PERSPECTIVES
Experts’ views on the green and social transition

Trimestrial - issue 8 - September 2023

on Sustainable FinanceAre banks change takers
or change makers?
by Eric Usher, Head of
United Nations Environment
Programme Finance Initiative

To mitigate climate change, will financial institutions merely be “change takers” by reacting
to sectoral shifts as they occur? Or are they
going to be “change makers” and take action
to build solutions and resilience towards achanging climate?
To catalyse the latter approach,
UNEP FI
worked with 32 banks, including BNP Paribas,
to draft UN Principles for Responsible Banking(PRB), with 129 banks becoming founding signatories at the 2019 launch. Most had transaction-based environmental and social risk
management practices in place, but lacked
the connectivity to understand these ESG
risks portfolio-wide in a strategic sense.
The PRB meant moving from a transactional
mindset to one aimed at aligning products,
services and portfolios with the biggest individual and societal challenges and needs– a new way for the industry to look at its

business. Is their funding adding to climatechange, or targeting actions to advancesociety?
The PRB requires banks to go beyond financial metrics to analyse the impact of all theirbusiness lines – on job creation, climate or biodiversity loss, gender equality, etc. PRB signatories must set and deliver on targets in theareas where they have the greatest impact,
such as aligning with the 2050 net-zero objective. Annual disclosures provide accountability and must be assured by the third year of
implementation and through inputs from the
PRB’s Civil Society Advisory Body.
Today, the PRB has 325 members from 80
countries, representing assets of $90 trillion, or half of the global banking industry.
The made progress and areas for improvements are detailed in the second biennial
PRB progress report, to be released in
September 2023.
Overall, the PRB is proving a key tool to ensurethat a growing share of the industry seek tobecome truly responsible bankers.

ALL STAKEHOLDERS MUST TAKERESPONSIBILITY FOR ACCELERATING THE TRANSITION
The challenges we are facing require
an unprecedented transformation ofsociety and the economy. Major investments are needed to change ourindustrial, societal and economic
models. To achieve net zero emissions
by 2050, for instance, annual investments in renewable energy will haveto be more than tripled by 2030 according to the IEA.
Financial players are well positioned
to deploy their capital, assets andexpertise in favour of this transition.
They are nonetheless part of a chainof responsibility that includes otherstakeholders.
While they grant loans, facilitate debt
issuance, manage their clients’ assets
and so forth, they do not own theeconomy. Their role is to use their position and implement their resources
to influence and encourage the system
to transition to a more sustainable anddecarbonised world. As this is a recent
topic in terms of financial development, it is still not handled perfectly,
yet progress is ongoing.
Antoine Sire, Head of Company
Engagement at BNP Paribas

Principles for Responsible Banking
Launched under the umbrella of the United Nations, these principles describe a unique framework designed to give a purpose, vision
and ambition to sustainable finance. Signatory banks commit to embedding these principles in all business areas and at every level(strategic, portfolio and transactional).

Principle 1

Principle 2

Principle 3

Principle 4

Principle 5

Principle 6

Alignement
Align our businessstrategy to individuals’ needs, the United
Nations Sustainable
Development Goals(SDG), the Paris
Climate Agreement
and other relevant
frameworks.

ImpactContinuously increase
our positive impacts
while reducing ournegative impacts.

Clients
Work responsiblywith our clients tocreate shared prosperity for current andfuture generations.

Stakeholders
Consult, engage
and partner with
relevant stakeholders
to achieve society’s
goals.

Gouvernance
Implement ourcommitment to theseprinciples througheffective governanceand a culture of
responsible banking.

Accountability
Periodically review the
implementation of theseprinciples and commit
to being transparent
about and accountablefor our impacts.

