Wholesale Banking and the Green Economy

Wholesale Banking and the Green Economy

Simon Thompson

Chartered Banker Institute CEO & ESG specialist

In the second part of this two-part video series on “Banks and the Green Economy”, Simon explains the role of wholesale and investment banks in serving corporate clients and other financial institutions.

In the second part of this two-part video series on “Banks and the Green Economy”, Simon explains the role of wholesale and investment banks in serving corporate clients and other financial institutions.

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Wholesale Banking and the Green Economy

9 mins 56 secs

Overview

Bank loans remain the world's single largest source of financing for businesses - and companies involved in environmentally harmful activities rely on wholesale and investment banks to meet their funding needs. 33 of the largest global banks provided fossil fuel companies with funding of more than $1.9 trillion between 2015 and 2018, according to the 2019 'Banking on Climate Change' report. Therefore, wholesale and investment banks have an important role to play in mobilising private capital for green investment through their lending and capital markets operations and incorporating climate risks and possibilities into their analysis and advisory services, and need to do much more.

Key learning objectives:

  • Identify the role of wholesale and investment banks serving corporate clients and other financial institutions

  • Outline the examples of green corporate banking products and services

  • Outline the principles for responsible banking

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Summary

What is the role of wholesale and investment banks serving corporate clients and other financial institutions?

  • Providing corporate loans, and issuing securities to finance investment
  • Trade finance, to help companies buy and sell abroad
  • The provision of advice in relation to IPOs, mergers, acquisitions and other corporate events

What are the examples of green corporate banking products and services?

  • Corporate lending - Includes direct lending, project finance and syndicated loans, where a group of lenders work together to provide funding for a single borrower
  • Green corporate deposit scheme - Provides businesses with a facility to deposit money with a bank in the knowledge that it would be invested in projects that have a positive social or environmental impact, equivalent to a green retail consumer current account
  • Investment banking - Advising on and transacting IPOs, mergers and acquisitions and other corporate events

What are the principles for responsible banking?

  • Alignment - Alignment with the SDGs and Paris Climate Agreement
  • Impact and Target Setting - Publishing goals to continually raise positive impacts while reducing negative environmental impacts and managing risks emerging from the activities, products and services of banks
  • Clients and Customers - Working wisely to promote sustainable practices with consumers and clients and to encourage economic activities that generate mutual prosperity
  • Stakeholders - Consulting, engaging, and partnering with relevant stakeholders proactively and responsibly
  • Governance - Implementing a bank’s commitment to the Principles through effective governance, and a culture of responsible banking
  • Transparency and Accountability - periodically and transparently reviewing individual and collective implementation of the Principles

While the six Principles for Responsible Banking are for organisations, alignment at three levels is required for the Principles to drive and continue to foster a culture of responsible, sustainable banking:

  1. Industry Level
  2. Institutional Level
  3. Individual Level

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Expert
Simon Thompson

Simon Thompson

Simon is the Chief Executive of the Chartered Banker Institute and co-author of Green Finance: Principles and Practice. He is also a former Vice President of the European Bank Training Network, and is currently Chair of the Global Banking Education Standards Committee. He specialises in professional ethics, and green and sustainable finance.

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