma economia com baixas emissões de carbono vai aumentar esses custos, que serão sentidos, de forma diferente, em toda a sociedade, incluindo pelo setor financeiro.

O aumento dos desastres naturais vai afetar necessariamente o setor segurador. No curto prazo, os riscos cobertos por seguros vão pressionar a rentabilidade e a resiliência do setor segurador e, no médio prazo, vão aumentar os prémios de seguro e aumentar as exclusões das apólices.

Este não é um problema exclusivo do setor segurador, uma vez que algumas es-timativas sugerem que quase metade da exposição dos bancos da zona euro está ligada de forma direta ou indireta a riscos de alterações climáticas.

Podemos, assim, facilmente perceber como a sustentabilidade, no caso, ao ní-vel ambiental, pode afetar de facto a estabilidade financeira. O fator ambiental tem um impacto direto no setor financeiro e este tem, por sua vez, de desenvol-ver competências para lidar com os novos riscos.

A experiência e o conhecimento adquiridos no setor financeiro são essenciais para orientar o financiamento para investimentos sustentáveis, por forma a tornar a nossa economia mais verde e mais sustentável.

Esta será, também, a chave para prosseguir o caminho definido no Acordo de Paris, em dezembro de 2015, que exige um montante de investimento adicional de cerca de 180 mil milhões de euros por ano nas próximas duas a três décadas.

O setor financeiro tem vindo a adaptar-se em resposta à crise financeira inter-nacional da última década. Este contexto pode permitir a adoção de soluções di-recionadas a uma economia verde e mais sustentável. Reorientar a afetação do financiamento para investimentos mais sustentáveis requer um salto no nível de consciência de como poderá funcionar o setor financeiro.

A União Europeia está a implementar diversas iniciativas para promover o pro-cesso de transição para uma economia circular, mais eficiente na utilização de recursos e com baixas emissões de carbono.

Para essa transição, muito do investimento em infraestruturas, tecnologia, equi-pamento e edifícios eficientes energeticamente terá de ser feito pelo setor privado. Todos os setores económicos têm, na verdade, de fazer a sua parte neste processo.

O

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este contexto, e em linha com a União dos Mercados de Capitais, a Comissão Europeia adotou recentemente, em março deste ano, um plano de ação para as finanças sustentáveis. Este plano é parte de um esforço maior para ligar o setor financeiro às necessidades específicas da Europa e para a economia mundial, em benefício daquilo que pensamos serem as necessidades do nosso planeta e da sociedade global.

Este plano de ação da Comissão Europeia tem três objetivos principais:

Primeiro, redirecionar o capital para investimento verde e sustentável.

Para isso, a regulamentação europeia deve fornecer uma harmonização clara das definições do que são atividades sustentáveis e quais os conceitos de obri-gações e de fundos de investimento verdes.

Esta harmonização é essencial para prevenir que certos produtos financei-ros utilizem abusivamente a marca “verde” ou, mais genericamente, a mar-ca “sustentável”, quando, na verdade, não cumpram os requisitos mínimos de sustentabilidade.

Segundo, integrar a sustentabilidade nas políticas de gestão do risco.

As propostas da Comissão Europeia clarificam os deveres dos investidores ins-titucionais e das entidades de gestão de ativos em matéria de sustentabilida-de, por forma a assegurar que estes agentes consideram a sustentabilidade nas suas políticas de investimento e na gestão do risco.

A Comissão europeia apresenta também um novo enquadramento para a cria-ção de índices de investimentos com baixas emissões de carbono, ou com im-pacto positivo no carbono, através de uma alteração ao regulamento dos índices de referência.

Em terceiro e último lugar, aumentar a transparência e os investimentos a longo prazo na economia e no setor financeiro, em particular.

A sustentabilidade e a manutenção dos investimentos a longo prazo estão de mãos dadas com objetivos ambientais e sociais. Contudo, algumas das atuais práticas de mercado privilegiam a obtenção de ganhos elevados e num curto período de tempo.

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ssim, uma das preocupações da agenda para a sustentabilidade tem de ser a re-dução da pressão para a realização de investimentos ditos especulativos, que procuram resultados no curto-prazo. Como referi, precisamos de assegurar que os agentes com projetos sustentáveis e produtivos obtenham financiamento, uma vez que este investimento irá re-forçar o crescimento económico e, assim, prevenir riscos futuros. Esta é uma tarefa absolutamente essencial para os intermediários financeiros. Tenho referido com bastante frequência a necessidade de que os decisores, a todos os níveis, introduzam o tempo como fator essencial no processo de to-mada de decisão. O tempo é uma variável muito importante e em economia é poucas vezes devidamente considerada.

Arrisco-me a dizer que a segunda maior crise da história do capitalismo deu-se porque encurtámos os tempos: de retorno; de materialização das mudanças; da sustentabilidade.

Isto não só aumenta o risco, como a desigualdade e gera níveis de investimento claramente inferiores aos desejáveis. Temos de evitar que isto volte a acontecer. E isto é também uma matéria de cidadania. O mundo está a mudar e a sustenta-bilidade tem um impacto material no risco e na rendibilidade dos investimen-tos. Se os intermediários financeiros querem servir melhor os seus clientes, en-tão os investimentos sustentáveis devem estar no topo das suas prioridades.

Os dados mostram que um aumento da exposição a investimentos sustentáveis raramente prejudica a rendibilidade, pelo contrário, muitas vezes melhora-a. Da mesma forma, ignorar o fator da sustentabilidade pode ameaçar a rendibi-lidade a longo prazo, uma vez que é expectável que o investimento sustentável seja um ativo seguro no longo prazo contra eventos negativos.

A estratégia europeia está desenhada para tornar os investimentos sustentáveis mais abertos e acessíveis e para exigir aos intermediários financeiros que inte-grem este fator nas suas decisões do dia-a-dia.

Este é o tempo. Hoje temos o contexto, os instrumentos e a oportunidade para agir.

A conferência de hoje é uma prova magnífica de que o investimento sustentá-vel deixou de ser um assunto para uma plateia reduzida; é hoje, pelo contrário, um setor em franco desenvolvimento. Devemos aspirar a tornar o investimento sustentável o “novo normal” dos mercados financeiros.

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ão posso deixar de sublinhar a excecional oportunidade que esta transição re-presenta sem apresentar os desafios que esta nos coloca. Esta transição deve decorrer a um ritmo equilibrado e deve manter a coesão social, não excluindo desta transição camadas importantes da população.

Temos objetivos ambiciosos no Portugal 2030 que exigem um comprome-timento de todos pela sustentabilidade: na descarbonização da sociedade, na transição para a economia circular e na valorização do território e da população. Recentemente, um estudo sugeria que os jovens portugueses estão particular-mente atentos às questões ambientais e tomam decisões com base em fatores ecológicos. Por outro lado, o mesmo estudo revelava que os fatores de sustenta-bilidade estavam entre os menos relevantes para os intermediários financeiros quando prestavam conselhos de investimento.

Para concluir, deixo uma palavra para a importância do papel que será desem-penhado pelos supervisores financeiros.

Em primeiro lugar, para prevenir, como já referi, a utilização abusiva da mar-ca “verde”. Aquilo que é classificado como verde tem de ser efetivamente res-ponsável em termos ambientais. De outro modo, estaremos a colocar em causa o sucesso deste projeto, a reputação dos agentes e a integridade dos mercados. Depois, destaco a importância de aumentar a consciência dos investidores para a importância do investimento sustentável, por exemplo, através da sua inclu-são no Plano Nacional de Formação Financeira.

E, por último, apesar da clara urgência nas matérias ambientais, realço a im-portância de não nos esquecermos dos fatores social e de governação.

É este, a meu ver, o caminho a seguir. Cabe-nos, a todos, agir.

Muito obrigado e votos de um excelente debate.

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Mesa Redonda“O que é sustentávelem Finanças?”



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COLIN MAYERCátedra Peter Moore de Estudos de Gestão, Said Business School da Universidade de Oxford

FILIPE SANTOSProfessor Catedrático de Empreendedorismo Social, Católica Lisbon School of Business & Economics

JOSÉ DE MATOSConsultor do Conselho de Administração, Banco de Portugal

PETER KERNANDiretor Executivo, S&P Global

TÂNIA DUARTECofundadora e Diretora de Operações, Conduct, Culture, People Research Foundation

UGO BASSIDiretor, Direção-Geral de Estabilidade Financeira, Serviços Financeiros e União dos Mercados de Capitais (FISMA), Comissão Europeia

Moderador

RUI PERES JORGEDiretor do Gabinete de Comunicação, CMVM

MESA REDONDA: “O QUE É SUSTENTÁVEL EM FINANÇAS?”




Da esquerda para a direita:

JOSÉ DE MATOS, Consultor do Conselho de Administração, Banco de Portugal;

FILIPE SANTOS, Professor Catedrático de Empreendedorismo Social,

Católica Lisbon School of Business & Economics;

PETER KERNAN, Diretor Executivo, S&P Global;

Moderador: RUI PERES JORGE, Diretor do Gabinete de Comunicação, CMVM;

TÂNIA DUARTE, Cofundadora e Diretora de Operações, Conduct, Culture, People Research Foundation;

UGO BASSI, Diretor, Direção-Geral de Estabilidade Financeira,

Serviços Financeiros e União dos Mercados de Capitais (FISMA), Comissão Europeia;

COLIN MAYER, Cátedra Peter Moore de Estudos de Gestão, Said Business School da Universidade de Oxford.




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RUI PERES JORGE

Sustainable finance is a fast-growing topic among policy makers and market participants. Its importance is explained by the climate crisis and the call for urgent action on that front, but also by the recent financial crisis, the alar-ming wealth inequality and the growth of populist movements.

This trend requires us to search for answers to questions such as: How im-portant is the inclusion of environmental, social and governance factors in financial markets, and in the economic decision process in general? Can we follow sustainable principles and still maximize profits, as expected by investors and shareholders? What are the risks of neglecting a more sus-tainable economic system? What role for central banks, governments, the European commission and market participants?

To help us understand this and other elements we have gathered an extraor-dinary panel. Unfortunatelly, due to technical problems the first few minu-tes of the conversation where not recorded, but one can still benefit from the insightful views of the panellists.

FILIPE SANTOS

Thank you very much.

There are nowadays mechanisms to customize the investments to a sense of the welfare for the shareholder. I can, for example, say I care a lot about education, I care about the environment, and I care about governance (i.e., that people sepa-rate chairmen and CEOs and that they have good governance practices). I input this information into the machine, and it creates a portfolio for me, with assets in different markets that are biased towards education, environment, and governan-ce. So, I think we are going beyond a financial system where we cared about one thing only (shareholder value with return) to one where the values and interests of different types of shareholders are taken into account in the investment decision. The ideas “I care for the long-term, I care for the environment, I care for governan-ce” are getting more and more incorporated into the financial system, and we ho-pefully will have a financial system that not only does the necessary maturity and liquidity adjustments but also the investments with the long-term interest of the society. I think we are at a stage where this will become increasingly possible, and technological advances will allow us to do that very efficiently with lower transac-tion costs.




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RUI PERES JORGE

This relates to how fast can sustainability develop. But, what are the ways of transformation that we can surf to make it faster? Digital evolution has a roll there, I think. I’ll move now to Peter. How can credit risk incorporate envi-ronmental, social, and governance factors? Which factors are taking the lead? How does it impact, positively or negatively, the activities? How do you view this debate on which factors are more important or should be more important?

PETER KERNAN

First of all, let me thank CMVM for organizing this event and also inviting us, it´s an absolute pleasure to be here. I work within the credit ratings part of S&P Global. A credit rating is a relatively simple product. With a credit rating, we are basically gi-ving an opinion about how likely it is to get you money back if you lend money to an entity. If you lend risk capital to an entity, how likely it is that you’ll get your interest when it’s due and how likely it is that you’ll get your money back when it’s due. What we think about the way that companies, banks and issuers can meet their financial commitments, create value, generate profits, then convert those profits into cash flows, and those cash flows are then used to pay interest and to repay the debt.

We’ve started formally looking at governance risks in 2000, we have been thinking and incorporating environmental risks for 12 or 13 years. But everything we do in ter-ms of thinking about those factors we do through the quite simple prism of saying: harder ESG factors for this entity is likely to lead to its profits going up, going down, its solvency weakening or strengthening; for a bank, its capitalization ratios be strengthening or not. In terms whether one of the E, S or G is more or less impor-tant than the other one, I would say: governance applies to basically everything we raise, so governance is really all-pervasive, because governance obviously determi-nes how the entity makes decisions and often good governance and good decision making processes lead to good decisions which could be beneficial for all sharehol-ders. And in terms of looking at the E and the S, and thinking what is most impor-tant, it can be entity-specific and industry-specific and country-specific. Through my time in S&P, I’ve analyzed, for example, utilities, telecom companies, retailers, or gas companies. For utilities, if you’re a generator, probably the E is likely to be more material, more of a driving factor of your creditworthiness going forward. That’s not to say the S is not important; it is important because you have customers, you have a brand, you have a reputation. If you do environmentally damaging things through your production that may damage your reputation, your brand and your market sha-re. For banks, past governance has been probably a more significant risk driver.




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Over the last few years, we’ve published several studies showing how the E, S, and G factors have impacted our credit ratings. Between 2015 and 2018, we found about 400 rating actions where an E, S or G factor was a driving factor of the ra-ting action. So, E, S and G are certainly meaningful and material; going forward, we would think that it probably becomes even more material and more meaningful for the ratings.

RUI PERES JORGE

We argue that, for instance, emissions and CO2 would be quite easy to mea-sure. However, I am not sure if it is quite easy to measure the social impact of something or governance issues. Therefore, I would argue that this is also a factor in why climate sometimes takes a bit of the lead.

PETER KERNAN

Yes, that is probably a fair assessment. If we think about the environmental factors certainly, if you produce and you emit carbon, and you have to pay to buy the carbon permits that are very tangible. We can see what that is going to cost you in terms of your profits and your cashflows.

I can go back to 2008, just after the emissions trading scheme had sort of got going and we at that time downgraded a coal power generation from invest-ment grade to non-investment grade primarily because we were able to tangibly and visibly see that that company’s profits were going to drop quite sharply be-cause they had to buy carbon permits and the costs were going up. That’s quite tangible.

On the social side, it can sometimes be a little more nebulous. Several months ago Starbucks had an issue: in one of their branches they had a problem because some black people were waiting there, there was a big kerfuffle, the police were called. All of a sudden, something that, ahead of time, I don’t think any of us could have foreseen could have become massive, which we would have seen as a social issue could have become very problematic. But the company reacted very quickly, and they closed every branch in the US for a day to give training to their employees. This is a super example of probably a very well-governed, well-managed company. A social factor materialized that could have been very, very costly because they might have lost market share very, very quickly, but they dealt with it super, super fast and there was no sort of financial damage. With something like that, it wouldn’t have an impact on the credit.




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RUI PERES JORGE

The ratings industry, in general, argues that it is not enough to incorporate the long-term effects of climate in credit risk. Is it possible that you are not putting into your credit ratings as much weight as you should on the costs of climate change?

PETER KERNAN

Our ratings are long-term ratings, so we are providing an opinion about the long-term creditworthiness. One of the inputs for many of our ratings is our financial forecasts. Those financial forecasts tend to be done over to a maximum 5-year horizon becau-se that is the horizon of which we would say we have good visibility about the core drivers of the business model and the revenues, the earnings, and the profitability. If for an entity environmental and social risks are tangible, visible and we think they’re going to be driving factors, we’ll incorporate them. When it comes to thinking about longer-term climate risk, I think that, to be candid, one of the challenges is to know exactly when and how the risks will crystalize and also if the entities we rate have the ability to act and react. We wouldn’t see it necessarily as appropriate today to say we need to take a rating down because something may happen. We think it’s going to ha-ppen at a macro level, but the impact on this entity is not clear. As it becomes clea-rer that there might be a micro-level impact for that entity, that entity can then take action, can choose to sell a business, can choose to buy a business, can choose to diversify and invest in renewables; they can also see opportunities.