Source: UNEP FI

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What’s at stake

The role of the financial sector in the transition
Financial players alone cannot transform the economy, but they can stimulate the transition bycomplementing the indispensable action of public authorities.
Financial institutions can create asnowball effectby Laurence Pessez,
Head of Corporate Social
Responsibility at BNP Paribas

Banks are tasked with supporting the transition stakeholders on
the path to a low-carbon economy and harnessing their resources to enable financing of the enormous investments necessary forthis transition.
For financial institutions, the transition to a more sustainable andlow carbon world is a strategic challenge. They must consider the
impact of climate change and biodiversity loss on their operations,and ensure that they contribute to improving the situation rather
than making it worse.
Banks play a vital role in financing the real economy. They can opt
to earmark funding for one sector rather than another, or makeit contingent on achieving sustainable objectives or adopting bestpractices.
The decisions and public statements of large banks and international asset managers are highly scrutinised, due to their impacts
worldwide, extending far beyond their operations. When a bankmakes its financing to players in an environmentally or sociallysensitive sector contingent on achieving sustainable objectives, itwields its leverage to make an impact. When hundreds of institutions make a public commitment to steer their activities towards
financing a world that is carbon neutral in 2050, this has a very real
influence on the selection of investments and the financing process.
These institutions alone cannot transform the economy. But they
can accelerate the transition to a development model that is moresustainable and in line with the planetary boundaries by supporting their corporate and individual customers, providing them thefunding required as well as tailored advise.
In order to effectively facilitate the transition, financial institutions
are making profound changes. One priority is ensuring that all staff
are proficient in sustainable development fields. It is also essential
they can access robust data on ESG, as this enables them to evaluate, take actions, account for and measure progress.
Ultimately, a financial institution by itself has very little ability
to drive change. So, they are coming together in coalitions, suchas under the Principles for Responsible Banking. Given the major
challenges facing the world, the key success factor is collaboration
between all stakeholders. If we are to act quickly, we must unite ourstrengths to support a sustainable and fair transition.

Sustainable investing continues tomature, but there is still some way to
go before reaching a consensus
by Jane Ambachtsheer,
Global Head of Sustainability at
BNP Paribas Asset Management

Many financial sector companies claim to be fully committed
towards a more sustainable and inclusive economy. Yet scepticism
remains whether the industry is shifting fundamentally or making
empty promises.
Sustainable finance is flourishing; sustainable investment-related regulations grew fromaround 50 in 2000 to almost 900 in
2022. More than 500 investors from 50 countries have committed
to achieving net zero through participation in
GFANZ. Industry
participants in Europe have been hard at work implementing theEU’s Sustainable Finance Disclosure Regulation. Sustainable investing principles and practices have become increasingly relevant toportfolio management.
However, scepticism remains around how deep the implementationof sustainable investment practices goes. To some stakeholders, investors are not doing enough. To others, the investment community isoverstepping its role by addressing issues such as climate change andinequality. Navigating a path forward is critical. To do so, we are seeing
increasing action by regulators around the world to define, measure,oversee and enforce standards and disclosures linked to sustainable investing, providing even more oversight. Asset managers have arole to play in the transition. They can implement exclusion policies,
offer sustainable thematic and impact investment opportunities, andexecute demanding stewardship practices as they engage with companies and policymakers.
Measuring and reporting on impact is also key. Examples include
reporting done by signatories to the Operating Principles for Impact
Management
disclosure document and the publication of BNPParibas Asset Management’s first Biodiversity Footprint. The recent
mandatory disclosure ofPrincipal Adverse Indicator data linked
to SFDR will also enable industry discussion and analysis. Beyond
integrating sustainability within their portfolios, asset managers canlead by example through operational activities – promoting diversity
and inclusion, reducing the use of paper, banning single-use plastics,
community outreach, etc.
The financial sector has an opportunity and an obligation to use its
capital allocation and stewardship practices to promote a more sustainable economy. Given the increasing level of transparency acrossthe industry, it will become harder for laggards to keep up.

PERSPECTIVES on Sustainable Finance3

Regulatory watch

Regulation, the catalyst of sustainable financeMore and more regulations aim to steer capital towards the transition, but there is stillmuch to be done to ensure they act as a cohesive and transformative force.
Regulation as an instrument fortransforming companies

Customers are more aware ofsustainability challenges

by Jeanne Aing,
Head of CIB Regulatory Anticipation
at BNP Paribas

by Valérie Truong Tan,
Sustainability ProgrammeManager – Company Engagement
at BNP Paribas

Regulatory initiatives aim to make the economy more sustainable.

New regulations are transforming the customer relationship.

