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The digitization of advice on sustainable financing arrives | Economy

The high level of commitment acquired by governments and large companies with sustainability requires large investments that banks will have to support with products adapted to each industry and client. The objective that the global temperature of the planet does not rise more than 1.5°C by the year 2050, included in the Paris Agreement seven years ago, conditions world financial activity, which is adjusted to the intermediate deadlines set by the regulators . Banking and business corporations are aligning themselves with ESG criteria (in Spanish, ASG: Environmental, Social and Governance) in all their activities, before a consumer and a market that demand it.

The most developed of the three criteria is climate, on which regulators have repeatedly ruled with the support of the main banking players. More than 100 global financial institutions endorse the Principles for Responsible Banking sponsored by the United Nations, and 450 have committed to orienting their financial portfolios towards the Paris goal in the Glasgow Finance Alliance towards Net Zero Emissions (GFANZ). , Global Financial Alliance for Net Zero) of the 2021 Climate Summit. In Europe, the European Banking Authority (EBA) launched its Sustainable Finance Action Plan in 2019, with the mandate to gradually integrate them into the prudential regulation of entities and will oblige them, in 2025, to report the classification and treatment of their assets from a sustainable perspective.

Several international indices already rank large companies based on their ESG practices. Among others, the London-based FTSE4Good, with a specific scale for the Spanish stock market (FTSE4Good IBEX Index), and the Dow Jones Sustainability Index (DJSI), but the regulators are working so that the data that classifies an investment as green are homogeneous and do not vary according to their source, in response to this claim by investors and consultants.

From commitment to action

Sustainable awareness in business and this mindset change in banking is not just coming from regulatory pressure. As Víctor Martínez, director of ESG for Investment Banking at the company NTT DATA for Europe and Latin America, explains, “Before 2021, it was seen more as an aspect of reputation and regulatory impact. This trend has changed in the last year, and ESG has become an opportunity to incorporate into the strategy of financial institutions”. The pandemic has accelerated awareness that much more sustainable business models are needed, and companies have stepped up the accelerator. “It is no longer a reputational issue -clarifies Martínez- but a business issue without which it will not be possible to move towards a profitable and sustainable future, both economically and environmentally”.

With our tools, banks can offer expert ESG advice to their clients, giving them a competitive advantage

(Víctor Martínez, Director of ESG for Investment Banking at NTT DATA for Europe and Latin America)

He knows in depth all the sides of the coin.

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Banking, engine of transformation

The investments that large companies will have to make to meet their ESG commitments will be largely financed by corporate and investment banking. Depending on the industry in which a company is dedicated and its location (since the environmental impact is different in each geography and sector), the bank will be the key financial partner that must accompany it in its transition process. By supporting them with tailored financing (even with discounts) and specific products aimed at decarbonisation, banks will strengthen the emotional connection (engagement) with your customers. To achieve this, financial institutions are committed to renewing their operations in risk analysis, financial decision making and the management of securities portfolios.

New relationship model between finance companies and sustainable companies

Companies of any size perceive any support related to climate issues that banks can offer them as a value-added service that provides loyalty and engagement. Financial companies, therefore, must be updated with data and specific analysis tools to be able to accompany their corporate clients on this journey, as reflected in the report Let’s Discuss Climate from the Institute for Sustainability Leadership at the University of Cambridge.

By applying a methodology based on a prior study of the positioning and starting point of companies, offering simulations of their impact scenarios and a prospective analysis of their climate risk, companies can predict, with quantifiable parameters, the effects that their practices will have on the income statement, and even prevent the probability of going into default (go into defaults). The bank’s accompaniment of the company continues with the design of a well-structured financial transition plan and the monitoring of its sustainable compliance.

NTT DATA's technology enables financiers to generate customizable climate risk impact scenarios based on sector and geography.
NTT DATA’s technology enables financiers to generate customizable climate risk impact scenarios based on sector and geography.SmileStudioAP (iStockphoto)

Technological companies, strategic ‘partners’

Any transformation (also the journey to true sustainability) needs to have well digitized processes and data. The banking ecosystem is one of the most digitized sectors and prone to the use of disruptive technologies to offer its services. Your natural strategic partner in this context is a technology consultancy that provides traceable, transparent and certified information to assess the sustainability of an investment. In the advice and services offered by the company, everything revolves “around how the bank accompanies its clients on this journey and continuously monitors the commitments made,” says Víctor Martínez, also responsible for Financing and ESG at NTT DATA .

“The tools we provide make it possible to generate climate risk impact scenarios, customizable based on the sector and geography. Thanks to them, the sales departments of financial companies can become expert advisors to their clients, capable of quantifying the investment they recommend to mitigate or avoid these impacts. This constitutes a competitive advantage for the bank. They are also useful for the risk areas of the financial entities themselves, because they warn them of the probability of default of a client of yours due to climatic risks in your territory”. Technological support continues in the area of ​​operations of financial institutions, incorporating ESG parameters to the supervision of compliance with contractual agreements and detecting if there are changes (regulatory, climatic or of another kind) that advise a change in strategy during its validity. , affecting financing.

A company specialized in ‘ESG banking’

NTT DATA consultancy is the sixth largest provider of IT (information technology) services in the world. Expert in the Banking area (sustainable financing, ESG banking and sustainable investment trends), has 40,000 professionals in 25 countries between Europe and Latam whose networking puts all the multidisciplinary teams in the area at the service of its client base in the region.

The integration of the historic Everis in the NTT Group is a quantitative leap in globality and a qualitative leap in the capacity for a transversal vision for sustainable finance, which has a global impact but a local casuistry. “In addition to our technological capacity, we have the competitive advantage of a much closer approach to knowing what bank customers need and, therefore, how the banks’ sustainable financing has to adapt to those needs,” explains Víctor Martínez.

The disruptive technologies of this company, specifically adapted to the banking sector, generate differential value. “In addition to our technological capacity and our experience in the banking sector, we work for non-financial entities from multiple sectors and regions and we know first-hand the challenge that the transition towards sustainability and the financing of associated transformation projects means for them” , summarizes Martinez.

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