RUI PERES JORGE

So, climate risk might be mitigated by a good governance structure? In that sense, they can reinforce or compensate each other?

PETER KERNAN

They can, and for many companies climate can create opportunities as well.

RUI PERES JORGE

José, I’ll come to you now. You’ve mentioned that Central Banks can offer




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some help or act on 3 dimensions: regulation, financial system stability and monetary policy. Let’s go a bit into stability and picking up on what Peter was saying on the transition risks for the banking sector and for the financial system, if we put too much weight on the risks of climate change, the assets that banks have might depreciate too much, and this needs to be managed. In other words, one may try to move to a more sustainable economy, a more sustainable climate and climate condition but, at the same time, that might be a new risk on the system that you are protecting. How do Central Banks look at this?

JOSÉ DE MATOS

It is a very interesting question. I’d like to make two comments. First, we can perform comparisons when we take all the information from the past and try to extract con-clusions for the future. In the climate area, my impression is that the past is not suffi-cient, and we have to study and to imagine other instruments, how to model and how to simulate risks for the future; and this is one of the difficult questions in this area.

Second, the Bank of England recently published an evaluation of the British banks on these aspects, and they cconcluded that 30% of the banks were responsible, meaning that they take the usual corporate and social responsibility perspective. The survey found that 60% of the banks recognize that climate change poses fi-nancial risks. I presume they are already taking into account the impact of climate change on the activity of banks from the medium-term (3- to 5-year horizon). Only 10% of the banks have a long-term strategic approach to this question. If I cou-ld imagine this type of things in Portugal with my short experience in the banking sector, in the Central Bank, I would say Portuguese banks are in the first group (res-ponsible banks, with nice social responsibility reports).

Let me tell a short story on this. In 2011/2012 I was at Caixa Geral de Depósitos and I tried to prepare a good social responsibility report. People told me that most of this type of reports were made in the industry with the help of external consultan-ts, namely auditors or advisors with experience in these matters. And then I asked: “I would like to have a benchmark. What is the good example we have in Portugal?”. And guess what? The good example was a bank that does not exist anymore. So, I became very, very humble when looking at these subjects because we seem to know all about it, the information is published, the information is analyzed, we have the certification, and then the disasters occur (and in my story it was not climate change, I presume). We have to study much more; we have to understand much more what this is all about.




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RUI PERES JORGE

There is the idea that it is easy to have the concept of sustainable finance or what might sustainable factors be, and that the difficulty lies on its integra-tion in the governance structure, in the company’s strategy, and have it really making a difference on the decisions you make. Tania, could you please ela-borate on this?

TÂNIA DUARTE

It has to have. Banks, for example, have to have a real and clear commitment in their internal policies. They have to be transparent with all stakeholders and sha-reholders, so they are properly informed of what it does mean, what is the mate-riality of ESG factors because these don´t need to be the same for every institution, it depends on their global, regional or even local areas of influence. They need this urgency of transparency to help them to decide and to be more informed, to put the right questions about what will be the future of banking or sustainable finance.

RUI PERES JORGE

But do you think that management has the tools, the concepts, to move into a more sustainable approach? Sometimes we get a feeling that we may have to be sceptic, as José was saying, about all the sustainability reports that are published…

TÂNIA DUARTE

Well, they need to decide what is the purpose of the report and they might have the tools. The issue is that ethics is a very personal and responsibility question of each individual and organization. They might have the tools but the decision at the end of the day is how they use those tools and if they will put all the effort to ethic’s poles of all the good and not so good things that could help stakeholders and sharehol-ders to have the right decision and to act according to their interests.

COLIN MAYER

I would like to pick up the points that both shared about the importance of gover-nance. I think it is absolutely right that there has been a great deal of whitewashing,




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I call it greenwashing, concerning the ESG issues. And I want to start with an exam-ple of one of the most successful banks in Europe, and by success I’m referring to sustainable finance, but not sustainable in the sense of just environmental but what we thought about a few years ago as sustainable, namely survival. It was a bank that needed no bailing out in the financial crisis, that has had steadily increa-sing returns to its equity holders before the financial crisis, through the financial crisis, after the financial crisis. It has one of the best capital ratios of any bank and one of the best credit ratings. It’s also one of the fastest-growing banks in the UK, but it’s not a British bank; it’s a Swedish bank. What is rather interesting about this bank is that it really does follow the principles I was describing earlier on. It has very clearly defined purposes. The first purpose is to put its customers first. The second is to have the lowest cost of any of its rival banks. So, it’s got a clear finan-cial objective as well as a clear objective in terms of who it services. The key to its success has been its values. It is a basic principle, the humane principle that it puts not just its customers first but emphasizes the importance of its employees and it does that by delegating decisions; the mantra of the bank is “the branch is the bank,” and the bank manager has discretion over basically any decisions (about len-ding, princing, etc.) that they are taking. That allows the bank to build up relations of trust because the branch managers don’t have to refer everything up constantly. And that has generated more loyal customers, that have given rise to revenues in return to the bank and greater financial stability of it. I think this really is a good illustration: it’s not just what the bank said it is doing; it is what it actually does in terms of the implementation of its governance and values.

RUI PERES JORGE

Colin, there might be kind of cherry-picking, to show us a good example of success which surely has a lot of factors that are contributing to it? At the end of the day, if it’s working so well why is the rest of the financial system not just following it?

COLIN MAYER

Some studies demonstrate that culture is one of the most important determinants in corporate success and really does create values associated with it. Why is it so hard? For the very reason I was just telling you about: even if the board of the com-pany wants to do this, it’s very difficult if you don’t have your investors behind you. Handels Bank is listed on the Swedish stock market, is actively traded, it has got very liquid investments, but it has two dominant shareholders. Who are they? One is The Oktogonen Foundation, and the other is Industrivärden, a Swedish holding company.




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Who owns Industrivärden? Predominantly Handels Bank. So, there is a cross-sha-reholding. Moreover, stable shareholders allow the bank to implement its policies.

RUI PERES JORGE

It seems that “you do need to have the purpose, and once you have it, a clear purpose may be easier to implement”. One of the things that Filipe commented on was the idea that once you’ve taken the impact out of being just a secondary variable (i.e., we would think about impact as the purpose of your existence) then an all-new world of opportunities arises. I would like you to elaborate a little on how important is this idea of changing your perspective on how you view the financial systemis and how it can make changes happen faster.

FILIPE SANTOS

Let me answer that twofold. One is by addressing a bit of the mainstream market, the other is more of the innovation element of the market. On the mainstream market, think about let’s say 2 companies, one a resource-intensive company that is extracti-ve of resources, and the other, for example, an educational company that empowers youth to be better citizens.. They both provide the same profit and the same opportu-nity for investors in terms of profit, and both have incorporated ESG. Which one would you prefer to invest in? Of course, it depends on the values of the investor. But if you take the point of view of the society, where should society allocate its resources? I think that most people would clearly opt for the educational one, the one that creates intangible valuable resources. But our financial system currently does not allow us to clearly distinguish, given a set of risk-adjusted returns, the societal quality of those investments. That’s what ESG is starting to bring. Could we have a system in the futu-re where a company reports its profits, and its impact-adjusted profits? Just imagine we have corporate accounts disclosing their standard financial accounts but there is a mechanism using the existing information where we can calculate profits based on societal impacts – the positive spillovers, the negative spillovers…. Of course, that’s impossible to measure. But we are making so much progress!

RUI PERES JORGE

It’s not impossible, and it’s difficult to see how one will give more relevance to an indicator like that (impact-adjusted profits) compared to just the clear bottom-line figure I know it’s there.




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FILIPE SANTOS

The fact that it is difficult never prevented us from achieving anything. We have to go small step by small step, and the ESG is a first step; maybe having some calcu-lation of positive and negative externalities that certain companies create might help.

There is a company from the apparel clothing sector that, 7 or 8 years ago, com-puted its negative externalities in the respective value chain. What was the impact they were having on the environment and communities? At that point it was about 100 million of negative impact. They didn´t do it again, but it was possible to do, and if you know what your negative costs are, you can start offsetting, you can change your practices. Once we measure the positive and the negative things, we can ac-tually manage them better.

In terms of the mainstream, that is an area where I think we will see a lot of pro-gress; we will start calculating the negative and positive impacts that societies and companies create, and companies that are purpose-driven, values-driven and focused on the area of societal interests and benefits will be incentivized and will be rewarded. On the innovation side in the sustainable finance world: impact investing is when we support purpose-driven businesses that are being created when we support entrepreneurs. There is a segment of social invest-ment or impact investing that is trying to create mechanisms. I identify the in-novative entrepreneurial companies that are bringing positive externalities that prevent societal problems from occurring, and how you can finance and support them for the long-term. There’s a new and small segment, maybe less than 20 billion of assets under management, but it’s growing very fast, and it identifyes pioneering companies that are solving some of the societal problems (that other companies have not been able to solve). So, if you take these two perspectives, the innovative segment and the mainstream impact measurement segment, I think we have kind of a charter for this incorporation of value creation into the core of finance.

TÂNIA DUARTE

When you speak about impacts, you should not forget that the direct impact of the business is easier to measure. It is easier to look only at the building and say: “Yes, we’re better for the environment using less water or less paper”. But you should not forget, even in the banking industry, that there are indirect impacts. If you have a big picture of that, you have a better view of what you could actually change or what you could change in a business or what would be our decisions to move towards sustainable finance.




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COLIN MAYER

I agree with Filipe’s point that the idea of having values-based, as well as value-ba-sed investment funds, are important. Very prominent economists and Nobel Prize-winners consider that we need to move towards that. And I think it’s fine, apart from the fact that there is one serious element amongst all of those and it’s called dis-tance discounting. That is to say, I do value education and investing in education a great deal but predominantly for my children. And I do value society a great deal, but it’s predominantly my street and my local community. Actually, it’s extremely difficult to get people to think beyond that. Although in principle it is a nice idea to think about impact investing as being a way of solving this problem, it’s not going to impact enough on the 100 trillion dollars of assets under management.

RUI PERES JORGE

This leads us again to you, Ugo. We’ve seen that there are lots of tensions here: society versus individual, short- versus long-term, value versus wel-fare, profit versus purpose. You are trying to do policy or at least to crea-te policy around this and present solutions that can be convincing for all stakeholders around the table. How do you view this, and how might the European Union contribute to accelerating changes with all these conflicts?

UGO BASSI

This is the crucial point, the balance between all these factors, which are some-times in tension with each other. The contribution that the policymaker can give to this change of culture (because what is needed is a change of culture, and this needs to be encouraged) is to play with transparency. This is a little bit the exercise that we are trying to do and to promote. For example, when it comes to asset mana-gers, the obligation to report and to disclose what they do can contribute and can inspire a reflection on that. This, of course, is going to be extremely helpful to fill in the gap between investors and companies.

The same type of exercise happened with the non-financial reporting directive which now applies only to big corporates (six thousand, which is nothing), that we would like in the future to expand for it to cover a much wider number of companies. I think that the policy-maker should refrain from identifying and setting targets and imposing compulsory targets in areas where, as you say, the personal, the individual choice is so important. The policymaker should help and create tools, identify as many tools as possible, to create a toolbox and to cooperate with the movements which are happe-




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ning spontaneously. After all, this is not a top-down exercise. This is an exercise that has a bottom-up or a combination of bottom-up and top-down. So, the policymaker, at least at the European level, is trying to support a movement which is already happe-ning in the society and which needs to be encouraged even more to get the best of it. When you say “who has to fix the problem?”, my answer would be that it needs to be a combination of everything: governance, regulators, investors, issuers and people. Another example that we are studying along these lines that will probably beco-me a concrete proposal is to basically insert in the questionnaire which the finan-cial advisors have to discuss with their retail clients, when retail clients go to their banks and ask for advice on where to put their money, we are studying an obliga-tion to insert in the questionnaire questions related to sustainability: for example, are you willing to devote part of your money to a sustainable investment? Secondly, and this is more delicate because it goes a little bit into a more intrusive approach, are you willing to renounce to a portion of your returns, at least in terms of short--term returns, to contribute to sustainable objectives or to hope for a higher long--term return? This is in line with the strategy that we have decided to adopt at the European level, which is basically to create the conditions for this change of cultu-re to happen (through the highest possible level of transparency).

RUI PERES JORGE

Thank you, Ugo. We have just a few more minutes, which I would like to use with the questions from the Audience.

PARTICIPANT 1

If you believe in the story that the financial, social, and environmental returns are coming together, and if you start a candid discussion that sustainability is about giving a financial return, then I’m afraid we are doing one step back to the old story. I’m wondering how you see that.

PARTICIPANT 2

Do you find that an economic model of perpetual growth trying to decouple GDP from energy is going to be very difficult? In Germany, for example, Angela Merkel got away from atomic energy only to reinvest more in carbon-producing energy. You look at China: they are the biggest investor in sustainable energy but car-bon-producing energy is on the rise. Is Europe moving ahead, but no one else is following?




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PARTICIPANT 3

I have two questions. First: don’t you think that you have to go back to the basics in terms of the economics we teach at universities? If we are still teaching the same old economic models, we are perpetuating the same type of linear thinking into our financial system. What can be done about it? Second: the issue is about metrics and indicators. Why do you keep using GDP as a way to compare countries’ econo-mic performance? We surely need other types of indicators to be at the forefront of this transition.

UGO BASSI

We are going to study the question and how to articulate it. You shouldn’t be gi-ving the same story; pursuing the same objectives means reducing the revenues. However, this is a clear issue, and you cannot think of creating a dialogue between advisors and investors without talking about returns. Studies show that there is a need to take this into account. How do we modulate how to articulate? Of course, we are studying all that and we will try not to fall in the trap of giving in the old story so that we take a step back.

Regarding the point raised explicitly about Europe going ahead and the others doing nothing: I have complete evidence that we, at a global level, are working on it, except for regrettably one big and extremely important jurisdiction, which is certainly not particularly enthusiastic about these issues and the related en-vironmental problems. Thus, I think all the rest of the world is following. I am just back from Asia where we held our yearly UE Asia-Pacific Forum where we discus-sed many issues with their governments and jurisdictions, and sustainable finan-ce was extremely high on the agenda not because we had to teach them what to do but because we wanted to hear and learn what they are doing on their initiati-ve. China is jumping ahead, and it’s certainly doing even more than we are doing. Surprisingly, jurisdictions which are not extremely vocal in the global debate, like Malaysia, for example, they are doing a lot as well. So, we would be surprised by seeing how this movement is shared and pushed almost everywhere in the world, regrettably with a big exception. Within Europe the way the structure of the indus-try is distributed and the fact that one big country like Germany has a very indus-trial structure doesn’t prevent them from being completely and fully on board on the project. The first discussions that we had within the Council showed that the-re is a great support at the level of the member states and in the Parliament there is also strong support.




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RUI PERES JORGE

We are just getting to the end of our panel, and I would like everyone to have a word. Peter, let me make a twist to this idea of Europe going first and taking some risks. I think it was the Irish that at some point said they were taking the heat in the banking sector for the rest of Europe when the crisis arose. So, coming to climate: do you view this idea of Europe taking more risks in being the first regarding these dimensions compared to other regions of the world? Or do you follow this idea of Ugo that everyone is making a big effort?

