How Companies Are Financing the Green Transition

Sustainable business practices are more important than ever to today’s consumers, and many companies have been transitioning to green solutions as a competitive strategy. However, to achieve them there needs to be proper support from the finance industry.

During day two of the U.S. Chamber’s 2nd Annual Global Forum, a panel of experts shared how their respective businesses are financing their commitments to greener business practices, and what companies need to know about making the “green transition.”

Industries Are Considering Where Climate Adaptation Needs to Take Place

As the private sector is thinking about how climate adaptation will happen, it’s also assessing where it will take place. Daniel Hanna, the Global Head of Sustainable Finance for Standard Chartered Bank, discussed how low-income countries are at significant risk from climate change impacts, and they also have the biggest opportunity to quickly transition into a low carbon economy.

When exploring these areas, Hanna and his colleagues assess blended finance, transition finance, and the role of carbon markets for these countries.

“We believe that there are a number of ways to leverage good quality carbon credits to channel funds into areas such as climate adaptation [and] biodiversity in low-income markets,” said Hanna. “[We’re] thinking creatively about how we can combine those with other existing financial products, as maybe a new way to move capital where it's really needed.”

Capital Must Be Redirected to Address Green Solutions

A common misconception is that there is currently a lot of money and financial resources in the private sector to generate bankable projects. While there is capital, Vivek Pathak, the Global Head of Climate Business at International Finance Corporation, was quick to point out it is not necessarily in a position to finance green transitions.

“We need to understand that capital wants certain returns,” explained Pathak. “It wants a certain risk profile, and it comes with a certain amount of currency risk. What's important to mention is that when we are coming across … bankable projects with a fair risk to reward, there is no shortfall of capital for that debt.”

“There are a number of cases in some of the most challenging markets in Asia and Africa where we structure deals, and we never had a problem raising capital,” he continued. “But the question is how [will] we spend a lot more time and effort than we've ever done before to make these deals happen.”

Industries Are Using Their Customers to Guide Them

Transitioning into green solutions is not possible without the cooperation of the industries directly affected by them, such as construction. Dr. Srinivas Veeramasuneni, the Chief Technology Officer of USG, talked about how USG uses its customers and clients as a driver to help decide what ventures to pursue.

He mentioned that USG works with the architectural community to assist its goal of having net-zero buildings by 2030. From the consumer point of view, Dr. Veeramasuneni discussed how millennials helped shape USG’s current perspective.

“The young generation wants to live in homes that are built[with] sustainable materials, and they want to work for the companies that actually focus and give priority [to] sustaining,” said Dr. Veeramasuneni. “We think [creating green solutions] is the right thing to do. Then, we are investing heavily to make sure we develop sustainable products as well as keep our operations outputting low carbon emissions.”