Europe has launched many regulatory initiatives to encourage companies to embrace a sustainable approach, from the EU taxonomy and
SFDR, to the CSRD and a Green Bond Standard. Regulations that havealready been adopted or are under discussion notably aim to facilitate
and finance the transition to a low-carbon economy, identify activities
that are sustainable and socially responsible, as well as enhance transparency and halt greenwashing.
The CSRD, whose comprehensive standards have just been adopted, isa good example of this. From 2025, some 50,000 companies will need to
publish material information about their corporate social responsibility,
including through their value chain. Companies that have credible plans
should in theory have an easier access to financing.
The challenge is particularly great due to the major needs associatedwith the energy transition:around €350 billion per year under theEuropean Deal Green alone. The banking sector is a key link that finances the real economy and fosters the energy transition.
Many challenges remain, chiefly ensuring easier and more consistent implementation for companies, and interoperability of the standards globally. Here, some initiatives are moving in the right direction, such as themutual recognition of sustainability reporting standards at the European(ESRS) and global ( ISSB) level. However, it will take longer to achieve
comparability between the different taxonomies.

The extension of the MiFID 21 and IDD2 directives to ESG criteria
is transforming the way banks interact with their customers.
Henceforth, the banks have to take customers' sustainability
preferences into account through a specific questionnaire andalign investment products' offer with their objectives andneeds. This will require the banks to develop a new range of
products aligned with the different aspects of sustainability(E, S, and G), as well as to adapt their advisoty tools andupskill their customer advisors.
Although sustainable investment solutions are increasingly
popular, customers are still sometimes sceptical. However,capital reallocation will be a long-term process as markets
mature further. Over time, the public will likely become more
supportive of such investment, in line with the availability ofadapted products as well as more reliable and transparent
information. The European Union may also increase the scopeof regulations that are now focused on environmental aspects
and large companies.
The Markets in Financial Instruments Directive
The Insurance Distribution Directive

1
2

Double materiality principle
Double materiality involves
a simultaneous review ofthe:• financial materiality, i.e.
the impact of physical andtransition risks of climatechange, loss of biodiversity, etc., on the activities of
the company (outside-in);• impact materiality, i.e. theeffect of the company’s
operations on the environment and/or society(inside-out).

Financial materiality
Information tounderstand how thecompany’s businessand performance are
evolving…

Impact of the environment andsociety on the company

Impact materiality… and theenvironmental andsocial impact of its
operations.

Impact of the company
on the environment and society

Source: Corporate Sustainability Reporting Directive (CSRD)PERSPECTIVES on Sustainable Finance4

The instruments of sustainable financeSupporting individuals and corporates
in the transition

To support the transition, financial institutions must include sustainability in theirrange of products, while also supporting their customers.
Directing financial flows towards themost virtuous companies and projects
by Andreas Lambropoulos,
Head of Sustainability & Company
Engagement at BNP Paribas
Investment & Protection Services

Accelerating the integration of sustainability in life and pension insurance
by Eric Béquet,
Head of Insurance Asset Management
at BNP Paribas Cardif

Numerous sustainable products are now available, but major
challenges remain for the next few years.
Banks, asset managers and insurers have a vital role to play insteering investments towards sustainable solutions. This is in linewith the interests of customers, who are seeking to give a meaning to their wealth. When creating sustainable products, financial
intermediaries analyse environmental criteria (CO2 emissions,
impact on biodiversity, etc.), social criteria (compliance with employment law, etc.), and corporate governance (gender equality indecision-making bodies, etc.). For their SRI funds, asset managers
therefore offer a wide selection of solutions: funds or mandates
incorporating ESG criteria or thematics, or impact funds designed
to generate a positive and measurable impact. This calls for major
investments in research, databases, the setting up of methodologies that comply with regulations, and up-skilling of staff.
Data availability is clearly one of the chief challenges in future, as
well as speeding up the just transition and increasing investment
in biodiversity. The TNFD has therefore just published its recommendations on how companies can structurally integrate nature
into their non-financial reporting.

Insurers sell long-term savings products and invest in the sharesand bonds of governments and companies that they can support on
the journey to a more sustainable model.
In a market experiencing transformation due to growing regulatory and societal constraints, insurers are evolving their approach toasset management.
By implementing sustainable investment strategies through theirgeneral funds, insurers are increasingly using sectoral filters andinvesting in companies that take into account ESG challenges. For
unit-linked products, insurance companies include non-financial
criteria in the process of asset selection.
By incorporating ESG criteria into their investment decision
making process, insurers can avoid future stranded assets. They
can also identify opportunities for products and investments thatwill help the economy to transition. In this way, insurers meetboth their customers’ needs and their own. In the next few years,
sustainable finance will have to tackle new challenges in order tosupport a just transition and focus on transactions that boost biodiversity protection in particular. Insurers are already developing
such expertise.