PETER KERNAN

I’ll be relatively brief because there’s the risk of going beyond my area of compe-tence. One thing we do observe for us as a credit rating’s agency, and by this I mean what’s critical in terms of thinking about the future implications of E and S in parti-cular on returns and cashflows, is policy: what policies are implemented, what are the details of the policies and what impact will those policies have on behaviour (of customers, of companies, how they govern the decisions they’re making, what they earn). Certainly, if I think about the utility sector and carbon pricing, obviously the European Union has been in the vanguard there. In terms of the introduction of carbon pricing, I know other jurisdictions have followed. Perhaps at a national level there isn’t the same level of engagement but, at a state level (perhaps not so much at a macro level, but rather at the micro level, depending on which coast you’re on) I think there’s a lot more activity.

RUI PERES JORGE If we want to have an impact we need much more than to impact industry. What could be the engine of change in the financial sector that could accele-rate sustainability?

TÂNIA DUARTE

We need to put all the information on the table, try to explain concepts, try to un-derstand the purpose and all the subjects around, and create the consciousness in people working in the financial sector. They need to be on board, and they need to understand why they are doing it if they believe in it, what is the meaning for their company, and to work towards that goal. It’s about thinking not only on the impacts




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but also how the organizations can move forward, about thinking more globally be-cause they have this opportunity to do something in terms of sustainable finance. Discuss and disclose, and the culture of the organizations should be on the agenda to move forward.

RUI PERES JORGE

José, how do you think we can put this for discussion or accelerate change in the Portuguese financial sector?

JOSÉ DE MATOS

I think the attitude here in Portugal is that these questions are very, very impor-tant but not so important as others because we have had some difficulties in the financial sector; we are in the process of recovering and solving some more urgent problems and it is a sort of a luxury to have these questions of green financial and sustainable development and so on.

Well, it is not. We need to go beyond the current phase and, of course, initiati-ves like this one are important to make people think about sustainability. I wou-ld like to mention that the work on taxonomy is very important; we have to know exactly what we are talking about when we discuss these issues because someti-mes some go a little beyond, and use these activities for public relations and the like. Preventing greenwashing in this area is very important.

We need very good information, a very good taxonomy, and we have to know exactly what we are talking about. This is important for internal auditors, exter-nal auditors and credit rating agencies for we need to trust the information that is published. I would say that this aspect of having very precise and high quality information is very important for the financial system. And, of course, supervi-sors are important.

RUI PERES JORGE

Filipe and Colin, could you address the questions of what should we teach and how we should measure what is sustainable in society? Should we use GDP?




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FILIPE SANTOS

I’ll tackle mostly the first question, in terms of what we teach and what we shou-ld be teaching. Academics and universities in general are the most innovative, but also the most hard to change at the same time. In some research areas we are on top of what’s happening, but in other areas we are just teaching based on manuals that are relatively old and don’t reflect current realities. There is a lot of ongoing re-search in some of these new topics, especially at more advanced Master level cou-rses, there is a lot of new courses, a lot of new ideas around sustainable finance, around impact investing, around social innovation, and maybe a bit less on the basi-cs, in Economics and Business. There is a lot of appetite from the students across the world for topics related to social sustainability, impact and innovation. I see a lot of movement in the fields of Business and Strategy, Operation’s Management and Economics. For example, Economics is starting to incorporate some of the-se new ideas into economic models. I see less advancements in the field of finan-cial academics, maybe because the maximization model is such a strong and well established one that they seem to have a hard time moving away from that model to incorporate different dimensions and new ideas. I think the same happened in Economics, with neoclassical economics and the rational decision-maker. But so-mehow we have been able to move away from that narrow mindset of what an eco-nomic agent looks like, and how it makes decisions. I think that in Finance we need to make a lot of progress in order to incorporate this dimension, I call it impact of value creation, and not only to capture what is represented by the risk-adjusted re-turn mindset. But we are on the right track, slowly but surely getting there.

COLIN MAYER

This is not going to work if it’s the case that one is giving up financial returns to create sustainable finance. But Filipe was also right in pointing out the fact that the underlying problem is the missmeasure of those returns. It’s not going to be sol-ved through valuing things like biodiversity; it’s simply impossible because we don’t have the prices. But we should recognize the fact that, as to the energy example, a resource extraction company that extracts resources is not allowing for the cost of replacement of the running down of that resource, let alone for the cost of cleaning up the environment. So, it is simply misstating profits, and it’s what I call “fake pro-fits” and not giving a fairer presentation of what the true underlying profits of tho-se activities are. And that comes to the question about GDP. We are doing exactly the same with GDP: we are failing to account for the maintenance depreciation of human, social, and macro capital alongside material capital, so we are systema-tically misstating income at a national level as well. And what should we be doing in terms of education? We should move away from a freedom doctrine that says that there is one and only one social responsibility: business to increase profits.




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We should start our courses by saying: what is the purpose of the business? And then everything, Accounting, Finance, Marketing, Operations, Management, etc., should follow from that.

RUI PERES JORGE

Well, we have no more time and need to close this panel. Thank you all, it was a very interesting discussion.




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Mesa Redonda “Investir em sustentabilidade: o que ganhocom isso?”



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ANTÓNIO MIGUELDiretor Executivo, Maze; Laboratório de Investimento Social

JORGE MOREIRA DA SILVADiretor, Direção de Cooperação para o Desenvolvimento da OCDE

MARGARIDA COUTOPresidente, GRACE - Grupo de Reflexão e Apoio à Cidadania Empresarial

PAUL TANGMembro do Parlamento Europeu, Aliança Progressista dos Socialistas e Democratas

WILL MARTINDALEDiretor de Políticas, UNPRI – Principles for Responsible Investment

Moderador

FILIPE SANTOSProfessor Catedrático de Empreendedorismo Social, Católica Lisbon School of Business & Economics

MESA REDONDA: “INVESTIR EM SUSTENTABILIDADE:

O QUE GANHO COM ISSO?”



MESA REDONDA: “INVESTIR EM SUSTENTABILIDADE: O QUE GANHO COM ISSO?”


Moderador: FILIPE SANTOS, Professor Catedrático de Empreendedorismo Social,

Católica Lisbon School of Business & Economics

ANTÓNIO MIGUEL, Diretor Executivo, Maze; Laboratório de Investimento Social

JORGE MOREIRA DA SILVA, Diretor, Direção de Cooperação para o Desenvolvimento da OCDE

MARGARIDA COUTO, Presidente, GRACE - Grupo de Reflexão e Apoio à Cidadania Empresarial

PAUL TANG, Membro do Parlamento Europeu, Aliança Progressista dos Socialistas e Democratas

WILL MARTINDALE, Diretor de Políticas, UNPRI – Principles for Responsible Investment.




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FILIPE SANTOS

It is a pleasure to see you all here again. We are going to continue the debate on sustainable finance for different stakeholders. It’s interesting to see how far a relatively recent movement has evolved (with 10 or 12 years). Minister Centeno maintained that sustainable finance may become the new norm. I think it’s already, to some extent, the new norm. In 2010 managers and in-vestors would say: “Well, these are interesting ideas about sustainability but I have a fiduciary responsibility to create shareholder value to maximi-ze my returns; those environmental and social issues are agreeable, but I’m not sure what I can do with them”. Now, in 2018, people perceive that you should not ignore incorporating sustainable considerations in investment decisions. Some numbers that were mentioned today provide evidence that many people are already doing that. We have around 100 trillion dollars in the world that is invested taking into consideration ESG factors. We obser-ve the development of new finance segments, finance for development, im-pact investing. There is also a lot of innovation in terms of regulation, trans-parency and disclosure. To discuss these topics, we have a wonderful panel with expertise in the different areas that I’ve mentioned.

I would start by asking the audience how you look into this issue of sustaina-bility and finance. The question is: why should we care about incorporating sustainability in finance, why is this issue of sustainability and finance so im-portant? We offer different options: i) the promotion of stable and equitable growth in our economies; ii) the sustainability of the companies themselves as they incorporate these considerations; iii) the efficiency and robustness of the financial markets, and iv) the offer of new investment opportunities.



Why shoul we care about sustainability in finance?

It improves sustentainability

for companies

It offers new investment

opportunities

It promotes more stable and equitable

growth

It promotes more efficiente and

robust markets

11% 9%

75%

5%



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We have a clear winner, with 75% of the votes: the promotion of more stab-le and equitable growth (the idea of equity, reducing inequalities and stab-le growth). These are interesting results, and I think they will allow several opportunities for discussion.

I would like to start with Will Martindale, from the United Nations (UN), na-mely from PRI – Principles for Responsible Investing. In 2005, Kofi Annan, Secretary-General of the United Nations at the time, challenged the financial system to start thinking and incorporating elements of sustainability into investment decisions. This challenge led to a very successful UN initiative on the principles of responsible investing, with voluntary adoption of a set of principles allying with the incorporation of the ESG factors. There are more than 2000 signatures and more than 80 trillion of assets owned by institu-tions that have signed these responsible investing principles. We now have a comprehensive view of what investors and what the key stakeholders are doing. Are they adopting and incorporating sustainability principles? What are some of the trends? What is the rate of growth, is it pausing or accelera-ting? What could you say about the adoption of these sustainability principles in finance and where do you think things are heading?

WILL MARTINDALE

Thank you, Filipe. Congratulations, Gabriela and everyone on the CMVM team, for putting today’s conference together.

I think that we broadly see three generations of responsible investment. The first generation is about awareness. It is about investors’ understanding that there are non-traditional materials that, firstly, influence the long-term value of the corpora-tion and, secondly, are in line with the values and preferences of the savers on who-se behalf they’re investing. The second generation is about integration. Integration describes how organizations like mine have played their role. Indeed, investors have started to integrate ESG factors in their investment decisions. I want to quote back something you said, Filipe: “you cannot not incorporate ESG issues”. Turning the tau-tology around: you must incorporate ESG issues. I think that currently there is a re-latively well-understood concept of investment that requires investors to consider ESG issues as a core characteristic to assess corporate values. I actually think we are on a third generation of responsible investment, that considers the outcomes of the investment activity. If I invest in company X, it has a real-world outcome, whether positive or negative. So, consideration must be given to how ESG issues affect the investment decision, but also how the investment decision affects ESG issues.





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The growth of responsible investment has been quite remarkable. I want to make one other comment around the growth of policy as a support for responsible in-vestment. We have undertaken a mapping of the 50 largest economies in the world to understand the regulatory instruments they are using to either stimulate or ac-quire responsible investment. We found almost 400 regulatory instruments, 50% of these were introduced in the last three years; it’s a hockey stick growth, and we see that this trend is going to continue.

I do want to comment on the poll, if I may. I’d like to challenge the word “care” that was in the title. I’m not asking you to “care” about ESG issues, this is not a chari-ty. I wouldn’t call it a movement either. I would say that ESG in sustainability is-sues is a necessary and core characteristic in determining the corporate value. You’re failing your fiduciary duty if ESF factors are not considered. There are three scenarios. The first scenario is that we ignore ESG factors, markets continue to be unsustainable, and, essentially, we have climate events that could be incredi-bly destructive. The second scenario is that policymakers do respond but perhaps respond too late; and buy responding too late that response is disorderly. There’s possibly a third scenario, an orderly transition, that requires us to act now; I think we’re seeing some leadership from Europe, and arguably, this conference taking place today is demonstrating that too.

But we really need to move to a regulatory environment that clarifies and codifies ESG and sustainability issues. So, as we are being hosted by CMVM, I do have three challenges for you. Firstly, I would encourage you to endorse and to support com-panies in your market to incorporate the Taskforce for Climate Related Financial Disclosures (TCRFD) recommendation. The second is to understand how your go-vernment’s commitment to 2 degrees of warming is interpreted in your mandate as a market regulator. Thirdly, I would encourage you to prepare a detailed guidance about the source of ESG disclosures that you would like to see from the companies that have their jurisdiction in Portugal, in order to ensure that investors have the in-formation they need to allocate capital to more sustainable companies. Thank you.

FILIPE SANTOS

Will raised very important points that we will follow up on the panel, namely about the third generation of responsible investing. There is a shift in the outcomes, because certain outcomes can actually lead us to broadly achieve the agenda for 2030 sustainable development goals. But Will also mentioned the issue of increasing regulation, the need for some standardization in the measurements, and the need for disclosure of sustainable data. On the topic of disclosure, Paul, you are a Dutch member of the European Parliament, fi-





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ghting for a healthy financial sector. I think many of us are together in that fight. Could you please give us your standpoint from the European Union and the European Parliament? What do you feel is necessary to move the agenda forward? What role can regulators actually play?

PAUL TANG

The topic of sustainable finance has been discussed for some time, but now you see it accelerate. At the end of the day, it’s a reset of the financial sector. And I think that policymaking in Brussels pushed the topic of sustainable finance by introducing the sustainable action plan. Of course, an action plan needs actions. I’m working on one of those actions, the “Disclosure by due diligence”. In my opinion, there is a change in the fiduciary duty or the duty of care; you have the duty of care for profits, for your clients, but you also have the duty of care for people on the planet. So, for me, that´s a change when the due diligence asks the financial institutions for all financial pro-ducts to identify, mitigate, prevent and report on ESG risks and impacts.

FILIPE SANTOS

Paul, just to clarify: the disclosures are amended for the financial operators and also for the corporations?

PAUL TANG

No, one of the discussions we had was about how you need to change disclosu-re in the companies. And we’ve tried to tackle that from this side, but then again, the most important for me is the change, in the mandate and in the fiduciary duty. I think Colin Mayer was right to say that it’s not always about measuring. What we ask is to consider impacts and risks, and you cannot detect that by the traditional, historical backward-looking analysis; it requires a forward-looking analysis. That is why we need a reset in the financial sector.

I must say that I’m getting more optimistic as I have more discussions. Two weeks ago, I was with a network of central banks and, for the first time, they adopted the idea of sustainable finance. I also see asset managers relatively positive. So, we already see this voluntary movement, and we have frontrunners; but what the le-gislation should do is to push the idlers and bring them to the frontier. Yesterday, I was at a conference where GRI presented disclosure on taxation, which is going to





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be on the public discussion. I think people really work in different areas to develop it, and that´s what we need.

FILIPE SANTOS

Hearing both Will and Paul, it seems clear that things are changing in a way that is unstoppable in terms of the financial system and in the way operators in the financial system will organize themselves and invest. But people say “it takes two to tango”, so not only do you need investors willing to invest in sustainability, but you also need to have projects to invest in; you need to have companies that adopt sustainable practices and also race to the top of their ESG adoption and include this consideration in their strategies. And for that, I would like to bring the discussion to Margarida Couto.

Margarida, you have been a promoter of social responsibility within your company, the pro-bono and social practice work with the ecosystem of social innovation in Portugal; you are also the President of Grace, which is a large group of Portuguese companies that reflect and adopt corporate citizenship practices. You know what is happening in Portugal, and also internationally, in terms of how companies are really taking sustainability seriously. We’ve heard earlier that the best CSR report was from a company that was so ba-dly governed that went bankrupt a year after. So, are there examples of so-cial washing and greenwashing? Or are we actually seeing a movement for truthful adoption by companies of the sustainable principles and practices?

MARGARIDA COUTO

We have both. But before that I would like to thank CMVM for the invitation. We, at Grace feel very proud to be represented here. I would like to congratulate you on the courage of doing your annual event on such a subject. On behalf of both Grace and companies that really care for this subject, I thank you for doing that because nor-mally these matters are put on the agenda by the good-hearted and idealists; howe-ver, everybody takes it seriously when the regulator puts the subject on the agenda. My life as President of Grace will become so much easier as from tomorrow because I will say “CMVM said this is important, you have to listen”. Things only get seriously dealt with when solemn people like the regulator treats them in all conscience. This is a big change in Portugal, and I never saw this subject discussed at this level.

