Barclay’s Daniel Hanna on Sustainable Finance

About this video

• Video Title: Barclay’s Daniel Hanna on Sustainable Finance
• Channel: Bloomberg Live
• Speakers: Daniel Hanna
• Duration: 16:25

Overview

This video features Daniel Hanna of Barclays discussing misconceptions and realities in sustainable finance. He addresses the complexities of ESG acronyms, the need for transparency, and the importance of driving real-world decarbonization, particularly in emerging markets. The conversation also touches on making sustainability affordable, the role of subsidies, the challenges of scaling new technologies, and the evolving investment landscape where energy transition investments are beginning to surpass fossil fuels.

Key takeaways

• Misconceptions in Sustainable Finance: A major challenge is the "alphabet soup" of acronyms and frameworks, leading to a lack of clarity. Another misconception is that sustainable finance inherently reduces revenues; instead, it can drive innovation and build sustainable business models.
• Transparency and Trust: For sustainable finance to be effective, investors and regulators need confidence that "green" claims are accurate. This requires transparent taxonomies and clear definitions.
• Real-World Decarbonization: Beyond just reducing emissions within a ringfence, sustainable finance must drive tangible, real-world decarbonization efforts. This is particularly challenging in emerging markets, where current taxonomies may not be suited to their specific needs and opportunities.
• Affordability and Scale: Making sustainability affordable is a significant hurdle. While subsidies can be catalytic for new technologies, the goal is to reach a scale where these initiatives become self-sustaining business models. Historical examples like solar power demonstrate how scaling can drastically reduce costs.
• The "Missing Middle" in Capital: There's a gap in funding for technologies that are too developed for venture capital but too nascent for large-scale infrastructure investment. Addressing this "missing middle" requires coordinated efforts from banks, insurers, and public capital.
• Investment Trends: Investment in the energy transition is now exceeding fossil fuel investment. While policy and capital are driving this, challenges remain in coordinating efforts across the value chain, such as the interdependence of green hydrogen producers and consumers.
• Urgency and Targets: There is an urgent need to reduce emissions, with targets like a 40% reduction this decade. Barclays aims to mobilize $1 trillion in sustainable and transition finance by 2030.
• Regional Momentum: Asia is showing significant growth in companies setting emission reduction targets and in ESG funds. Europe is also driving momentum through initiatives like the EU Green Deal and carbon pricing mechanisms.
• Profitability and Future Outlook: While valuations can fluctuate, innovation and change in the green sector are creating value. The trend of energy transition investment outstripping fossil fuel investment is expected to continue, driven by policy, capital, and growing awareness of opportunities.