Enabling everyone to make meaningful investments
by Eleonore Bedel,
Chief Sustainability Officer
at BNP Paribas Wealth Management

The number of definitions of responsible
investment almost matches the number ofinvestors. Consequently, the financial sector’s role is to raise investors’ awareness of
responsible solutions and to help them findthose that best fit their needs.
Responsible investment should evidently
have a positive impact on society and/or
the environment. But how this is done inpractice will vary, depending on each individual. For one, it should be an investment
to help developing countries, and for another it calls for investing in a low-carbon fundfrom the outset.
In addition, there are now numerous
products for responsible investment, andregulation has resulted in a great deal of information becoming available to investors.
Not surprisingly, an individual investor may
find it challenging to get their bearings.
This is why financial institutions need tofocus on helping their clients navigate

the world of sustainable investment. They
should make information more understandable and accessible for their clientsand potential clients. For instance, BNP
Paribas has established a methodology toassist with evaluating the responsibility
level of financial instruments, on a scaleof zero to 10, illustrated in cloverleaf form.
Lastly, it is essential that staff are trained,
so they can raise the awareness of clientsand support them. Here, bankers also playa vital role. He or she should be able to help
their clients to build a portfolio tailored totheir ESG preferences, their risk profile andtheir yield expectations.

PERSPECTIVES on Sustainable Finance5

The instruments of sustainable finance

The main instruments to finance a sustainable economy
by Agnès Gourc, Head of Sustainable
Capital Markets, DCM Structuring &Solutions at BNP Paribas

The sustainable loan market continues
to grow. A quarter of the EMEA loan market
volume is currently accounted for by sustainability-linked loans (SLLs).
Broadly speaking, two approaches are usedin sustainable finance. At the entity level,sustainability-linked instruments tie theterms of the borrower/issuer’s facility to
the achievement of sustainability goals. The

approach is applied to many types of financial instruments, with SSLs the most widelyadopted.
The second approach requires the borrower
or issuer to also identify projects with either
environmental or social benefits, hence
making them green or social bonds or credits. Transactions involving both are sustainability bonds or sustainability loans. The
proceeds must be earmarked for projects
that achieve positive social or environmental outcomes or address a social/environmental issue.

Green financing supports projects such as
renewable energy, energy efficiency, green
buildings, circular economy, and climatechange adaptation. Social instruments
are often aimed at people living below thepoverty line, marginalised communities,
migrants, unemployed, women, sexualand gender minorities, and people withdisabilities.
Little market regulation is in place, butmarket-based principles exist:
ICMA
principles for bonds; LMA principles forloans.

Carrot rather than stickby Valérie Eymard,
Chief Sustainability Officer
at BNP Paribas CPBS

The sustainable range of products for individuals is mainly focused on real-estate
financing and electric cars.
Over 95% of Europeans say they are readyto adopt a more sustainable lifestyle. Yet

according to a Kantar study published in
2022, only 11% are actively following this,mainly due to financial pressures and alack of confidence in brands.
In terms of positive impact financial services for individuals, the offer is mainly concentrated in financing sustainable housing
and mobility. Although the goal is to makeadditional products more sustainable, it
is difficult to ascertain if individuals will
actually use the money made available tothem to make green purchases.
CO2 emissions calculators based on expenses enabling clients to understandtheir expenses' footprint are flourishing,but individuals do not like a spotlight on
their negative impact on the environment.
One can see a similar impact when unsustainable practices incur a surcharge. Here,it is better to support and even to reward
individuals who adopt virtuous habits,
rather than to blame those who do not.