Going to your questions, Filipe, the answer is twofold. Yes, we have a lot of greenwashing and we have a lot of social washing. At the level of Grace, 165 companies





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(including multinational, large and SMEs companies from different sectors) appa-rently are concerned about ESG factors. The banking sector is not all that well re-presented at Grace level. One of the good exceptions was a member of the for-mer panel because it was José Matos that brought Caixa Geral de Depósitos to Grace. I think there’s a lot of companies that already understand that they need to change if they want to survive and to be in the market in the long-term. There is greenwashing and events that take out credibility of this discussion. We only had two Portuguese companies that were listed in the Dow Jones Sustainability Index. And they both collapsed simultaneously due to bad governance. They were listed on the index, but at the end of the day, the reason why they expired was simply be-cause they were not doing what they said they were doing. And that takes credibi-lity away and makes the conversation much more difficult.

I’m not as optimistic as you or as Minister Centeno is; when you say it’s becoming the new normal, it’s not. It’s not the new normal, and I don’t believe it will be the new normal while our generation is still in charge. I think it will take a generation renewal to become the new norm. But I think that some drivers are very important. One is the investors requiring the companies to be sustainable as a criterion to in-vest in this company. The other driver is the millennial consumer, who is concerned with sustainability and already represents a very important part of the consumer market. And then there are governmental drivers like the Directive on the disclosu-re of non-financial performance, that has been recently implemented. If it is man-datory to disclose what companies have done in a non-financial area like ESG, then companies need to do something. Otherwise, they don’t have anything to disclose, and get a bad perception. I think all these driving forces will start to make things change.

Contrary to what has been said in the previous panel, I don’t think Europe is a fron-trunner in this matter. I think the United States is the frontrunner, and I think that Europe is lagging behind. Everybody knows that Larry Fink (the CEO of BlackRock) wrote a letter to all the CEOs of the companies in which they invest; and when BlackRock speaks, America listens but I am not sure that Europe listens. When I read this letter, and this was in February or March of this year, I thought: “Finally, they will understand, all the CEOs will understand” because all of them received the letter. I’m just quoting one small paragraph of this letter: “Society is demanding that companies both public or private serve a social purpose. To prosper over time, every company must deliver financial performance as well as positively contribution to society. Companies must benefit all of the stakeholders, including shareholders, employees, customers and the communities in which they operate”. The title of the letter is: “A Sense of Purpose”. I think it is a big sign for change when a company that manages 6 trillion in assets around the world writes this kind of letter. The problem is I don’t think that the CEOs paid the attention that the letter deserves.





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PAUL TANG

What I hear in fact from many financial institutions is hope that Europe will take the lead and sets a global standard.

FILIPE SANTOS

You have a more cautious view. The view where there is the saying and the-re is the doing, and sometimes there is a gap between the two. It’s partly the role of regulators to make sure that the saying aligns with the doing. To some extent sustainable finance is new, hard to measure, hard to implement and not easy to disclose; it takes time and that is part of the challenge.

An area of sustainable finance which is very important to achieve - the 2030 agenda for sustainable development goals - is finance for development. We have been mainly talking about the issue of sustainability in the mainstream financial markets, i.e., how to allocate large portfolios of assets under ma-nagement or how corporations behave. But then we have the other side whi-ch is, in developing countries, how can finance be a tool for sustainable de-velopment? Jorge, can you give a sense of what is happening? What are the main positive developments? And what are the main challenges?

JORGE MOREIRA DA SILVA

I would like to thank CMVM for this invitation. I accepted it immediately because it’s an opportunity to address these topics within the financial sector, following a holis-tic approach. We are dealing with a new market place that requires supply, requires demand, and requires regulators; without the regulators’ rule, the market alone will not be sufficiently aligned with a major goal - the sustainable development goals.

I would like to start by saying that it’s not sufficient to go in the right direction. We have a good narrative today around the sustainable development and sustainabili-ty. I think that we are aligned. But this is no longer a matter of direction; it is a mat-ter of pace and a matter of speed. And we are not doing well. We are not able to be consistent in action on what we agreed on in 2015. In 2015, we gave hope to multi-lateralism. The world agreed in the Paris Agreement on sustainable development goals and the world agreed on the Addis Ababa Action Agenda for financing for de-velopment. Three years latter what is happening is not consistent with action on what we agreed; and our credibility will not be measured by what we’ve agreed, but by what we are able to implement.





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It’s good to have data and to include it in this discussion. As you know, OECD is the data house, and we are always focused on getting evidence, developing standards that are science- and evidence-based. What we have concluded is that to imple-ment the 17 SDG goals, the 179 targets through the 32 indicators, we are facing a 2.5 annual trillion dollar gap. We will not succeed in implementing sustainable develop-ment goals without mobilizing more 2.5 trillion dollars every year.

Last week, we’ve presented our global outlook on financing for development. It was led by the development corporation directorate that I lead, the finance directorate, the environment directorate, and the tax directorate. This gives you an idea of how OECD considers that sustainable development requires a comprehensive, integra-ted, and interdependent approach. We’ve concluded that the official development assistance (ODA) is not sufficient but it has steadily increased. In the last 3 years, the ODA and aid to Developing Countries rose by 30%, but it only represents 0.3% GDP. This is not enough; what we have agreed, many years ago, was 0.7% GDP.

But what was surprising was the fact that indirect investment dropped by 30% in the last 2 years, and this is an alarming signal. You can see the paradox: we said in 2015 that we would not succeed without the private sector. However, the 2.5 trillion gap will not be addressed merely with public budgets, we need the private sector. At the same time, we realize that there is a business case for sustainability in the private sector; many reports were produced showing that sustainability might be possible, profitable and cost-effective. However, in practical terms, we were not able to succeed. Obviously, there are promising initiatives, and we are working on social impact investment, on blended finance and on several initiatives where the ODA is playing a catalytic role to mobilize the private sector. But since this is insuf-ficient, the question is: “What do we need to do now to ensure that we are not only going in the right direction, but we are at the right pace and with the right speed to achieve the SDGs?”

We need transparency, we need better measurement. You cannot stimulate what you cannot measure. Unfortunately, we don’t have the necessary tools yet, the measurement instruments. We need a new tool, and we call it Total Official Support for Sustainable Development; we are designing this tool to be able to measure all the relevant flows. Second, we need reforms, both in developing and in develo-ped countries. We need to ensure that we have an environment that is investmen-t-friendly. We have 55 trillion available in pension and insurance funds. We have more than 200 trillion available in the capital markets. So, we just need 2.5 trillion: we need reforms in developing countries to ensure predictability and stability, to ensure that when you commit to an investment you know that that investment is reliable and that the legislation won’t constantly change. But you also need refor-ms in all the OECD countries. Why? Because we need to better align supply with





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the right needs from the developing countries and to avoid the duplication, frag-mentation and an approach that is not consistent. And that´s why we need blended finance and social impact investment to be able to leverage ODA. And finally, we need coordination.

FILIPE SANTOS

What do you mean by “blended finance”? I think this is a new concept for the audience.


Blended finance is a new tool where you blend, you mix the public and the private money, but it’s not about public-private partnerships. The blended finance takes the official initiatives, for example, launched by development agencies or development financial institutions, and tries to mobilize commercial finance targeting the SDGs. Blended finance is a partnership where you blend several funds and sources of fi-nance with the purpose of targeting the SDGs. There are already 82 billion dollars mobilised from the private sector in the last 4 years through blended finance.

OECD recently agreed on blended finance principles, making sure that you are not calling blended finance to everything just because you are blending. If you call it blended finance, it’s because it follows 5 principles of sustainability and alignment with the SDGs. I think that we are missing something similar on the social impact investment. It’s a growing market, but you need to build evidence-based, adding more data and more standards to ensure that you have no greenwashing and no socialwashing.

FILIPE SANTOS

I think you call us to think more deeply about social impact investing. You also mentioned the importance of both the demand for and the supply of ca-pital. Supply and demand don’t match in a new market, there is an interme-diary risk; so, you always need someone to be the translator, the interme-diary that brings things together. And that´s the role that António Miguel has been playing in Portugal for the last few years with the laboratory for social investment, in collaboration with Gulbenkian. The venture called Maze, de-coding impact, was the first registered social investment fund in Portugal. António, you have been trying to develop and mobilize markets for impact





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investing. Do you agree that we need more measurement tools? And do you see that social impact investing is addressing some of the issues that we’ve been discussing?

ANTÓNIO MIGUEL

My first word goes to CMVM. Just 2 days ago, we’ve announced and launched the first social impact fund in Portugal. I’ve been lucky to work with other regulators across the world; the diligent, efficient, and constructive approach that CMVM has put into this process have been second to none. On behalf of all our team, we are really thankful for this, and we look forward to working together in the coming years to make the Portuguese financial system more sustainable.

A lot has been already said, but I just want to corroborate on how we see the impact as the biggest economic opportunity of our times. We like to look at it as the rule of the two thirds. If you look at consumer preferences, at least two-thirds of con-sumers want to consume products that do not harm the environment and promote social best-practices. If you go and talk to your kids, most of them will tell you not to drink a soda using a plastic straw. All these little things are making changes on how consumers behave and, therefore, how companies will behave. The second market force is the millennial generation. Millennials are driving your businesses, and they want you to show how you create impact beyond shareholder maximization.

I think this change in mindset is going to make a profound change in how com-panies operate. If you look at the messages by the big 4 consulting firms, Deloitte, for example, is all about the impact that matters; EY is all about building a better working force. It’s not a coincidence; it’s what people want. And luckily, millennials are inheriting huge wealth transfer, and if you ask them, at least 80% of them want to allocate their capital using environmental, social and governance practices. So, everything we are talking about here is not a matter of “whether is it going to ha-ppen?”, but rather “when it is going to happen”.

I think it’s going to happen faster than everyone anticipates. If we’re not prepared, we will not be able to surf this wave as well as we should. On what we’re doing, we don’t look at finance as an end in itself; we look at finance and capital as a means towards an end. And if we look at the market and the capital gaps in the UN sus-tainable development goals, we see the 2.5 trillion gap. So, we think: “Well, this market failure exists because both private and public entities have been failing at addressing these gaps”. Businesses have proved to be a great way to do this in a sustainable way. Capital drives incentives, so we need to stop hiding capital from





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businesses that want to have a blended performance, both financial and impact. We like to call this the “impact lock model”, which is about businesses where finan-cial performance and impact performance are mutually reinforcing. That means that the more revenues you generate, the more impact you’re creating.

Technology is allowing this to happen at a very early stage. When we look at the blue economy, food waste, ocean protection and other sectors, we see that tech-nology is disrupting. We need risk finance to fund these projects, and that´s what we are doing. This first fund has a similar structure of a venture capital fund that will mostly support projects on an early stage, looking for cycles of upside that ha-ppen at 10/12 years. Minister Centeno talked about time, it is an important variable. We are seeing a lot of these businesses being created. One out of three new start--ups has an impact angle, whether it is social or environmental. We want to support high-growth, tech-based solutions that are addressing social and environmental issues.

Another form of capital that we’ve been using are impact bonds. Sometimes the correlation between impact and economic opportunity is not direct. I’ll give you an example. If we reduce the number of children being taken away from their families and going into the care system, we achieve a good social outcome; however, we’re not only saving money to the families, but also saving money to the government. We’ve also developed in Portugal impact bonds where the economic case comes from the potential savings to the public sector which uses those saving to reimbur-se and potentially pay a return to investors. In that case you’re creating a positive correlation between the financial outcomes and the social or environmental out-comes. This is something that we’ve been working on for the past 5 years, and it’s still in a very early stage; and I can’t wait to be here in 5 years to tell you about what did and didn’t do so well.

FILIPE SANTOS

The third generation of sustainable finance has a strong focus on the out-comes, that also come through financial innovation. We cannot do the same things all over again. We have this blended finance models where the goal of public financing is to crowd in private financing to address the sustainable development goals. We are surprised at the reduction in foreign direct invest-ment, which means that we also need to invest in the local entrepreneurs, in the local talent in the different countries. Impact investing is supporting ear-ly-stage innovative ideas in different countries. There’s also the increasing pressure on companies from an increasing number of stakeholders (regula-tors, consumers, employees, and the talent that companies want to attract).





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That means that companies cannot neglect the sustainable agenda. But we also continue to see a big difference between the intentions of the idealists and what is happening in practice. I would like to take us to the issue of risks, obstacles and challenges. Can I show the second question on the screen for the audience, please? What are the main risks of sustainable investment?

Who would like to share some thoughts on the risks, given the results from the audience?

WILL MARTINDALE

Although my confidence in the financial sector to understand complex products is high, I think that there is the risk of the complexity that we’re adding by conside-ring ESG in responsible investment. Second, there is a risk for international inves-tors and for international companies as a result of the geographical fragmentation. In the US, for example, we’re seeing some state level responses on sustainability: California passed the SB-100 bill which requires the public funds to manage against an energy transition; the state of Illinois has committed to ESG principles; New York funds are suing the oil majors for lack of disclosure. But obviously the ultimate risk of all is that we just don’t meet our sustainability targets.

ANTÓNIO MIGUEL

I’d like to add two reflexions based on what Will said. First, the sustainability world is a world of extremes. On the one hand, we hear “we need to go on to sustainabili-ty”, and on the other hand people also say, “but actually this is more of public rela-tions, and we cannot measure”. Impact and sustainability are not binary variables. As in any efficient market, it is important to have a spectrum of products and asset



What are tha main risks of sustainable investment?

Measurements insuffencencies may obscure investment racional

Underestimation of financial risksin ESG strategies

Ending up as being only a public relations instrument

Creating false hopes as to the social power of Finance

39%

13%

30%

19%



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classes where impact is embedded and assessed using different ratings. I think it cannot be a binary discussion about “this is impactful finance; this is not impactful finance,” but rather a more dynamic conversation.

Second, the major risk of not being able to meet the UN SDGs is the exclusion of impact or value creation as a third variable in the investment equation. Investment decisions cannot be made based only on risk and return. When in the seventies you talked about venture capital, no one would believe that venture capital would be what it is today. It’s part of the portfolio diversification. And if we don’t provide the right incentives, the biggest risk that we face is to end up in a self-fulfilling prophe-cy that sustainability is not a good investment when actually is the type of invest-ment we need to ensure the long-term generational value of our planet.


I’m coming with a perspective of how OECD countries can help. I’m not focusing on the sustainability investment in Portugal, in the US or in France, but also on how in-vestments designed in those countries are targeting the SDGs and contributing to the SDG in Developing Countries. From this perspective, I think that we are facing two major risks. One is the fragmentation at a global level and not aligning the effor-ts on regulation from OECD and non-OECD countries; we are no longer in a North-South world. For instance South-South cooperation, triangle cooperation, the role of China, India, Brazil should be considered; they are providing not only loans but also grants blended finance and climate finance. If we design regulation mainly focused in some countries, we will miss the impact. I think that it is very important through the UN, G20, G7, the OECD to have a dialogue on what is missing in terms of regu-lation for impact investment, for blended finance, for all this innovative initiatives.

The second risk is about having the same countries supported with different me-chanisms. Let me give you some figures. Blended finance: mobilised 81/82 billion dollars in the last 2 years to 4 years, but only 7% of that went to the least developed countries. So, although you have these innovative mechanisms, they are targeting more profitable projects. I understand the private sector; the private sector must be focused on profit in a sustainable manner. That’s why regulators, policymakers, policyshapers and international organizations must ensure that when we are de-signing mechanisms and creating the incentives, we are giving a clear signal to the private sector to go to those places where people are facing pandemics, climate change, ecosystem degradation and poverty. I hope that we are focusing exactly on those who are suffering the most. To sum up, I think these are the two main risks: not shifting the trillions to those most in need, and at the same time facing the risk of fragmentation at a global level in terms of not having a level playing field for the-se innovative mechanisms.





