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Banks snap up ESG hires as Covid-19 turns $3tn market into ‘competitive necessity’

Just this year, banks including Citi, Deutsche Bank, Goldman Sachs, HSBC and JPMorgan have created teams of bankers to focus on ESG and sustainability

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The big bank push to capitalise on the ESG wave is gaining pace.

As the Covid pandemic upends the world of investing, banks have spotted an opportunity — a boom in advisory work as clients shift their business model to a low carbon economy.

Just this year, banks including Citi, Deutsche Bank, Goldman Sachs, HSBC and JPMorgan have created teams of bankers to focus on ESG and sustainability. While they remain a small core unit of specialist expertise at most banks, the advisers are creating strategies that span country and sector teams across their organisations.

“We soon realised that this megatrend will generate significant economic opportunities,” said Keith Tuffley, who co-heads a division at Citi dedicated to ESG advisory, which was created in May. Tuffley called ESG “a major strategic opportunity for Citi and for our clients, especially given the material shifts of capital required to effect the industrial and energy transitions.”

Tuffley co-heads a new unit that is set to hire eight senior bankers over the next two years and drafts in around 100 of what he calls sustainability champions across its investment bank. Meanwhile, Goldman unveiled a “sustainability solutions council” for its investment bank in January that has 14 senior dealmakers and is expected to expand.

The trend has been hugely accelerated by the Covid-19 crisis.

During a speech earlier in November, former Bank of England governor Mark Carney said the transition to a net-zero economy will create “the greatest commercial opportunity of our time” for the financial sector. Sukhvir Basran and Andrew Carey, co-heads of Hogan Lovells Impact Finance & Investing group estimate that the financing gap for the transition is between $2.5tn to 3tn a year.

“It is likely that, for a number of reasons, the pandemic has significantly increased this figure,” they said.

Deutsche Bank hired Trisha Taneja to head a new sustainable finance unit in April and also has four senior bankers in the team and a network of “ESG champions” across the bank. HSBC rolled out a Strategic Solutions Group in July. And JPMorgan has been hiring bankers for an ESG Solutions led by Neha Coulon, which launched earlier this year.

Banks are looking at the bigger picture. ESG, and climate change more broadly, is being viewed as something that will shape boardroom decision making for years to come, spanning across regions and sectors, just as the need for digital transformation has spurred dealmaking in recent years.

“We are asking all our investment bankers and relationship bankers to be able to talk about this, because it’s a game-changing theme that will affect how companies are set up and economies are run,” said Alexi Chan, co-head of capital markets at HSBC.

At HSBC, 24,000 bankers have completed ESG modules at its inhouse “university”, while Citi has seen huge internal demand, particularly among juniors, for involvement with the bank’s sustainability push, according to Phil Drury, head of its banking, capital markets and advisory unit in Europe, the Middle East and Africa. Deutsche’s model also aims to increase knowledge of ESG issues among its bankers.

“The opportunity is huge but it’s also a competitive necessity,” said Basran and Carey on investment banks’ moves. “The advisory fees available to the banks that can support corporate clients and help them position themselves to attract ESG-focused capital are significant.”

Both green and sustainable bond issuance have reached all-time highs this year, according to Refinitiv data, reaching a total of $531bn in the first nine months of 2020 as governments, companies and banks all looked for finance amid the Covid-19 crisis. Meanwhile, equity capital markets activity for sustainable companies rose 38% to $9.7bn over the same period, which, again, is a record.

However, there remains an element of scepticism around the space, with some firms issuing these products accused of so-called greenwashing — where companies posit themselves as environmentally friendly without following through. Of the €660bn of outstanding green bonds today, around 15% were issued by firms “involved in controversial practices that contravene environmental standards”, according to research from asset manager NN Investment Partners in October.

Banks’ own environmental pledges have also drawn criticism from climate campaigners, who argue they continue to finance a significant number of fossil-fuel dependent companies. The Rainforest Action Group, a California-based pressure group, estimates that JPMorgan is the biggest financier of fossil fuels, and heaped pressure on Barclays and HSBC to cut their exposure to such companies in November.

HSBC announced in October that it would be carbon neutral by 2050, while also financing between $750bn and $1tn over the next 10 years to fight climate change, while JPMorgan has promised $200bn to finance green initiatives and to push clients towards compliance with the Paris climate agreements. Citi said it would finance $250bn for clients on environmental initiatives over the next five years.

At a Bloomberg conference on 18 November, HSBC chief executive Noel Quinn called on banking executives to “finance the transition” towards a low-carbon economy, adding that peer pressure would help drive real change. “The whole financial system needs to play its part in that,” he said.

