The role of sustainable finance at Cop27

For Laetitia Hamon, capital markets are important to finance environmental and social projects. Photo: Romain Gamba/Maison Moderne

For Laetitia Hamon, capital markets are important to finance environmental and social projects. Photo: Romain Gamba/Maison Moderne

The goals of climate conferences must be ambitious, says Laetitia Hamon, head of sustainable finance at the Luxembourg Stock Exchange. She expects from Cop27 to get developed and developing countries to work closer together on sustainable finance. Luxembourg has and will play a role in this, Hamon said in an interview with Delano.

Lisa Christl: Finance was at the heart of the Paris Agreement negotiations. The Glasgow outcomes at Cop26 also reiterated the centrality of finance as a catalyst for progress on all aspects of the global climate agenda. You are attending the Cop27 in Sharm El Sheikh this week. What do you expect from the Cop27 regarding finance?

Laetitia Hamon: I can give a little bit of background before answering the question. It’s true that for the Paris Agreement, the countries made commitments to limit global warming to well below 2, which means they had to commit to certain levels of decrease of their emissions. And then last year, at Cop26 in Glasgow the importance was if countries had submitted their national determined contributions, that means the number of emissions that they plan to decrease until 2050. But in Glasgow, the world realised that there were insufficient commitments to limit global warming to well below two degrees or 1.5 degrees.

So, what we expect from the Cop27 is to have that on the table again and see who’s submitted more ambitious nationally determined contributions. But also, to see how developed countries are going to help developing countries in order to adapt to climate change and be able to be resilient to it. So that’s really the main issue.

It is an African Cop this year, we expect that there’s a big focus on those countries and regions that are most impacted by climate change. So that they can really raise awareness around that and attract more finance. The question is that for the time being, the developed countries are facing crisis as well on their side. It’s maybe a difficult conversation, but we’ll see. Hopefully, we can find a way of having this country’s contributed as they committed to help develop countries as one.

The other discussion is on how private money can help, because public money will not be enough to meet the necessary needs for money for climate mitigation and adaptation. There is also a whole debate around private money, and that’s where stock exchanges like LuxSE can play a real role.

Emerging markets are A, the ones that are more impacted by climate change, and B, the ones that hold most of the biodiversity in the world.
Laetitia Hamon

Laetitia Hamonhead of sustainable financeLuxembourg Stock Exchange (LuxSE)

You are attending next week’s panel on “Making sustainable finance truly global--the role of Luxembourg’s financial ecosystem” at the European Investment Bank and Benelux pavilion in Sharm El Sheikh. You’ve started to talk about how developed countries can help developing countries. This will be one of the topics according to the agenda, but what other topics do you want to address there?

There are several angles to this panel. But the first thing is to showcase how Luxembourg contributes already and can contribute more on helping and building capacity for developing countries. What we realised is that there are more and more public entities, but also private entities in Luxembourg, involved in these regions. We at the Luxembourg Stock Exchange have a strong strategic plan to help stock exchanges in Africa, to build capacity and to develop their capital markets.

There’s the aspect of mobilising finance, that is absolutely essential. But there’s also a question around capacity building. And that goes around knowledge sharing, training, and we can give specific examples. We’ve been already active. We went to Cape Verde for example and gave training at the Cape Verde Stock Exchange. And signed a memorandum of understanding with the  Rwanda Stock Exchange, to name some. That’s concrete things that we can do to prepare the ground we really realised we need to help in bridging the education gap. We need to build capacity, because what we find also in those regions is that it’s mainly public insurances. Sovereigns that will issue debt, for instance, but it’s more difficult to mobilise private markets. So that’s what we’re going to discuss during the panel. And also doubling sustainable debt issuance to our markets in order to attract more international investors.

Sustainable finance has many faces. Could you explain the main topics that are important at Cop27?

Yes. I’ll focus on sustainable debts market because, as you said, sustainable finance is extremely broad, it can relate to banks, to the insurance sector, to the asset management sector, to the capital markets. So, what we do here are capital markets. This is so relevant because to finance, environmental and social projects that are essential for the transition to a low carbon economy and to meet our targets, it’s essential that relevant projects that create environmental and social impacts are targeted. That’s why it’s at the core of Cop27. There is a need for money. So those that are raising money, they should use it to finance appropriate environmental and social projects. And it must be traced and be transparent around all instruments, so that investors understand clearly how the money has been raised, what kinds of projects will be financed and what impact they generate. That’s all the aspects around transparency and helping investors, and as mentioned, especially private investors, to invest in those instruments, notably those in emerging markets. 

You need to be optimistic to what the finance industry can do as well, and I’m really convinced that the finance industry can do it.
Laetitia Hamon

Laetitia Hamonhead of sustainable financeLuxembourg Stock Exchange

Why is Cop27 important for the Luxembourg financial sector in general?

We really feel that we have a duty to help develop the capital markets. As a market operator, we must do that. And since emerging markets are A, the ones that are more impacted by climate change, and B, the ones that hold most of the biodiversity in the world. It’s absolutely crucial that we help them as well.

What actions do we need to take in Luxembourg today and tomorrow to support that?

There’s a big focus around disclosure, not only on capital markets, but also a sustainable disclosure regulation, that’s absolutely crucial. And on top of that, avoid greenwashing by creating trust and transparency. There’s also the question about channelling money where it needs to go and create funds and money that would go directly to those projects. I know that the Ministry of Finance and Ministry of Foreign Affairs and the Ministry of Environment and Climate are working together in that direction. So that they can mobilise funds towards service projects, and they are focused on emerging markets as well. That’s also something we’ve observed. We work more and more closely with LuxDev, which is the development and cooperation agency of the government because they take concrete action.

When we are looking back, we see that the Paris Agreement with the 1.5-degree goal seems more and more difficult to achieve. What do you think? Will decisions that are taken at Cop27, and on sustainable finance, play a role in the achievements of the future in this regard?

The commitments are ambitious and should be ambitious because we have a set deadline by 2050. We’ll see it at Cop27. That’s really the turning point to me: there were a lot of commitments whether now it’s starting to be implemented is the question. But if I was pessimistic on that, I wouldn’t be working on this. You need to be optimistic to what the finance industry can do as well, and I’m really convinced that the finance industry can do it. It took some time for everybody to understand what it is and how they can work on it. But now, maybe I’m biased, but every time we talk to insurers, and we talk to financial market players, they know what sustainable finances are and if they’ve not acted already, they will soon.

The event “Making sustainable finance truly global --the role of Luxembourg’s financial ecosystem” will take place on Wednesday 9 November 2022 at 11a.m. and can be followed via livestream.