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PAUL TANG

I was allowed to develop, with other researchers, a framework for public cost-be-nefit analysis by public investment, and what we needed was not only financial re-turn; we wanted to have the social return, the broad welfare. Of course, we run into the problem that we cannot measure everything, but we never assumed in the fra-mework that we would measure everything; what we wanted to achieve is to inclu-de all the impacts, all the risks, if not quantitatively, at least qualitatively. For us the framework of public cost-benefit analysis is a tool for dialogue. At the end of the day, the policymakers and the politicians have to decide, and they have to weigh the arguments that are in the public framework. I believe that at the end of the day, the most important is the dialogue within the company, preferably at Board level (top--down). But it is also important to engage investors, asset managers, banks and other stakeholders. I am not concerned about the frontrunners, I am concerned with the mass and the idlers and a lot of companies still need to change, so as to prevent us from corrupting social and natural capital. So, dialogue; measurement is not the problem.

MARGARIDA COUTO

I totally agree with you on the measurement process. I think that if we insist in mea-suring the same way things that need to be measured in a different way, we will ne-ver agree on the methodology and on the results. I’ll give an example, now with my experience as a partner of a big law firm and not as the president of Grace. I like to think that my law firm is very successful because we have incorporated ESG cri-teria from scratch. And one thing is clear: if it’s not top-down, if the management is not engaged, if the management does not believe that the results are good for everybody, including for its own people, it will not happen. So, if it is with the marke-ting department or with the communication department or with any other depart-ment and not at the board level, sustainability changes will probably not happen.

FILIPE SANTOS

I think we benefited from a wonderful panel of idealists that are also ac-tion-oriented and also of evangelists for their own domains. We also got a much more challenging view about sustainable finance. The first round ta-ble discussed how we integrate ESG factors and which one (economic, social or governance) is more important. In this round table, we also got into de-tail on how we do it, and the difficulties we face. We have the sense that the path towards sustainability is unstoppable. How are we following that path? At what pace? Is the pace fast enough for the planet and the least developed





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countries? We need active regulation about sustainable principles, transpa-rency and disclosure of relevant information. We heard about the segment of impact investing and the need to adopt blended finance models. There is the gap between the saying and the doing, and we need all to work on the doing. Thank you very much.





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Key Note Speaker Sustainable investing:why and how?

DIRK SCHOENMAKER

Senior fellow, Bruegel; Professor of Banking and Finance, Erasmus University




KEY NOTE SPEAKER: SUSTAINABLE INVESTING: WHY AND HOW?

Dirk Schoenmaker, Senior fellow, Bruegel; Professor of Bankingand Finance, Erasmus University



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It is a pleasure to be here this afternoon.

think this morning all the issues were fairly discussed during the roundtables and I was satisfied with all the discussions. There is one conclusion which I really want to take home: the integrated value of sustainable finance. Indeed, we must combine financial (F), social (S) and environmental (E) value:

Sustainable Finance: integrate F + S + E = integrated value

I would like to elaborate on why and how we can do sustainable investing. So, what are the sustainability challenges?

Figure 1: Planetary boundaries framework

Source: https://www.stockholmresilience.org/research/planetary-boundaries.html

https://www.cmvm.pt/pt/Comunicados/ConferenciasdaCMVM/Documents/Lisbon_Sustainable_Investing_

Schoenmaker%20%28v2%20Nov%202018%29.pdf

KEY NOTE SPEAKER:SUSTAINABLE INVESTING:

WHY AND HOW?

I



https://www.stockholmresilience.org/research/planetary-boundaries.html

https://www.cmvm.pt/pt/Comunicados/ConferenciasdaCMVM/Documents/Lisbon_Sustainable_Investing_Schoenmaker%20%28v2%20Nov%202018%29.pdf


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ithin science there is an agreement that climate change is a top risk. Considering the planetary boundaries framework (Figure 1), in the green area one is safe, in the yellow one has surpassed the safe territory boundary, and in the orange the risk is considered to be high. The main identified problem is biochemical flows which is basically what is used to fertilise agriculture. The climate issue is of course the biggest issue, but there is more going on.

There are 40 gigatons of greenhouse gas emissions a year. In the map below (Figure 2), the green is the scenario based on what we do today. The purple sce-nario is what we need if we really need to go down either 2.6º C to 3.2º C degrees. If we don’t do anything, risks will occur sooner or later (yellow scenario).

We will likely get carbon taxes, it’s only a question of when, and that’s a tran-sition risk. Then, if you are with carbon intensive assets in your portfolio, they will become stranded assets because nobody will buy them anymore from you. The trick is to invest today either in the older assets or in the low carbon assets, because the transition is going to happen.

Figure 2: Global greenhouse gas emissions scenarios

Source: https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions



WKEY NOTE SPEAKER:

SUSTAINABLE INVESTING:WHY AND HOW?



https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions



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hings are going to happen. Are you prepared for it? Because if they happen, you will be too late. In the Netherlands, we are busy discussing if we should be faster than the EU and with the target of 2.30, 2.35ºC.

Also, on the social area there are quite a few important things. Many people live below social foundations: food security (no hunger), adequate income (no po-verty with income of less than $3.10 a day), access to health care, to water, to energy and clean cooking facilities, education, decent work (living wage), gen-der equality and social equity, and political voice (right of people to be involved in decisions that affect them).

The doughnut of Kate Raworth defines a safe and just space for humanity to thrive in based on both social boundaries (income, access to healthcare and ba-sically life’s essentials) and planetary boundaries (biodiversity, land conver-sion, climate change). Climate change is extremely important and should be made a priority but there are more things than climate. There are quite a few environmental challenges and there are also social challenges.

Figure 3: The doughnut of Kate Raworth

Source: https://www.cmvm.pt/pt/Comunicados/ConferenciasdaCMVM/Documents/Lisbon_Sustainable_Investing_


TKEY NOTE SPEAKER:






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think most of you are familiar with the United Nation’s Sustainable Development Goals (SDGs). How can we make SDGs operational? Please consider the SDG 8 of decent work and economic growth, that is on the social side. Living wage is linked with SDG 8; it is more or less the minimum wage compared to the coun-try’s living conditions. It provides a family with the means to buy life’s essen-tials. So, living wage for each country is different: in Bangladesh it will be lower than in Portugal and in the Netherlands.

Figure 4: Global goals for sustainable development

Source: https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions



IKEY NOTE SPEAKER:


A lot of multinationals outsource production to low- and medium-income coun-tries. If you would pay the living wage, then you will have an impact on the other SDGs, namely SDG 1 (no poverty), SDG 2 (zero hunger), SDG 3 (good health and wellbeing) and SDG 4 (quality education). If you pay a living wage to the mother or a father of a family, then they can buy food for their family and they can put the children through school, because there is no need for child labour, as the parents earn enough. Therefore, in that sense living wage is one way of making SDGs operational. Leading companies are looking at this issue for the produc-tion in low- and middle-income countries and, in that way, we can go beyond the environmental issues also, i.e., including the social issues in ESG investing.



https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions



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s an academic, I need to go to my formal framework called a “wedding cake”. There is one way of looking at the SDGs that is putting all factors together. At the bottom you have the biosphere, because it is a pre-condition for society. There is the climate change, life in water and life above water. Then, we have the challenges at the society level, like gender issues and no hunger. And then, at the top, we have the economic issues, what we do in finance, in the risk-re-turn space. The trick is: how can we integrate these 3 factors?

Figure 5: Biosphere, society and economy



If you have human capital in your company, then you have an impact on the so-ciety, on your community, where you are operating. And if you’re using natu-ral resources and if you deplete them, then there is no future for the company.

Now, I’m trying to play a little game. If you ask an economist or a finance per-son what these social and environmental issues are, they will answer “exter-nalities”. Externalities are not priced, so the economist answer is “sorry, we cannot do anything about it”.


WHY AND HOW?

A





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Figure 6: Perspectives on externalities




WHY AND HOW?

B ut if you ask a human rights’ person what are these social issues, that person will be extremely clear: he/she will say they are life’s essentials; “how can we do without them? There is no doubt about it”. And, finally, if we go to an ecolo-gist, he/she will be also very clear: of course, “we need to live within our ecolo-gical ceilings, our planetary boundaries, because otherwise there is no future”. It is really an economist thing to look at social and environmental issues as pu-blic goods not being priced. For other sciences, it is quite natural to look at en-vironmental and societal issues.

And how to put this together? This is my important formula. Sustainable deve-lopment means that you integrate, financial (F), social (S) and environmental (E) value, achieving and integrated value (I). You should look at the 3 elements in combination and not in isolation.

Sustainable Development: I = F + S + E

I consider that sustainable finance is still about shareholder value, that integra-tes the 3 elements (F, S and E). The stakeholder view allows for achieving UN’s SDGs (long term value creation) moving from a narrow F dimension to broader

F ES

Economist:

A public good which

is not priced

Ecologist:

Need to operate within

planetary bounderies

Human rights advocate:

Ensuring every person’s

claim to life’s essentials





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F, S, and E dimensions. We can go one step further and put social and environ-mental impacts first, achieving what this morning was called “value-based in-vesting”. They’re great as frontrunners and we can learn a lot from them.

If you really want sustainable investing and sustainable investing impact on outcomes then this is the area where we can do business, because you look at all 3 dimensions in tandem. I think Collin Mayer was this morning very clear, they run in parallel if you treat workforce well and if you’re good for the community, then as a company you have a better outlook.

Figure 7: Managing sustainable development




WHY AND HOW?

Then, the ‘economist question’ to be answered is the following: if the social and environmental factors are not priced, why should I pay attention to them?

The first answer could be anticipation of regulation/taxation. If a carbon tax is going to come, it is better to be prepared. The second one is reputation, pres-sure from non-governmental organizations and/or consumers. Consumers are also pressing companies to do it. Although these two are extremely relevant, I think the third one is the most important: the transition to SDGs by 2030. You





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want to make your business future resistant because, even if only half of the-se SDGs are achieved (i.e., we kept them carbon taxed but it’s a bit too low), the future will be different and if your company is not prepared, then you lose out. All carbon intensive companies will lose out for sure. Whether to wind or solar or hydric alternatives, we don’t know, that´s the normal business risk. But your business is not future proof if you stick with your old ways. For example, if at some point consumers will only buy clothing that is done with living wages and your business model is to have cheap clothing from Asia, then your business is gone. So, sustainable finance is about the future in finance.

The next question is: how to do it?

First of all, the fiduciary duty of investors: investors really have an obligation to include sustainability into the consideration. Then, we go to the next item: should we have an official taxonomy of sustainable finance, and now I’m a bit challenging, because in the end sustainability is about companies’ prepared-ness for transition. If you get creative destruction, new businesses come up and some old businesses die, and some businesses can reform. I am a believer that the market could really look at what is working or not, following a market-led approach through fundamental investing. If you would make some framework, then please keep it extremely flexible for there are always new developments.

This morning the BlackRock case was discussed. They are sending beautiful le-tters but their analysts, if they are in a conference call, still ask for the quarterly returns and they have a passive benchmark. I am proposing an active invest-ment strategy. If you want to get sustainability going, you should do inves-ting in and then also engaging with these companies in order to get them to good business practices, and that´s what we call “stewardship”. That requi-res some work: it means that the investor is not buying an ESG rating because they are scratching the surface, they use reported indicators (e.g., credit ratin-gs) and you cannot always trust them, so you really have to check yourself how the company is doing. That´s what we call “fundamental analysis”. The aim is to get these social and environmental issues on the plate, to really see what is going on because in that way you can get this integrated value. Some investors are doing it, like Alecta, a pension fund in Sweden, but it’s not mainstream yet. This is active investing.

There are some main elements of the sustainable investing approach. First, we need a long investment horizon. It means an intended holding period, because if there is information in the long-term which is negative, we are still allowed to sell, but you need to have a long-term outlook. The second element of sus-tainable investing is the active management in concentrated portfolios. You can


WHY AND HOW?



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only do fundamental analysis of 50 to 100 companies but from a risk perspec-tive 100 shares might not be sufficient, you have to check of course that they are not similar companies. The great thing is that once you have selected these companies, you have more information, and then you can also do the effective engagement for this company, that is the third element. For example, if you in-vest in a company and you want to improve their environmental track record, you talk with them and you ask them to improve and then to report on it. And in that way “stewardship finance” can help the business going forward to sustai-nable practices because that is the end goal. Then we have to leave the market benchmark and do a performance analysis of value-added.

To sum up, the challenge is to combine the 3 elements. I hope to have shown that it is possible. If you really want to do it in a proper way, you have to do fun-damental analysis, and finance is in the end about anticipating events and pri-cing them today. In that sense, finance should be forward looking and can al-ready act now.


Thank you very much, it was a very clear and inspiring presentation. You mentioned frequently that maybe the most important aspect is the combi-nation of finance issues with environmental and social ones. Does this mean that the Governance part of the story has been given less attention than the Social and the Environmental? Is there a role for Governance in this story? Or do you see the sustainability strategy to rely on environmental and social issues?

DIRK SCHOENMAKER

That´s a very good question. I think that what you are saying is that we are moving to outcomes, the F, the S and the E, and Governance is an intermediate variable. Management quality is an extremely important variable, but I would say it is an in-termediate variable. Good governance means how good business is doing, so it is important for the financial side. If you are in control of your business, you can also think about social and environmental issues. So G, good governance, is extremely important, but in my framework, it is an intermediate variable. The stewardship approach (investors talk to companies) is in the end all about governance.


WHY AND HOW?



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Would you say that G is like an instrumental variable, to the other two?

DIRK SCHOENMAKER

Exactly. Good governance leads to profits and to good sustainable and environ-mental practices. Governance is only in the process to get these things done.


In one of the slides there is a table that defines sustainable finance like a process. The Traditional Finance goal is to create shareholder value (F). Sustainable Finance 1.0 creates ‘refined’ shareholder value (F > S and E), Sustainable Finance 2.0 creates stakeholder value (I=F+S+E) and Sustainable Finance 3.0 creates common good value (S and E > F). Is Sustainable Finance 3.0 the end of the process that we should aim for?

DIRK SCHOENMAKER

That´s a very good question because you noticed new topics in my thinking that has also evolved. I’ve come to the conclusion (and I think this was also the con-sensus this morning) that sustainable finance is where the real business is, be-cause we really integrated finance returns and social and environmental di-mensions. In the end you need to pay your beneficiaries, but please in a liveable environment. Value-based investors are the frontrunners, they are a bit the en-thusiastic people and they are quite useful in governance matters. My thinking evolved, but it would be nice if mainstream finance would be doing that.


Could we get there?

DIRK SCHOENMAKER

Exactly. And there is no need to do away with financial returns.


WHY AND HOW?



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Do you see it as a process that should start from “finance as usual”?

DIRK SCHOENMAKER

Yes. I think we are already in Sustainable Finance 1.0.; the question is how to get from Sustainable Finance 1.0 to Sustainable Finance 2.0.


Do you think that shareholders and investors in general will contribute to this challenge?

DIRK SCHOENMAKER

I think that Asia and Continental Europe have already adopted the stakeholder mo-del rather than only the shareholder model. So, I think we are slowly moving, and the important thing is to recognize that not only shareholders are important in this model but also all stakeholders. And in the long-term you serve shareholders better by having a balanced approach.


You’ve mentioned Europe and Asia as the leaders of this movement. However, we’ve heard this morning that maybe Europe was not doing enough on this matter.

