Message from the CEO, Nina Schindler
In continuation with its first event “COOP26” in 2021 to mark the United Nations COP26, the EACB has carried on also in 2022 with its format on the role that cooperative banks can play to face the challenges arising from climate change. This year’s edition “COOP27” focused on the adaptation to climate phenomena that are already occurring with tremendous consequences for the economies and productive sectors.
Different regions, countries and communities are asymmetrically exposed to the physical impacts of climate change as well as to the socioeconomic consequences of mitigation and adaptation policies, and feel the impact of the wider transition to a low emissions and more climate resilient economic model. Ensuring that communities find secure pathways in these sectoral redeployments and achieving social and economic development goals are key elements of a successful just transition.
The members of the European Association of Co-operative Banks are committed to accompanying their clients, including communities, through the necessary adaptation towards more sustainable economies and to providing guidance through open conversation, discussing step-by-step planning and strategies to properly take into account ESG risks. The financial sector has already unveiled new opportunities by managing these risks in innovative ways.
By bringing together the finance, real economy and governmental worlds on stage, the "COOP27" debates made evident that efficient solutions to slow climate change and prevent carbon lockdowns are only found when all sides tug the same side of the rope with the aim of successfully achieving an unprecedented transformation of our economy and increasing the resilience of our communities and economies.
3 Questions to Peter Glas, Delta Programme Commissionner of the Netherlands
Peter Glas studied biology and Dutch law in Leiden (NL). In 2003 -2018 Peter Glas was chairman of Water Board De Dommel (NL). This regional water authority is responsible for surface-water management, flood control, sanitation, irrigation and drainage. Peter has also chaired the Association of Water Boards (Unie van Waterschappen) and the OECD Water Governance Initiative. Since 2019 Peter Glas holds the position of Delta programme commissioner of the Netherlands.
- As commissioner, your main task is to advise your government how to keep your country safe from climate related risks. What does that mean in practice and what are the Delta commissariat’s main activities?
60% of the Netherlands is flood prone; it is protected by 3500km of dykes and flood defenses. After some floodings in the 90’s, we entered a program "Room for the River" to give room to water and biodiversity; we reinstated flood plains in the NL despite it being a very crowded country.
The Delta Commissioner is instated by the Delta law in the Netherlands since 2012. According to this law, there must be a Delta program focusing on flood safety, freshwater availability, and climate adaptation in inner cities. For that, an independent commissioner was appointed already in 2010. I am the second in that capacity. The task is to be a liaison officer between all levels/branches of government (national, regional, local) and a special branch of government in the Netherlands: the Water board, and make them work together to develop concrete investment plans to combat the threats we are facing - which are manifold.
Every year a Delta program is presented to Parliament by the Minister, but first I present it to the Cabinet. There is also a Delta fund which has been running for 14 years; every year a new instalment is added of around 1.5 billion EUR.
- What kind of actions would you expect from banks? Which is, in your opinion, the biggest issue that needs to be addressed? Can cooperative banks meet these expectations and how, on the other hand, could public authorities help banks in this regard with enabling regulation?
It’s very interesting to see that banks are developing new products; I would like to see the financial sector be the agent of change toward a more sustainable future and indeed towards a more climate resilient future. If you tackle water, and data, and energy, then you have fixed the basic conditions. New projects, for example linked to the use of wooden piles in housing are indeed derived from water issues and help develop better solutions for future challenges. There are many discussions on the importance of data. I read an EBA stress test report on flood risk and droughts, and while I have some comments on the science and data basis of that report, it is an important step. The fact that these analyses are being made, that they are not only on the table of the Chief Risk Officer, and that there is also maybe a Chief Opportunity Officer to identify potential changes, is very much welcome. There is a Dutch saying, if you are in a rope pulling competition, you better be pulling on the same side of the rope. I think this is happening now, and we should pull harder.
- One of the challenges for climate adaptation finance is the long duration of projects and high uncertainty of their success, making it hard for market players to calculate the risk and to step in. Could you please elaborate on this and what can be done about it?
If we look at any investment in the physical entities that you see around in Utrecht, some of that was started 50, 100 years or centuries ago and will continue to be here. If your time-frame is the next 5 or 10 years, then you do not factor in the long term perspective and the long term effects of what we are doing right now. The core of the Delta program is that we decided not just to react with investment and flood protection to the disasters of the past, but to look ahead. I have been told the risk models of banks are based on things that happened in the past, and now you have to reverse that to take a forward looking point of view and look at the long term consequences of what you are doing. It could be profitable in 5 to 10 years’ time, but further down there may be flood risks, droughts, torrential rain, etc. It is now common knowledge that any euro invested in climate adaptation really pays back in the long run, so portfolios should have a long-term perspective.
Second Opinion from Berry Marttin, President, EACB & Member of the Managing Board, Rabobank
Berry Marttin is member of the Managing Board of Rabobank. Over the course of his career, he has gained extensive experience as an international banker in both wholesale and retail banking working in various senior executive positions internationally. As from 2009, he joined the Managing Board with special focus on Rabobank’s international rural banking activities and further responsibilities. Outside Rabobank, he serves as Member of the Supervisory Board of IDH (Sustainable Trade Initiative), Member of the Supervisory Board of ARISE and Member of the Board of EACB.
The first thing to consider when talking about sustainability is that organisations have to look at themselves. At Rabobank, we decided to completely change the organization and start structuring ourselves along the transition. Within the bank we defined three core transitions:
- Food and agriculture: a dedicated group of people is looking into these sectors;
- Energy: extremely important for Europe in the current context;
- Financial inclusion: particularly important to us, being a cooperative bank.
Once this is set up, we need to be able to understand what is happening and carry out stress scenarios. To do this, we need to think about the relevant data we should collect and how to collect it. This means we must consider a top-bottom approach (portfolio analysis) but also bottom-up (from individual clients level), and how data will interact. With this, we identify gaps: risks in portfolios, the gaps in the products to be offered to clients. Rabobank is currently going through this process.
We need science to make sure we understand what is actually going on. When I reflect on the COP27, I consider it was very interesting to see that a lot of companies gave ambition statements. But many of them are actually still looking at the science and pathways to follow. In the governmental policies discussions, there was a clear need for accountability. If you put the two together - the commitments given by countries, companies and banks, and the accountability aspect - I’m still worried that we, as companies, as banks, are giving commitments without being able to rely and the science that would enable us to reach them. That is confusing to the public.
Society is now looking at banks and companies to change and be very respectful of biodiversity but actually, if you look at it closely, there is no understanding on how to put biodiversity in our balance sheets. We have TCFD, TNFD, but the standards are still all developing. As a society and as organisations, we need to quickly get those standards right so that we can de-risk the investments that have to be made to reduce the climate impact and adaptation. Before you know it, you can go in the wrong direction and spend billions doing the wrong thing.
Traditionally, risk models were two dimensional: you would look at the financial risk of a client and the LGD, collateral. We are now adding a third dimension: the environmental impact risk, which has a direct relationship to those other two. We now use three dimensional matrixes to take financial decisions exactly on the point of both the environmental and sustainability aspects, and I think that’s very important. We are also capacitating our account managers to talk at the kitchen table and at the boardroom about those issues. A lot of companies now need to change, write and publish an impact report, a road to Paris report, which are quite difficult to produce. If you sign to SBTI, NZBA, you need to have a very good plan on how you are getting to 1.5 degrees in 2050. The question is, can you sit down with your clients and have an open discussion? That’s going to be an extremely important part of it.