Green finance in the face of climate urgency
According to the Brundtland Report of 1987, sustainable development aims to meet the needs of the present without compromising the ability of future generations to meet their own needs. It is based on three pillars: the environment, society, and the economy.
The Paris Agreement: A foundational text The Paris Agreement, signed on December 12, 2015, is a legally binding treaty aimed at limiting global warming to +1.5°C and not exceeding +2°C compared to pre-industrial levels. To achieve this goal, humanity must aim for carbon neutrality by 2050, meaning that greenhouse gas emissions must not exceed what the planet can absorb.
The challenge of emission reduction: To achieve this carbon neutrality, each individual and business must reduce their greenhouse gas emissions by at least 7% per year until 2050. This is a challenge because today, over 80% of primary energy consumption comes from fossil fuels: one third from oil, one quarter from gas, and one fifth from coal, all of which are significant CO2-emitting energy sources.
Adapting our lifestyles: To meet the goals of the Paris Agreement, signatory countries must implement climate action plans. Additionally, individuals must adapt their lifestyles: the way we eat, live, travel, and consume must evolve to be compatible with low-emission development. This transition also applies to the financial system, which must direct its financial flows towards more sustainable activities.
Sustainable engineer at Societe Generale Private Banking France
The role of sustainable finance
The estimated cost of this climate transition ranges from 30 to 65 billion euros per year1. Public investments alone will not be sufficient to finance this, which is why sustainable finance is essential to bridge the gap between project developers working towards this transition and private investors capable of funding these initiatives. The stakes are high, as it involves mobilizing household savings, estimated at over 6,000 billion euros in France.
Instruments of sustainable finance:
Green Bonds: Debt securities issued by governments or companies to finance environmental projects. In June 2017, the French Treasury issued the first sovereign green bond for 8 billion euros, with a demand reaching 98 billion euros, demonstrating investors' appetite to support this transition.
PAB (Paris Aligned Benchmark) and CTB (Climate Transition Benchmark) indices and thematic funds: Since 2016, these indices aim to invest in companies that respect the decarbonization trajectory of the Paris Agreement.
Green Fin labeled funds: These funds, audited by independent third-party organizations such as EY France, Novethic, and Afnor, measure the effective contribution of investments to the energy and ecological transition.
Regulators play a key role in the evolution of green finance. Legislative frameworks such as the Green Taxonomy (2020), SFDR (Sustainable Finance Disclosure Regulation - 2021), CSRD (Corporate Sustainability Reporting Directive - 2024), and the Energy-Climate Law (2019) provide a framework to:
Create a common language for sustainable finance
Facilitate the identification of responsible projects by investors, financial intermediaries, and regulators.
Encourage all economic actors to adopt practices compatible with the energy transition.
The success of the Montreal Protocol: An illustration of regulatory effectiveness
A concrete example of the success of international regulation is the Montreal Protocol of 1987, aimed at protecting the ozone layer. By regulating the use of CFCs (chlorofluorocarbons), primarily found in aerosols, industries were forced to find alternatives. This significantly reduced the emissions of these harmful gases and, over time, helped restore the ozone layer.
Conclusion
Today, green finance is essential to address the climate urgency by channeling the necessary financial resources towards sustainable projects and transforming economic behaviors for a more planet-friendly future.
DISCLAIMER :
This document has no contractual value. It is not intended to provide an investment service such as investment advice, a related investment service, arbitration advice or legal, accounting or tax advice from Société Générale Private Banking France (‘SGPB France’), which cannot therefore be held liable for any decision taken by an investor solely on the basis of its content. SGPB France undertakes neither to update nor to modify it.
Before making any investment decision, please review the details of the documentation for the service or product being considered, including any associated risks, and consult your legal and tax advice. If the document is consulted by a French tax non-resident, he or she will have to ensure with his or her legal and tax advisors that he or she complies with the legal and regulatory provisions of the jurisdiction concerned. It is not intended for distribution in the United States, or to a U.S. tax resident, or to any person or jurisdiction for which such distribution would be restricted or unlawful.
The past performance information that may be reproduced is not intended to guarantee future performance. These future performances are therefore indicative. The return to investors will vary depending on market performance and the shelf life of the investment. Future performance may be subject to tax, which depends on your present and future personal situation.
Societe Generale has put in place a policy to manage conflicts of interest. SGPB France has put in place (i) a policy to handle complaints made by its customers, available on request from your private banker or on its website and (ii) a policy to protect personal data (https://www.privatebanking.societegenerale.com/fr/protection-donnees-personnelles/). At any time and without charge, you have the right to access, rectify, limit processing, erase your data and the right to object to their use for the purposes of commercial prospecting by contacting our Data Protection Officer by email (protectiondesdonnees@societegenerale.fr). In the event of a dispute, you can lodge a complaint with the Commission Nationale de l’Informatique et des Libertés (CNIL), the supervisory authority responsible for compliance with personal data obligations.
This document is issued by Societe Generale, a French bank authorized and supervised by the Prudential Control and Resolution Authority, located at 4 Place de Budapest, 75436 Paris Cedex 09, under the prudential supervision of the European Central Bank (‘ECB’) and registered with ORIAS as an insurance intermediary under number 07 022 493, orias.fr. Societe Generale is a French public limited company with a capital of EUR 1 003 724 927.50 on 17 November 2023, whose registered office is located at 29 boulevard Haussmann, 75009 Paris, and whose unique identification number is 552 120 222 R.C.S. Paris (ADEME FR231725_01YSGB). More details are available on request or at www.privatebanking.societegenerale.com/. This document may not be communicated or reproduced in whole or in part, without the prior written consent of SGPB France.
Non-financial analysis, also known as ESG analysis (Environmental, Social, Governance), is essential for evaluating a...
Sustainable finance is a concept that integrates environmental, social, and governance (ESG) criteria into investment...
Interview with Matthieu Gombault, Head of Wine and Forestry Banking Services at Societe Generale Private Banking, and...
Interview with Matthieu Gombault, Head of Wine and Forestry Banking Services at Societe Generale Private Banking.