DIRK SCHOENMAKER

There are different things going on. The People’s Bank of China is working very hard, but we should acknowledge at the same time that they are still building coal-fired sta-tions in China as well. In Germany and in The Netherlands we also have coal-powered stations. It is quite clear the intention of China, in Europe and also in Canada (Canada is closer to Europe than to the US on this matter), that value the social and the envi-ronmental issues. In the US at the state level, like in California, a lot is also happening.


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It’s impressive how the emerging markets are looking at this issue, very at-tentively and sometimes leading the movement.

DIRK SCHOENMAKER

Yes. For example, in Brazil, banks can lose their license if they are financing deforestation in the Amazon. The banking regulator in Brazil is really leading the movement to keep the Amazon going. That´s exciting, to see that regulators can work together with the market. I would say everybody (higher education, investors, regulators, accountants) should do their job.


I am also curious about this fiduciary duty issue that you’ve mentioned. Do you believe that this change, this transformation of the market and of the mentalities will impact the shape and the content of the fiduciary duty as we know it today?

DIRK SCHOENMAKER

Yes, because in the end, for example, you have the corporate governance codes with all detailed requirements you should comply with. If the code says “you need to say something about it” and it is comply or explain, that is one thing; but if it is a requirement you will look at it. So, if fiduciary duty is put down into legislation, that sustainability must be part of your investment consideration, you would even viola-te the law if you would not do it. Europe is built on law, the treaties are the power of the European integration, so by putting fiduciary duty into our mainstream law, and not putting fiduciary but putting sustainability into fiduciary duty, we really make a powerful change because then no investment manager can ignore it.


For instance, in Portugal we have the fiduciary duty in the law, but we don’t have a reference to sustainability. The question is whether the duty of loyalty and the duty of diligence should include or not these kinds of concerns.


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DIRK SCHOENMAKER

If the legislation in the European Parliament gets through, you’ll have to implement it and then it is quite clear if you do your due diligence and you talk about your be-neficiaries then the discussion will include in the future the sustainability issue. We are here, of course talking a little bit with the believers (so this is not an unbiased sample), but it is quite obvious that for the beneficiaries you should not ignore the-se issues; they will become more mainstream and sustainability cannot be ignored.


In your last slide, the last sentence, I believe is about patient capital. In the end, this is all about long-term sustainability, profitability and everything. And of course, we have to talk about patient capital. What kind of instrumen-ts or measures in this regard do you envisage?

DIRK SCHOENMAKER

Basically, what I’m arguing is that if you are an insurance company or a pension fund, or even a mutual fund with clients who want you to do these long-term invest-ments, then try to resist the temptation of just buying the best market products around. Think where you put your money, select and engage with the companies. For example, big investors with a long-term investment horizon can talk with com-panies about certain practices they want to see changed, and ask the question: how may the company become more sustainable so that the investor can keep it in his portfolio? That kind of stewardship, that would be my dream.


Thank you very much, Dirk, for your excellent contribution to this conference.


WHY AND HOW?



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Roundtable Looking for Responsible Investorsfor Long-Term Relationships



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ANDRÉ FIGUEIREDOHead Capital Market at PLMJ

ANTÓNIO CORREIAPartner at PricewaterhouseCoopers

CRISTINA CASALINHOCEO of the Portuguese Treasury and Debt Management Agency

JOÃO WENGOROVIUS MENESESGeneral Secretary of the BCSD - Conselho Empresarial para o Desenvolvimento Sustentável

NANDINI SUKUMARCEO at World Federation of Exchanges

PAULO RODRIGUES DA SILVACEO at Euronext Portugal

Moderador

RITA OLIVEIRA PINTODirector at Regulatory Policy and International Affairs Department at CMVM

ROUNDTABLE LOOKING FOR RESPONSIBLE INVESTORS

FOR LONG-TERM RELATIONSHIPS




Moderador: RITA OLIVEIRA PINTO,

Director at Regulatory Policy and International Affairs Department at CMVM;

ANDRÉ FIGUEIREDO, Head Capital Market at PLMJ;

ANTÓNIO CORREIA, Partner at PricewaterhouseCoopers ;

CRISTINA CASALINHO, CEO of the Portuguese Treasury and Debt Management Agency;

JOÃO WENGOROVIUS MENEZES, General Secretary of the BCSD - Conselho Empresarial

para o Desenvolvimento Sustentável;

NANDINI SUKUMAR, CEO at World Federation of Exchanges ;

PAULO RODRIGUES DA SILVA, CEO at Euronext Portugal.


ROUNDTABLE LOOKING FOR RESPONSIBLE INVESTORSFOR LONG-TERM RELATIONSHIPS



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RITA OLIVEIRA PINTO

Good afternoon to everyone. In the morning we listened to a very fruitful discussions and got valuable insight regarding the relevant ESG factors and sustainable products from the investor’s perspective. Now it is time to hear the perception of the issuers and of the markets where sustainable products are negotiated. The discussion will focus on the challenges that issuers face to comply with ESG principles and on the potential benefits for long-term sustainability. We will identify the opportunities, and risks on the supply side of sustainable products, both from the perspective of the public sector and the private sector entities. We will also discuss the roles that exchanges may play to encourage the growth of sustainable finance.

We have the privilege to have with us, André, who has been closely working with teams related to social investment; António is responsible for the Sustainable Consultancy Services in PWC; Cristina is the CEO of the biggest Portuguese debt issuer, and has been thinking about green bonds certain-ly; João works for the Council that represents the main issuers, and some of them have already issued green bonds; Nandini and Paulo will bring their perspective about sustainability in international and national markets.

We have a couple of issues that I would like to put forward to the audience.

Main bottleneck in issuingESG-compliant assets is:

Main opportunity for issuers



Contributeto a more

sustainablesociety

49%

Lake of clear regulationto comply with

35%

Reportingburden

2%

Decrease financial risk15%

Improvereputation

19%

Increaseinvestor

base16%

Lake of propermeasurment tools

of ESG factors63%



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We have clear winners in both cases and we will certainly deal with those is-sues throughout our discussion.

International organizations such as the United Nations, the OCDE, and the Financial Stability Board, financial regulators and institutional investors have been increasingly urging issuers to integrate ESG factors. This inclu-des aspects such as how they respond to climate change, how good they are with water and waste management, how they integrate diversity in their recruitment policies, how they manage their supply chains, and how they fight corruption or bribery. In Europe, disclosure of non-financial infor-mation became mandatory by law, and now credit institutions, insurance companies, and other large issuers are required to disclose a sustainability report. Compliance with this obligation must be certified by the company’s auditor. In this context, I would like to ask João what has BSCD been doing in this respect and which are, from your perspective, the mains challenges for issuers to integrate ESG factors.

JOÃO WENGOROVIUS MENESES

I think there are two main layers to integrate ESG. On the one hand, we do need to improve metrics, to develop a shared taxonomy, and to improve indexes in order to have the right tools in place. These tools will allow to measure improvements com-pared with a baseline. That´s the kind of stewardship that we’ve been doing at BCSD in Portugal. We’ve been helping our companies throughout a journey towards sus-tainability, by understanding which are the major challenges and then addressing those challenges in order to move their value chain towards a sustainable business model.

You also need another layer, which is commitment. Sustainability is an opportunity and a value driver rather than a legal compliance or a risk management approach. Sustainability is not only about mitigating negative externalities, but also about ha-ving a positive impact. Quoting Saint Exupery “If you want to build a ship don’t drum up people together to collect the wood and don’t assign them tasks and work but rather teach them to long for the endless immensity of the sea”. Accordingly, sus-tainability is not only about having the right tools and integrating those ESG risk tools management into your value chain in your company; you need to have the ri-ght motivation in place, you also need to be enthusiastic for it.





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RITA OLIVEIRA PINTO

So, do you see sustainability more as an opportunity rather than a challenge?

JOÃO WENGOROVIUS MENESES

Yes. You need to be enthusiastic for the transformational process; the good news is that it is an opportunity. It’s not just about having less impact. If you comply with the legal framework and if you manage your risk, that´s good for your shareholders and stakeholders in general. But, on the other hand, you will only embrace that lar-ge sustainability opportunity if you really yearn for it and add the motivational as-pects. If I ask you the story of your life, your answer won’t be: “Well, at 7 years old, I didn’t have a bank account, then I opened a bank account at the age of 15 with 100 euros, at the age of 30 I had 10 thousand euros in my bank account and I retired at the age of 70, with X thousand euros in my bank account”. I would feel sad, and you would feel sad for me if you asked me the story of my life, and I would tell you this. The story of your life is much broader than the story of your bank account. The same applies to a company.

RITA OLIVEIRA PINTO

António, I would like your view on the quality of the disclosure of the non--financial information and which aspect you think could be improved in this respect.

ANTÓNIO CORREIA

There are some differences of mindset regarding sustainability areas, not only in the disclosure, but also in what sustainability means for the companies, the issuers, the country, and the global market as a whole. For me, if the management has de-veloped areas such as risk management, products, commercial activities and peo-ple, the company as a whole also includes environmental and social issues. So, the report and the information the company discloses to investors and the information the company gets internally, need to be integrated. As the strategy is integrated, the mindset needs to be integrated, and the information the company provides to investors needs to be integrated too. This means that the company should not have a sustainability report, a risk management report, a people’s report and a commer-cial report. If commercial, people, environmental, innovation, and all other intan-





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gible assets the company has, are important for the management, the company needs to manage them as a whole, and not separated like the company normally does in the sustainability report.

The annual report is audited and needs to comply with the framework of financial reporting. The sustainability report doesn’t have a complete framework, not only in Portugal, but also around Europe. Although a framework for the sustainabili-ty report is lacking, there are also some facilitators. The main Portuguese com-panies that issue some sustainability information in these reports go to the Global Reporting Initiative. There are frameworks for the accounting report. However, the same doesn’t apply for intangible assets, such as innovation, people, and environ-ment. These areas in the companies are not so well handled in terms of information and systems like the financials are. So, we should have information provided by the company for all these aspects as a whole, tangible and intangible, which are the fu-ture of the company.

Numbers are in the past. If we look at the current financial information, this does not mean that the company will be profitable for the long-term. For that, we need to look at the people’s motivation, client’s satisfaction, innovation, company’s beha-viour in the neighbour communities, among others. And these areas are not so well handled in terms of information both internally and externally.

Public interest entities need to provide non-financial information; what the auditor does, and it is obliged to it, is to check if the information is there, and not if the in-formation is correct. Today we have around Europe, including Portugal, a complete set of financial information that is disclosed and the auditors and the regulators look at the information to assess if it is correct. We also have a complete set of sustainability information, about innovation, people, environmental and social as-pects that might be, or not, correct because nobody audits this information. If the company wants to audit, it invites the auditor, and the auditor gives an opinion on the information. But if the company doesn’t want to audit it, or wants to audit only a small piece of the information that is disclosed, that is what the external auditor audits. So, there are no frameworks for that information, not only in Portugal but also in Europe. I spent 5 years in Brussels discussing all these areas, and even to-day there is not a global, a common framework to audit and to make sure that the information companies provide about sustainability is correct.





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RITA OLIVEIRA PINTO

If we move forward to more involvement of the auditors auditing this non--financial information, are the available standards to audit financial infor-mation enough to audit also the intangible assets?

ANTÓNIO CORREIA

The auditors can use international standards to audit this kind of information, and that’s what happens in Portugal. Fortunately, more or less half of the listed com-panies or public interest entities in Portugal that issue sustainability reports asked us to ensure the information is correct.

One must not forget that the companies are not obliged to issue this kind of re-port. Only some reports include information in terms of governance, social, and en-vironmental aspects. But the sustainability reports or the integrated reports that some companies in Portugal already have offer much broad information regarding sustainability areas (and not only environmental ones). These companies include in their sustainability report their investments in innovation, how people are satis-fied, how clients are satisfied with their products. If the companies don’t want to audit the report, it is not audited. There isn´t any obligation to audit this informa-tion. But, fortunately, at least 50% of the main companies in Portugal audited it.

RITA OLIVEIRA PINTO

Cristina, would you like to add to this issue of reporting? How do you see the obligation of the issuers to disclose this information?

CRISTINA CASALINHO

We don’t have reporting obligations for sustainable information as we have for the financial reporting. If an issuer issues or prints a green bond, we must haves two sets of reporting. One is the allocation report, to make proof that the funds actually are directed for the announced purpose. And we have different cases, we don’t have a standard, different countries have different approaches. Traditionally, what we have is that some part of the reporting is done internally by a set of ministries, the Ministry of Environment, of Finance, of Economy, in some cases. In Holland, for instance, they have an external auditor to audit the reporting process. In many





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other countries, like Belgium or France, an external auditor does not intervene.

Then, you have a second layer - the impact assessment reporting. There are diffe-rent national perspectives towards this report. For instance, Holland does it inter-nally, and they have an internal committee that prepares the report. The allocation report comes one year after the issue and the impact report comes later, even la-ter than the allocation report. In Holland, they announce its timing and also provide some indication on the metrics they would be using for the impact assessment. In France, they set up an expert committee, with experts from around the world, that will supervise the impact assessment. And they’ve not been providing, as far as I know, any indication on the metrics they are going to use. Belgium is setting a special internal committee.

So, there are completely different approaches. What I really find a little bit contro-versial is the fact that, usually, a sovereign issuer doesn’t need to comply with tho-se reporting requirements. If we ask a sovereign to follow these requirements, it will add transparency and accountability to the budgetary process, which is a good thing. But then you have the kind of the flip side of that, because you are saying: “ok, you are looking at the sovereign as if it gets this type of financing, I’m going to finance a specific project”. But should we treat a sovereign the same way we treat a corpo-rate? Perhaps not. If we take the budgetary process, what we say is that we have, at least in Portugal, an assessment before or at the time the budget is admitted to the Parliament. First of all, you have the Parliament monitoring the budget itself. Then, you have the Public Finance’s Council monitoring and having some oversight on the budget. Then, you have the European Semester also auditing the budgetary process and later on its execution and the final assessment or the impact assessment. I think that for a sovereign, if you carve out some part of the expenditure and say that this part needs extra monitoring, it’s a kind of casting, a shadow on the rest of the budge-tary process. This is so because you are saying that the rest of the budgetary process is not sufficiently transparent or accountable. So, you need to say that these specific projects are better or more valuable and, because of that, their scrutiny needs to be tighter. That might be doubtful if you are saying that unemployment benefits should not be as scrutinized as the building of a mini-dam. In terms of reporting, from a pure sovereign perspective, it’s a little bit more doubtful that the level of scrutiny that will be asked for a sovereign should be at the same level as for a corporate.

RITA OLIVEIRA PINTO

Let me go now to Nandini. Which merits do you identify when issuers inte-grate and disclose how ESG factors impact their decisions?





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NANDINI SUKUMAR

I find the results of the first two surveys surprising. Looking at sustainability from an exchange perspective and from an issuer perspective, the exchanges, obviou-sly, are in the middle of the ecosystem. Exchanges are public markets. We belie-ve in transparency (and it’s in our DNA) and in democratic access to the markets. We consider that good corporate governance will contribute to well-functioning markets, where there is strong investor protection, which leads to confidence. The green bond market has gone from 3 billion dollars in 2013, to 40 billion currently, in terms of issuance. There is a real sense among the issuer community that lack of compliance is punished, but good behaviour doesn’t necessarily have the same upside.

Another thing that I found very interesting in the survey is that the burden of repor-ting is a deterrent. I think there are no doubts that the better corporate governan-ce you have, the more transparent you are in your behaviour, the more you act in a way that inspires confidence, and the better it is for the long-term health of your organization and for the society. I loved the analogy that was made about the story of our life: we don’t start by saying: “7 years old”, you know, “my parents bought me a piggy bank” and then “I was 70, I died with X amount of money”. That is also true for the issuer, but if only there is some way to make that tangible to them. I think that the investors are beginning to act, and the rise of impact investment is a good example.