SMEs and MidCaps need to be supported in their transition
by Arnaud Algrin,
Head of Low-Carbon Transition
for MidCaps & SMEs Initiativeat BNP Paribas

Banks are a vital link for the successfultransition of companies.
The vast majority of SME owners in theindustrial sector became aware of theenergy challenges following the recent
crisis.
However, only 20% have devised
a decarbonisation strategy, often due to alack of time and resources. This shift will

accelerate in the coming years because ofpressure from key clients and regulations.
Companies with a turnover of more than
€40 million and 250 employees will have tocomply with the CSRD.
A study we completed in 2022* highlights
how business leaders are mainly asking for
support to find financing adapted to theirtransition projects. Moreover, they would
like to be guided towards reliable partners
who can implement these projects andtherefore expect to turn to their bank forexpertise.

Banks must therefore be ready to provide
innovative solutions that facilitate thetransition of such stakeholders. For example, banks are today leveraging on AI
to help companies find the appropriate
public funding from among the hundredsof programmes available; or provide new
turnkey offers supporting them to electrify their fleet as part of their mobility
transition.
*Survey of 1,100 SMEs and MidCaps in four countries, and49 relationship managers at BNP Paribas Fortis in Belgium

PERSPECTIVES on Sustainable Finance

6

Innovation watch

Financial and technological innovations
supporting the transition

From securitisation to artificial intelligence, various solutions can contribute todeveloping sustainable finance and accelerating the transition.
Supporting the transition throughsecuritisation
by Francois Artignan,
Global Head of Group Public &Regulatory Affairs at BNP Paribas

Algorithms support sustainability
initiatives
by Imène Ben Rejeb-mzah,
Head of Climate Analytics andAlignment (C2A) Data Analytics
at BNP Paribas

Europe’s climate ambitions should encourage the use of
securitisation.

AI tools are one of the options now being explored to overcome thescarcity of extra-financial data.

The EU’s aim to be climate neutral by 2050, and to reduce byhalf its greenhouse gas emissions by 2030, will require additional
financing.
The needs are estimated at €350 billion per year
simply to reach the goals for cutting CO2 emissions. Given the pressures on public budgets, all resources will have to be mobilised.

To develop sustainable finance, we need to roll out tools measuring environmental and social risks, with a maturity level matchingthat of tools to measure financial risks. Just as an assessment of
a company’s financial risks involves reviewing its financial statements, an assessment of its environmental and social risks will
require data identifying these risks, such as carbon footprint orenergy performance. Customers are not yet required by regulations
or laws to provide these extra-financial data.

Securitisation is one of the options available and can help to turna loan portfolio into debt securities or financial products that may
then be sold to investors. Banks can harness this method to free
up regulatory capital, in order to increase their financing capacity.
A tool of this kind is suitable to support the financing of green
assets, such as SME transition loans or mortgages for energy-efficient homes.
This year, the EU created a European label for green bonds (theGreen Bond Standard) that applies to securitisation operations if
the funds raised are used to finance activities that are aligned with
theEuropean taxonomy. However, EU regulations are still restrictive and are hampering the development of the securitisation
market. It is hoped that the EU’s climate ambitions will foster the
emergence of more favourable conditions.

For example, we have recently developed a machine-learning algorithm that enables us to model the energy performance certificate (EPC) for residential properties that are not available in
the French Agency for Ecological Transition’s (ADEME) database,which has centralised the data for French EPC since 2013. Thisdata allows us to measure the average energy performance of ourreal estate loan portfolio for individuals, as well as to design andimplement a decarbonisation strategy.
The use of machine-learning modelling to fill data gaps is among thesolutions being studied in order to comply with European regulations
on climate risk transparency (CSRD, Pillar 3) and to align the financing
trajectory with the climate goal of reaching carbon neutrality in 2050.

Developing low-carbon hydrogen
Air Liquide in China
Thanks to a green loan, SCIPIG, a Chinese subsidiary of
Air Liquide, will invest 500 million yuan in the productionof low-carbon hydrogen, thus avoiding the emission of
350,000 tonnes of CO2 annually.
Aimed at funding two steam-reforming hydrogen production
units and related infrastructure, this green loan will enable
Shanghai Chemical Industry Park Industrial Gases (SCIPIG)
to accelerate its low-carbon transition. Both units will beequipped with CO2 capture and recycling facilities.
Replacing an existing coal-based gasification unit, they will be
gradually brought into service from the end of 2023. When

operating at full capacity, the project will avoid emissions
equivalent to the electricity consumption of one million Chinesehouseholds.
This project “contributes to China’s energy transition and highlights the key role that hydrogen can play,” said Nicolas Poirot,
CEO of Air Liquide China. “This green loan underlines our capacity to achieve the highest environmental standards, whileproviding reliable and competitive solutions,” he added. The
funding is in line with “the Equator Principles, the principles
that govern green loans, and the EU-China Common GroundTaxonomy, the world’s strictest,” noted LI Nan, CFO of Air Liquide China.