Citi chief executive Michael Corbat said in September that the Covid-19 pandemic was a “dress rehearsal” for the looming climate crisis.

Dealmakers insist that ESG in investment banking has gone beyond token issuance of green or sustainable bonds, which are usually pushed through by treasurers and chief financial officers, and more towards strategic discussions at the very top of companies.

The Covid-19 crisis, which has upended business models of previously stable companies, has shown what impact a huge macro shock can have. Bank of England governor Andrew Bailey warned in a November speech that climate change is a bigger risk than the 2008 financial crisis and the coronavirus pandemic.

“The pandemic has accelerated certain trends that were already emerging around the ESG debate and an understanding of the consequences has undoubtedly increased, which will potentially result in further strategic opportunities for investment banks to advise on,” said Patrick Frowein, co-head of investment banking coverage and advisory at Deutsche Bank.

“Covid has taken the ESG debate to another level,” added Citi’s Drury. “Covid is not a financial crisis, it’s a global health pandemic and it touches everybody. And the environment affects everybody, and the current crisis has created a new sense of urgency.”

To contact the author of this story with feedback or news, email Paul Clarke

Source: https://www.penews.com/articles/banks-snap-up-esg-hires-as-covid-19-turns-3tn-market-into-competitive-necessity-20201120

Private Equity

Techware Group B.V – 859415831-11012022C

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” The Leapfunder Note is a sensible and attractive way to place capital in start-ups in the Netherlands “

” Diversification is important in angel investing. Leapfunder is a platform that allows angels to spread their investments. “

” Leapfunder investing allows you to become actively involved in a start-up, just as in classical angel investing, while taking all the hassle out of transaction execution “

” Leapfunder is ideal for investing smaller amounts in a start-up in the very early stages. Such investments can be a powerful addition to a portfolio “

” With Leapfunder you get a great opportunity to build up a diversified portfolio of start-up investments, often investors can play an active role in developing the company “

” When I saw the Leapfunder proposition I thought straight-away: this is what start-ups need. I am an entrepreneur and wish this system had been available when I started my company. “

Pieter ter Kuile

Investor

Wouter Kneepkens

Investor

Ronald Bazuin

Investor

Eric van der Maten

Investor

Eric van Gilst

Investor

Donald Res

Investor

Source: https://www.leapfunder.com/companies/154

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Private Equity

Techware Group B.V – 859415831-­‐11012022B

Avatar

Published

on

” The Leapfunder Note is a sensible and attractive way to place capital in start-ups in the Netherlands “

” Diversification is important in angel investing. Leapfunder is a platform that allows angels to spread their investments. “

” Leapfunder investing allows you to become actively involved in a start-up, just as in classical angel investing, while taking all the hassle out of transaction execution “

” Leapfunder is ideal for investing smaller amounts in a start-up in the very early stages. Such investments can be a powerful addition to a portfolio “

” With Leapfunder you get a great opportunity to build up a diversified portfolio of start-up investments, often investors can play an active role in developing the company “

” When I saw the Leapfunder proposition I thought straight-away: this is what start-ups need. I am an entrepreneur and wish this system had been available when I started my company. “

Pieter ter Kuile

Investor

Wouter Kneepkens

Investor

Ronald Bazuin

Investor

Eric van der Maten

Investor

Eric van Gilst

Investor

Donald Res

Investor

Source: https://www.leapfunder.com/companies/154

Continue Reading

Private Equity

Techware Group B.V – 859415831-11012022

Avatar

Published

on

” The Leapfunder Note is a sensible and attractive way to place capital in start-ups in the Netherlands “

” Diversification is important in angel investing. Leapfunder is a platform that allows angels to spread their investments. “

” Leapfunder investing allows you to become actively involved in a start-up, just as in classical angel investing, while taking all the hassle out of transaction execution “

” Leapfunder is ideal for investing smaller amounts in a start-up in the very early stages. Such investments can be a powerful addition to a portfolio “

” With Leapfunder you get a great opportunity to build up a diversified portfolio of start-up investments, often investors can play an active role in developing the company “

” When I saw the Leapfunder proposition I thought straight-away: this is what start-ups need. I am an entrepreneur and wish this system had been available when I started my company. “

Pieter ter Kuile

Investor

Wouter Kneepkens

Investor

Ronald Bazuin

Investor

Eric van der Maten

Investor

Eric van Gilst

Investor

Donald Res

Investor

Source: https://www.leapfunder.com/companies/154

Continue Reading
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