RITA OLIVEIRA PINTO

Paulo, do you agree with Nandini? Would you like to further elaborate on this?

PAULO RODRIGUES DA SILVA

I would like to look at a few numbers. We may all believe that the trend is there, that the direction is right, but the numbers are still very limited. And, actually, they are not moving exactly at the pace that was anticipated. Green bonds from the clima-te bonds initiative: 155 billion in 2017. The number for this year (2018) was expected to be between 250 billion and 300 billion, but in the first 3 quarters it was only 105 billion.

We may all believe that stakeholder value is the trend of the future. We see the new generations, the millennials, being much more concerned about sustainable is-





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sues. But if there are no real incentives that will help steer and move together with that trend, it’s not going to happen. And the studies say that the risk and the cost of green bond financing in the primary market is not lower than brown bonds. There is a slight difference in the secondary markets, which shows that there are already some investors that are looking for some specific assets in their portfolio. There are compliance and reporting costs in the issuance of green bonds. One thing that has been discussed is the subsidisation of the cost of labelling. If we truly want so-ciety to move in that direction, this is one of the possible incentives. I suspect that to achieve the real goals a bit more nudge will be required.

NANDINI SUKUMAR

Adding to Paulo’s remarks. I am very struck by his remark about how the labelling helps. If you look at fair-trade, you realize that people don’t mind paying a premium for a coffee that is certified. So, how do we make that leap now in the securities market? Because that´s where you want to go.

CRISTINA CASALINHO

I was quite surprised to see the reporting with only 2% of the votes of the audien-ce, because it’s one of the concerns. If you ask an issuer and a sovereign issuer (that´s the experience I have to share), one of the things that worries everyone is all the reporting that we have to do. It takes at least 6 months to come up with a pool of eligible assets. And we have to hire the structuring advisory bank to help us with that. That involves costs at an early stage. Then, you have to do a lot more road showing, and we have to bring a Minister or a Deputy Minister with us, which involves additional costs.

The reporting also involves a lot of costs, as you have to have a second party opi-nion. And then the amount you pay on that bond is exactly the same you pay on a brown bond. France gained 1 basis point, and they said: “Well, we are very happy because our investor base broadened up quite considerably”. But the extra return they got was 1 basis point.

I was in a meeting with a sovereign, and I asked: “what is the incentive that you have, to be a first mover in this market?”. If you ask them personally what they will say is that they actually are in this market because there was someone in the envi-ronmental ministry pushing for it, i.e., a political drive. They want to bring climate awareness to the market and to come out as a green country. From an issuer pers-pective, we have another drawback on a green bond. If you look at Portugal, we print 15 billion bonds per year and we open two lines. Traditionally, our lines have outstandings of 10/15 billion, which means we cannot afford to bring much more





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than two lines per year if we want to bring them to a level that allows investors to come in and buy and sell the bonds on a regular basis. If we carve this up or slice this program with a lot of bonds or with a lot of instruments we end up with a range of small instruments, which means that these instruments will cost us much more than if we stick with just a simple one. So, it’s not easy because you have a lot of costs.

I think that the way forward is to support this trend. The investor base is growing at the fastest pace, including millennials and other generations. ESG awareness is building up quite strongly, and the most interesting thing is that this pool of inves-tors is not increasing because the pool of savings is also increasing. What we see is that this stream is increasing because the other stream is shrinking. If you don’t tap this enlarging base, you’ll be alienating a large part of your investor base. So, you really need to do it even if it is more costly for you.


One of the big activities of Euronext are the indexes. Around 2/3 of the new indexes that we are creating are ESG related. Some of them for use by specific entities (e.g., Morgan Stanley, Goldman Sachs). There is some demand, some latent change in the behaviour of the investor. But I think we have to go to the basics because this is not only “peace and love” and sustainability.

RITA OLIVEIRA PINTO

We have an increasing demand for this type of products. In terms of the su-pply side, what do you see as the main risks and opportunities in the con-ception and launch of sustainable products? André, you have been working closely with these social impact funds, what is your perspective?

ANDRÉ FIGUEIREDO

I’ll take a different angle. I think reporting on ESG compliance is not the bottle-neck; the bottleneck is complying with ESG standards and guidelines. My expe-rience as a lawyer (acting both for established issuers, and recent impact-driven entities) shows that drafting long reports costs advisors’ fees. But it is a process that should be done. If there is critical information to disclose (having gender equality within your entity, having concerns about the environment, about the social impact, about work-life balance, etc.) then, reporting on ESG standards is not difficult.





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We have the self-fulfilling prophecy that this is not going to work because now we are saying that it’s not working. And if it’s true that green bonds are still in line with brown or common bonds, there are different approaches from new investors. New players are coming into the market, and the market is shifting a bit. And I think that´s the converted part of me saying: “This came to stay, and this is a structural change”. People have already mentioned today the BlackRock CEO letter. I don’t really consider him as a front mover. I see him writing that letter as acknowledging that the changes are here to stay and that BlackRock is following the trend.

From my experience, having worked with the recent social impact fund, everyone asks: “what’s that?”; and you go to the fund regulation, and you have a methodology, it’s one page and it’s clear. So, you set out your impact rule and then you set out your theory of change: how those actions will have access to the results you want to achieve. And then you define the result that you want to have, and then you disclose the result.


I want to comment on the “peace and love” idea. The Kyoto protocol is circa 20 years old. We started to speak about these environmental and social issues not so many years ago. The electric vehicles are still 1%/2% of the entire world sales of vehicles; however, they already grow much quicker than the others. But there are a few as-pects that I want to share that are not based on numbers. I work in a firm wherein 2/3 are millennials. The main reason for them leaving the firm is that they feel the firm is not completely fulfiling its corporate social responsibility. What does this mean?

It means that we need to be a good neighbour for communities, we need to allow them time to learn. The most important variable for millennials is not the salary or the career they could have in the firm. The most important is that the firm needs to manage its corporate social responsibility. We will lose people, qualified staff, if we don’t account for these challenges. It is not a question of numbers, salaries and be-nefits. Probably employees with 20 years of experience in the firm don’t think like this, but the younger people do.

RITA OLIVEIRA PINTO

I would like to hear Nandini on the main dynamics and trends being imple-mented in the international exchanges. I know that the Japan and the Shanghai stock exchanges are both very active in sustainable finance; Luxembourg has launched an exchange on products regarding the environment, and they are thinking about the other factors. Could you share your ideas on this?





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NANDINI SUKUMAR

You’ve mentioned three great examples, Rita. The Luxembourg market is evange-list for green bonds and showed that listing green can also be good for business. I think, going to Paulo’s remark, it’s not just about “peace and love”. You have to de-monstrate the value, in addition to talking about it. And, of course, we have Japan and Shanghai.

As an industry, the exchanges have been very active on sustainability for the last decade. In some ways, our industry has been the pioneer in pushing some of the sustainability issues. And that´s because exchanges are in the middle of the ecosys-tem. I’m looking at Gabriela because when she invited me to this panel, I said: “I’m so happy you asked me because no one has mentioned the word exchange on this”, i.e., the role of exchanges in the sustainability debate.

The exchanges have been the pioneers. If you believe in the listing process, whi-ch every stock exchange does, you do want to improve corporate governance in your market. It’s obviously a balance; you want to be in a place where you have the best possible corporate governance standards and you also care for sustainabi-lity. The WFE has a sustainability working group, that consists of exchanges wi-thin the WFE membership who are engaged with the issue of sustainable finance. We do a survey every year. In the last survey, published in June this year, 88% of the exchanges stated that they are engaged in sustainable finance. That´s a big round number. This year, in that survey, we asked for the first time about the UN’s Sustainable Development Goals. An increasing number of exchanges are doing their own sustainability reporting, and 9 exchanges are already reporting against the UN Sustainable Development Goals. Green bonds are a common product in the exchanges. As I said, in 2013, investors bought 13 billion, and in 2017 they bought 49 billion of green bonds. In general, a perceived lack of investor demand and lack of resources to implement are among the top challenges amongst exchanges glo-bally. If we ask “Tell us what are your greatest challenges? the answer would be “particularly, the emerging market”.

We have now published, as an industry, the five principles for a sustainable exchange. Exchanges of all our members have signed up for it, China, Luxembourg, Johannesburg and Brazil exchanges being very active in sustainable work. The 5 principles are the following: education - we commit to educating; engagement - we commit to engagement with the stakeholders; implementation - we commit to implementing ourselves (it is like the exchangers own sustainability); we commit to enhancing the availability and the quality of disclosure.





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RITA OLIVEIRA PINTO

Paulo, would you like to comment on what Euronext has been doing in terms of promoting sustainable finance?


We participate in all these international communities and processes. Indexes are clearly a very big area in sustainability. Sustainability is one of the topics in the agenda on our next Managing Board, and it is exactly because we are working on the strategic plan for the next 3 years. I think reporting and the metrics are overs-tated; for me, green ratings are just like the other ratings and the market will take care of that, as it normally does.

But one interesting thing is the difference between developed countries and de-veloping countries. There are signs that demand is building up, so reporting is not the issue. Then, what is the issue? I think that a part of the issue are exactly projects. Actually, I think the main issue is the supply of enough projects and the ability to identify those projects; and it’s not only about sovereigns. There is an useful work from the Climate Works Foundation about what they call “LCR – Low-carbon Climate Resilient Investment”. Although there are several large projects related with energy efficiency and renewables, the change that needs to occur is on smaller projects that have to be identified.

CRISTINA CASALINHO

Allow me a quick comment. I think that being a sovereign is a bit different; it is controversial having an issuer issuing (or not) green bonds because what some countries believe is that the government should be structurally committed to being green. That´s why we believe that, for instance, rating agencies should in-clude in their rating process a factor considering how green the specific country has been in terms of environmental industries. What I was trying to bring to the table is the current stage in terms of the green bond issuance. For a sovereign issuer, it is still costly. It doesn’t mean that it will deter sovereign issuers from issuing green bonds. We know that this trend is there. This is a decision that will be taken, but there are different possible approaches. Some believe that it shouldn’t be done by the sovereign, but by agencies. Germany is an example: all the green bond issuing is done through FKW. And there are other examples from the Netherlands.





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RITA OLIVEIRA PINTO

Do you have the example of France?

CRISTINA CASALINHO

It is the same. Also, the European Commission has tabled an action plan. This ac-tion plan is quite well advanced, they’ve been doing a lot of work in terms of taxo-nomy, which means that they are going to have a classification for all green indus-tries, and green activities. They will progress into setting EU standards; they will evolve into labelling and to change the process adopted by rating agencies do de-velop ESG ratings. A lot is going on, and this is still a work in progress.

RITA OLIVEIRA PINTO

Thank you very much for your inputs. Unfortunately we do not have time to go to the audience. It was a very interesting discussion.





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Roundtable Sustainability: to regulate or not to regulate?



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STEVEN MAIJOORPresidente, Autoridade Europeia dos Valores Mobiliários e dos Mercados (ESMA)

GABRIEL BERNARDINOPresidente, Autoridade Europeia dos Seguros e Pensões Complementares de Reforma (EIOPA)

GABRIELA FIGUEIREDO DIASPresidente, Comissão do Mercado de Valores Mobiliários (CMVM)

Moderador

UGO BASSIDiretor, Direção-Geral de Estabilidade Financeira, FISMA, Comissão Europeia

ROUNDTABLE SUSTAINABILITY:

TO REGULATE OR NOT TO REGULATE?




Moderador: UGO BASSI, Diretor, Direção-Geral de Estabilidade Financeira, FISMA, Comissão Europeia ;

GABRIELA FIGUEIREDO DIAS, Presidente, Comissão do Mercado de Valores Mobiliários (CMVM);

ANTÓNIO CORREIA, Partner at PricewaterhouseCoopers ;

GABRIEL BERNARDINO, Presidente, Autoridade Europeia dos Seguros

e Pensões Complementares de Reforma (EIOPA);

STEVEN MAIJOOR, Presidente, Autoridade Europeia dos Valores Mobiliários e dos Mercados (ESMA).


ROUNDTABLE SUSTAINABILITY: TO REGULATE OR NOT TO REGULATE?



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ROUNDTABLE SUSTAINABILITY: TO

REGULATE OR NOT TO REGULATE?

UGO BASSI

Good afternoon. To regulate or not to regulate. This is the question that has been floating around throughout the whole debate. Of course, the opinions were as likely divergent and different. And that is, of course, the beauty of a debate. We will be discussing this issue with 3 distinguished panellists and regulators. I’ll be extremely happy to hear their views, firstly, on the gene-ral question: to regulate or not to regulate? I will start by our host. Gabriela, what do you think?


To regulate or not to regulate. I think this is not exactly the question to be answe-red, as it is too binary. It is not a question to which we can answer yes or no. Before thinking about regulating, we should try to identify the problems, risks and challen-ges, and understand where the regulators can make a difference. If any kind of re-gulation is needed, it’s also important to discuss how far regulation should go. We should try and find the right balance between the need to allow innovation and sus-tainability to become mainstream in this field, and the need to minimize potential risks, to tackle them correctly.

There is a role for regulation to play in this story, but it’s a bit too soon to tell exactly where and how. CMVM is mostly focusing on understanding the risks, the fra-mework, and the challenges related to sustainable finance. This is why we are lau-nching a public consultation on sustainable finance. We intend to start by gathe-ring knowledge, which is essential for us to understand where to go. Of course, the European Commission has already taken the lead in this regulation process. To sum up, some regulation is needed, I believe, but it’s too soon to say exactly what it is. But, in parallel with regulation, the sustainability issue also brings supervisory concerns.

UGO BASSI

Do you think regulation should do more in addressing climate? Should re-gulators focus more on the social and governance dimensions of invest-ment? If you allow me, I’ll ask Steven to contribute to the general deba-te, and then of course with some specific feature related to the insurance sector.



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STEVEN MAIJOOR

I think that this is the first time I would say I’m in favour of regulation, to make sure that sustainability is properly addressed in the capital markets.

Sustainability is a relatively new theme. First, we should ask some questions: Do issuers properly reflect the risks of sustainability when they are reporting on their profits and other values? Do the ratings sufficiently consider the risks of an envi-ronmental disaster? Do the ratings consider the environmental risks on the value of certain technologies that might become outdated or that are legacy assets? There is a need for reliable financial information that accounts for the sustainability risk. So, there’s, to some extent, a very classical issue in capital markets: it’s about how sustainability risks are properly reflected when investors need to decide.

The other part of the issue, in my view, is that we see a changed preference on the investor side. We can see that investors want to take into account the sustaina-bility of their investments, in addition to risk and return. To some extent, they are willing to forego some return or to take on some extra risks, if they know that their investments are better in terms of the sustainability impact. These elements need to be properly raised by the capital markets: to make sure that investor preferen-ces are changing in the direction of more sustainable investments and that sustai-nability risks are properly reflected.

I don’t see that the capitals market system per se should have an inherent drive to sustainability. This occurs, on the one hand, from changes in investor prefe-rences, and, on the other, from the increasing awareness that sustainability risks must be properly reflected. We have regulation on both sides, to make sure that it works properly. We have seen all kinds of voluntary activities by the private sector to make sustainability work, such as reporting systems developed by the private sector that helped to signal sustainable investments. However, ultimately there is the risk of greenwashing.