PERSPECTIVES on Sustainable Finance7

Our clients commit

Involving all the stakeholders
With innovative financing, and the collaboration of every stakeholder, it is possible to support
projects that make a difference around the world.
Impact bonds, a new kind of partnershipfor tailored financing

Aligning finance and mission: thechallenge for nonprofit associations
by Vanessa Bouquillion, Head of Company
Engagement at BNP Paribas Wealth Management
France and Private Banker for Non-profits andFrançois Soulage, Former President of Secours
Catholique, President of the Kaori Ethical Committeeby Maha Keramane,
Head of the Positive Impact
Business Accelerator at BNP Paribas

Experimenting solutions to ensure inclusion of the most vulnerable
through impact bonds.

Nonprofit associations must innovate in their tools, yet stayfaithful to their values.

An impact bond is based on an innovative form of financial partnership designed to address social and environmental needs that are hardly or not at
all covered by current facilities (see below for the definition and outline ▼).
Our first social impact bond was launched in 2016, and we have continued to develop this tool, in terms of the number or size of projects andthe range of societal issues addressed such as environmental challenges
or development in countries in the Global South, etc. We participated indesigning and financing the first development impact bond, a pilot project
launched by France to tackle menstrual precariousness in Ethiopia alongside AFD1, the NGO Care (based in France and Ethiopia), and the French
Ministry for Europe and Foreign Affairs. “Through the lens of menstrual hygiene, we are tackling the key challenge of gender inequality and women’sautonomy and empowerment,” says Care’s Helen Pankhurst. Indeed, theabsence of appropriate water and sanitation infrastructures and accessible
sanitary products can lead to school dropout and workplace absenteeism.
In effect, this unique project combines three intervention areas linked tothis issue – raising awareness among 320,000 people, distributing reusable
sanitary pads to 30,000 young girls, and building or renovating water andsanitation facilities in 60 schools in Ethiopia’s Adama region. “This collaboration places menstrual care at the heart of the debate and reinforces the
dialogue with the Ethiopian authorities, with the ultimate goal of scaling
the programme nationally,” concludes AFD’s Virginie Arnaud Le Pape.

Through the Climate Action+ alliance, the Church of England pension fundplayed a role in the 2020 negotiations that obliged Shell to commit tonet-zero emissions. Last May, it sold all its shares in the oil company, after
Shell announced that it intended to increase its fossil fuel capacities. Justin
Welby, Archbishop of Canterbury, said at the time: “The Church will follow
not just the science, but our faith – both of which call us to work for climate justice.” The decision may seem surprising, but it is in fact very muchaligned with the fund’s values.
France has also been active in the ESG movement followed by non-profit
associations. In 2022, Secours Catholique-Caritas France launched Kaori, asavers association offering an unrivalled responsible and socially supportive life insurance policy. Its members are invited to vote regularly, in orderto make sure the selection of the contract’s underlying assets is alignedwith members’ expectations in terms of non-financial criteria. These requirements exclude the most polluting companies and finances only those
whose activities are the most virtuous, particularly for the fight against
global warming and boosting social benefit.
Foundations and associations can therefore play a dual role in the environmental and social transition. Thanks to their status and goals, they canoffer (financial) tools that enable their members, and possibly even the
public at large, to shift towards a society that is more sustainable andmore in tune with their main mission. They can also apply pressure throughtheir investment decisions, ensuring that funding is harnessed as fast as
possible for a just transition.

Agence Française de Développement (French DFI)1

How impact bonds work
An impact bond, which is a financing tool to foster
innovative social and environmental projects, isbased on a unique collaborative model between
the public, private and the social and solidarity
economy (SSE) sectors. Practically speaking, the experimental project is pre-financed by investors, whowill be fully or partially repaid by the public authorities, depending on the achievement of impact
objectives (reducing criminal recidivism, waste
recycling rate, etc.). The impacts generated enable
cost savings for the government, some of which
are used to repay and remunerate the financial risk
borne by the investors. BNP Paribas supports thedevelopment of impact bonds in Europe: click on
this link to learn how.