There is a real need for the public sector to intervene. Probably, this is also an area where the public sector has been lagging behind the private sector. I can remem-ber stories in the ’90s: “We have a special segment in our trading venue that is a green segment, and we’re struggling with how we can make that a credible seg-ment. Could you help us?”. Sustainability is an area where there was a private sec-tor committee recommending to the Commission various action points, which is not typically the way we regulate financial markets. Sustainability is something where the private sector has been pushing the public sector. We need you to get better information on sustainability to better fulfil the changing demand and thus respond to investor preferences.





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UGO BASSI

I presume that Gabriel may want to add the specific angle of climate change and the effects of climate change on catastrophes. The question for you is: are we sufficiently protected?

GABRIEL BERNARDINO

I believe that there is a need for some regulation. And I think that what the Commission did after the expert group report on sustainable finance was an act of leadership. Right now, the discussion is even wider, so I think it was an act of vision to put this element of sustainability on the agenda. The way I believe it should be regulated is by giving the right incentives. When I look, for example, at the insuran-ce and pension sectors, the right incentive should be to make sure that risks rela-ted to sustainability are integrated into the risk management of the companies and in the decisions that are taken. We will only have a change in the way the financial sector approaches sustainability when we have the capability to introduce in to-day’s investment decisions the considerations of the prospects for the future due to the effects of climate change. To the insurance and pension sectors, this is an issue about the business model because they invest in the long-term. If the insu-rance and pension sectors don’t take into consideration those elements nowadays, they will be faced with problems not also for their own companies, but also for their consumers. This is an element that acts in the best interest of consumers.

UGO BASSI

We’ve discussed a little bit this morning what the European Commission is doing to promote sustainable finance. Can you explain what EIOPA and ESMA are doing in order to introduce and integrate sustainability risks in the investment chain?

GABRIEL BERNARDINO

EIOPA will have consultations in the coming weeks on the way to introduce sustai-nability considerations. And the way that we are integrating sustainable finance is precisely what I was trying to describe. To put the focus on having the conside-ration of these risks from a governance and a risk management perspective, and in terms of the transparency and the information that is provided to the market.





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As I said, I think that to have an investment policy based on sustainable grounds is a responsible business practice and a win-win for the companies and the con-sumers. It should not be a political imposition. It should be doing business for the benefit of your customers and doing business in line with what you want to sell and what you want to have as a risk.

There is one point that I want to make concerning the insurance sector on this is-sue of climate change. If we look at Europe in the last 10/15 years, we have already seen the increase in severity and frequency of natural catastrophes. In Portugal, we have seen wildfires and floods in the last 2/3/4 years. The reality is that only around 1/3 of the costs of these events are insured. We have a huge protection gap in our societies. Although some countries decided, many years ago, on developing collective systems to deal with natural catastrophes, there is the need to do it also at the European level. We need collectively to have mechanisms to close this pro-tection gap, by combining efforts from a public and a private perspective.

UGO BASSI

Do you envisage a situation where this protection gap is filled by means of regulatory measures, so in a compulsory way?

GABRIEL BERNARDINO

The protection gap is a worldwide issue. Sometimes, people think: “Ah, this is for Developing Countries.” No, this is also for Developed Countries. In Europe, only 1/3 of the costs are protected. How can we close this protection gap? One of the things that is being done in some countries is to join together efforts from the private and the public sectors. The public sector can have a role in terms of guaranteeing extre-me situations in natural catastrophes. The most significant risk in Portugal might be the seismic risk. However, only 15% of the houses in Portugal are insured. This is a huge risk, not only for all the individuals but also for the banking sector, because they have the guarantees of the homes when they lend money. It is a financial stabi-lity issue and a public finance issue. The pension gaps have been taken into conside-ration and economic governance in the sustainability of public finances, the protec-tion gap should be on the agenda of the sustainability of public finances.





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UGO BASSI

Steven, what is ESMA doing in this area?

STEVEN MAIJOOR

Before going there, I’d like to highlight that the issue of protection against climate change is also relevant for Developed Countries. For example, in the Netherlands half of our country is below sea level.

I’d like to go back to the earlier points that I’ve made about the need for a proper reflection of sustainable risks and for a response to the changed preferences of investors. In the first area, how are risks properly reflected? It’s first of all around non-financial reporting by issuers. There is already an obligation for non-financial information to be included in the financial statements, including the risk of the en-vironment for issuers. What we have done on an annual basis, together with the na-tional regulators, is an agreement on common topics that should be revealed when assessing the financial statements of listed issuers.

For the year 2018, we have included the reporting on non-financial information and adjusted on the usefulness and the reliability of that information from an investor perspective. This is one of those concrete actions. It is very important to realise how much is in the first phase compared to, for example, the traditional reporting systems. It has taken us many decades to get to a reliable reporting system on pro-fits and risks. Thus, it will take a long time to get reliable reporting on non-financial information and the risks related to the environment.

We also need to make sure that this information is finally relevant and reliable when used by investors. To give insurance to that information, the typical role of auditing also needs to be developed. We have just started addressing reporting by issuers. We will also very soon start a consultation on ratings, to understand to what ex-tent are rating agencies considering sufficiently the risks related to sustainabili-ty. Insurance companies are probably the best examples where sustainable risks should affect their ratings. Are ratings sufficient considering the risks of sustai-nability when they decide on the creditworthiness of a financial instrument of an issuer? We always underline that the methodologies are to be decided upon by the rating agencies. We will not instruct how to take the environment into account when they do their ratings, but we will take that information. Are they sufficiently taking this information into account when they decide on these ratings? Those are the concrete measures we’re taking now on the risk side.





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On the other side, we have to answer the question “how do you sufficiently take into account the changing investor preferences?”. Do investors appropriately take sus-tainability factors into account when they are deciding on their investments? Are sustainable issues properly considered when a new product is manufactured? We will consult on that. Also, very soon we expect to start consultation on how these sustainability factors should be taken into account in target market definitions and in the advice that is provided by investment firms when they are advising clients on financial products.

UGO BASSI

Gabriela, as a regulator and supervisor, you have to look at financial stabili-ty, investor protection, and market transparency and integrity. How do you think you’ll be able to reconcile with all these main objectives and also the objectives of sustainability? How do they link with each other? Is there any tension or complementarity? How do you see these issues developing in your daily activity?


I believe that there are always tensions, but these tensions can be turned into opportunities. You mentioned risk mitigation, financial stability, transparency, in-vestor protection, and these are the main pillars of our mission as a securities re-gulator. We provide a public service, we work for the public good and taking these pillars all together is what we have to do to accomplish our mission in a proper way.

It was said that there is a tension between investor protection and market deve-lopment and financial stability. I don’t see it that way. I think that they are comple-mentary and have to be coordinated, to allow us to act for the public good. How do these pillars relate to sustainability? I think that sustainability issues and elements are at the intersection of these pillars. Our ultimate goals are to ensure that marke-ts work in a sound way and that investors are protected. And this is only possible if we integrate sustainability issues in our strategy as a regulator.

We acknowledge that some regulations may be needed. More than that, a regulator needs to have a long-term strategy and to integrate long-term elements. It is now clear that we have to integrate these social, environmental and governance issues in long-term goals. If we don’t address them, it will be difficult to anticipate how the markets will evolve and what the investors will need in the future to be protec-ted. And this is our function as a securities regulator. If we want to make sure that





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markets work well, we have to anticipate what comes next. There is a new gene-ration more demanding in terms of sustainability issues. The current incumbent investors and their financial intermediaries are already becoming aware of these requirements and this call from the society.

GABRIEL BERNARDINO

I think this is an issue for the different stakeholders, regulators, supervisors, the industry, and consumers. If we are trapped in the short-term decision and are in-capable of really taking the long-term approach, we will not achieve the sustaina-bility goals. That´s what is really difficult, namely, because, for the industry, the decisions are taken in a horizon of a board that has a 3- to 5-year mandate to op-timize the results. Politicians might need to make difficult decisions from an eco-nomic perspective during their mandate, decisions which of course will only be giving benefits in 10/15 years, while they will be judged in the short-term. I think the main important issue here is to have the capability to look in the long-term. Although it is difficult, I think that insurance and pension funds are probably best prepared for this.

STEVEN MAIJOOR

I’m completely at ease in integrating sustainability in capital markets, ensuring that the capital markets can continue to conduct a function of ensuring that investor preferences for certain savings are in line with their preferences and the risks of those investments. It is very important to realise how complex this issue will be. There will also be room for retail investor disappointments under the heading of sustainability, if unsustainable investments were sold under the umbrella of sus-tainability. The potential for fraud in this sector should be considered. A positive development of the sustainable market might attract people that have not the best intentions. It will be important to maintain the willingness to invest in sustainable products to make sure these investments are made properly and responsibly. And there will be very complex issues. For example, the Schiphol, the Dutch Airport, well known as one of the biggest European hubs, has recently issued green bonds. To what extent is it acceptable or unacceptable that one of the most polluting or-ganizations can issue green bonds?

UGO BASSI

If there is a need for some regulation, we have to pitch it at the right level. All that we are now working on together, and at a European level, is transparen-cy. The European Commission is creating the conditions to encourage and to





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promote sustainable finance by promoting transparency with the taxonomy and the disclosure obligation. That´s certainly helpful. Is that enough, or do you envisage more, and what?

GABRIEL BERNARDINO

No, it’s not. I think you should take some time to see how transparency works. We should not be tempted to try and standardize everything on disclosures immedia-tely. The work on taxonomy is very important; then, after some time of implemen-tation of disclosures, we need to standardize it. When I talk with market participan-ts, that´s what they tell me all the time: “if you want us to do a good job in terms of risk assessment and having the proper incentives there, you need to standardize data. Otherwise, we cannot do a better job”. That´s what I would do: work on the transparency for 2/3 years and then on standardization.

But it is not sufficient, and for me, the keyword is “stewardship”, it’s to make sure that the financial sector and especially the long-term investors have the capacity to have the proper dialogue with the companies they invest in, giving them the in-centives to move to a lower carbon footprint. And this stewardship element has 2 components: the dialogue, where you have clear targets that you want to achieve; and to have the capacity to exercise your duties as a shareholder. If things go in the wrong direction, you should not allow it. And this is something that needs to be very clear in the mandates that insurances and pension funds give to asset mana-gers. And there should be much more activism in relation to this. So, transparency is important, but we need to push for stewardship, that´s the fundamental element on making this transition in a gradual way. The risk here is if we go in for a zero-one approach. If everybody invests only in this type of assets and dumps all the other types of assets, then we’re going to have a financial stability problem with stranded assets. We should avoid this scenario because that´s not the way we can lead the economy in a gradual way for this transition.

UGO BASSI

Steven, is transparency enough?

STEVEN MAIJOOR

I think we should not underestimate how difficult and how complex it is in getting





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to transparency, standardization, and reliability. If we have that, that would be an enormous step. Once we are there, I think it would really help to channel the capital in the right direction.

UGO BASSI

Very good. I now turn to the audience.

PARTICIPANT I

How to regulate social media and fake news?

PARTICIPANT II

I want to give you tangibility about this short- versus long-term approach. Portugal has a long-term objective towards a carbon-neutral economy. A carbon-neutral economy means that we have to completely change the paradigm that we produce and consume in order to accomplish our services without carbon emissions. This means that for many sectors a complete transformation. How will the regulators cope with this goal for the Portuguese economy to become carbon-neutral in the next 30 years?

PARTICIPANT III

The European Commission presented its action plan for funding sustainable grow-th, and, afterwards, presented proposals that are more focused on the investment side than on the financing side. Now we have the European Parliament that is pro-posing to change the scope and to include credit institutions and all financial pro-ducts and services. I was looking into the draft report of the European Parliament, it proposes that all financial products and services must be submitted to the com-petent national authorities that will have to check if it contributes to the sustai-nability investment objectives. I’d like to have your view on that. Also, there are in-vestment gaps needing to be filled in the coming years. How to balance short-term concerns with the need for long-term investments?


It’s not for the financial market regulator to regulate social media. If there is fake news, there is information flowing that does not correctly reflect the reality of, for instance, a listed firm. If the information can mislead investors, what the financial





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market regulator can do is ask the listed firm to clarify and justify if the news is ac-tually fake or not. This is the maximum for the securities regulator. This is not for us to answer how to regulate social media.

As to the second question, we have to clearly separate policy and political deci-sions, and regulation and supervision. It’s not up to the regulator to make political decisions like the programming or planning for low-carbon or neutral-carbon eco-nomy. What we can do is integrate what it means for regulators and supervisors in our remit. This means that if there is any specific regulation coming from this po-licy or from this program, we must include it in our strategy and in our remit, and then implement it and ensure that it is complied with. But it’s definitely not for the regulator to be involved in political decisions. I can anticipate that some specific regulation may become a reality and then we will have to deal with it. For the super-visor and the regulator, what we have to do is to ensure that the market works well, and, for this, transparency is key. Transparency is the centre of our attention, it’s the main instrument that we have to ensure that investors are protected, that the market works well, and that supervised entities are also governed in a proper way to avoid market failures and disruptions.

GABRIEL BERNARDINO

I totally agree with Gabriela, that supervisors and regulators cannot substitute po-litical decisions. I might give you one political decision that could drive the agenda: carbon pricing. I think we all agree that regulation and supervision can give the right incentives. I will give you 2 other examples that can help the agenda, from the public sector and the political side. The first, supply side related. The insurance sector is willing to invest more capital in sustainable projects. However, there is not enough supply of good projects. So, what could the governments do? Standardize, do it at a European level, don’t do it differently for each market. Standardize, have a pipe-line for infrastructure projects and projects linked to a sustainable economy. The second, and very important, is the political risk. How can I invest for 30/40 years on something where the political risk is huge? The alignment of interests from a politi-cal side creating mitigants of political risk will be very important.

STEVEN MAIJOOR

I fully agree with the description of what should we do with social media and fake news. Elon Musk had this famous tweet where he said: “I will take my shares, I want to go private” that he did in the middle of the night. And he had the consequence of that, the SEC took it on the Board and, so, that is the way to respond to this. If there is inaccurate information published by an issuer or by an investor, or an important market participant, regulators need to be accountable to that and act.





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Secondly, markets and investors are willing to take a long-term perspective. If they know that an investment brings a good return, they need the information on this long-term impact. We can see it in the companies that have been, for years, loss--making (like Amazon.com), but ultimately they became profitable. There was the willingness to invest and to have a long-term investment. I think that it is not a pro-blem of the capital markets. It is much more about a stable political environment and stable parameters for this type of investment. But I don’t think there is a pro-blem of the capital markets per se, that they are not willing to take a long-term perspective. The Commission, the politicians, have a vision in Europe to develop sustainability. The vision should be complemented with action on the resourcing side. Sustainable finance is supported both in Europe and in Asia. So, on the regu-latory side, getting together is important. China is very far on this, and I think that should help this area.

UGO BASSI

We are getting towards the end of the panel and the event. So, I will ask Gabriela to give us her concluding remarks.


Thank you very much, Ugo. My first words go to the panellists of this regulators’ pa-nel. I thank you for this very fruitful and rich discussion on what regulators should and should not do. This was one of the goals of this conference. As regulators, we are looking at this issue. Although some regulators have already had some answers, we are still working on our role as regulators in this sustainability issue. I’m very proud because I think it was the first time in Portugal that the issue has been dis-cussed. I’m also very proud of having in the audience so many different people co-ming from different institutions, organizations, individuals, something different from what we usually see and meet on these occasions. And this means that the civil society and the public, in general, are interested in the issue and were curious about what was going to happen here. I was curious too. We heard about opportu-nities, challenges, risks, cynical approaches and sceptical approaches. But in the end, I would say that there is hope.






Nº 62 | ABRIL 2019

CADERNOS DO MERCADO DE VALORES MOBILIÁRIOS · 2020-07-27 · 7 CADERNOS DO MERCADO DE VALORES...

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