5. Repayment and premium depending on thelevel of achievement of the impact indicators

Arranger
Outcome Funders(Public Authorities) 1. Coordination of

Investors

the stakeholders,legal and financial
engineering

2. Upfront financingof the project

Independent Evaluator
Service Provider (association, social
enterprise, NGO, foundation, etc.)
3. Project implementation
4. Project evaluation: measurement of impact indicators andoverall evaluation of the action

Final beneficiaries

PERSPECTIVES on Sustainable Finance

8Flashforward

Collaboration as a lever for action
By itself, the financial industry will not change the world, but the involvement of other stakeholders,such as microfinance institutions and training professionals, can help everyone to progress

Microfinance: delivering financial
services to the underserved
by Caroline Tsilikounas, General Manager at
European Microfinance Network andNicola Benaglio, Programme and Research
Manager at European Microfinance Network

Education is key to accelerating thetransition to a sustainable economy
by Thomas Vergunst, Programme
Director, Finance Sector Education at
Cambridge Institute for Sustainability
Leadership (CISL)

Microfinance helps people start new ventures, consolidate existing businesses and improve their living conditions.

Ongoing learning is vital to help financial institutions and businesses
navigate a rapidly changing world.

The main principle of microfinance is to ensure that households without much or any collateral can benefit from financial services that will
help start or grow their businesses. In Europe it includes a variety offinancial services, not just loans, for low-income entrepreneurs; supporting non-financial services to increase the prospects of success;and ensuring that donor subsidies complement rather than competewith private sector capital.

Businesses in many countries now face a range of rapidly evolving risks
and opportunities related to interconnected trends that are playingout across social, environmental, technological and economic systems.
Staying abreast of these trends – and the associated shifts in stakeholder expectations and demands – is an ongoing challenge for businesses. Amidst growing complexity and divergent views, how can abusiness formulate clear strategic, tactical and operational responses
that ensure they can transition while still remaining relevant andresilient as part of a low-carbon, sustainable economy? Ongoing education plays a key role here. Many people in business acquired theircore knowledge, skills, attitudes and values many years ago. There is
therefore an urgent need for continued learning at all levels withinorganisations. At CISL, for example, we work extensively with boards
and senior leaders from financial institutions and multinational corporations to help them understand why there is an urgent need forchange. We then explore what ‘good’ looks like from the perspectiveof corporate leadership regarding sustainability and highlight what
others are doing to respond. Lastly, and arguably most importantly, we
focus on how business leaders can lead positive change in practice.

Launched in 2003, the European Microfinance Network (EMN) promotes microfinance as a tool to fight social and financial exclusion. The
provision of non-financial and financial services to those who may be
excluded from the traditional financial sectors is key to reducing theirvulnerability due to insufficient credit history or precarious working
positions. It means helping potential entrepreneurs to manage a loan,
to start and run a sustainable business, and – should it fail – to acquire
skills that are transferable to the wider job market. One example is
PerMicro in Italy. In 11 years, Permicro granted microloans to 34.250
entrepreneurs and families. As a results of this support 937 entrepreneurs and more than 5,300 families have gone from being non-bankable to bankable. Apart from socio-economic inclusion, recipients of
microfinance report significant increases in health and well-being.

When the past is no longer a good predictor of the future, we need education to help shine a light on the way forward and support us to take action.

The BNP Paribas 2025 objectives for sustainable finance
BNP Paribas is convinced that finance is a key lever to accelerate the transition.
Financing the transition:• €150 billion in sustainable credits to companies, institutions and individuals for sustainable projects;• €200 billion in sustainable bonds issued for clients of BNP Paribas.
Responsible investments:• €300 billion in sustainable investments, i.e. assets under management in line with ESG principles;• €200 millions in own investments to support innovative-impact companies in three fields: local development and climate, socialand societal activities, as well as natural capital.
Civil responsibility:• 6 million beneficiaries of products and services that support financial inclusion.
To find out more about the BNP Paribas objectives for CSR, click

here.

Disclaimer
This publication has been prepared by BNP PARIBAS for informational purposes only. The opinions expressed are personal views and BNP PARIBAS
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