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Beyond moral coercion: BBVA’s big bet on the business of sustainability

December 14, 2021, 3:00 PM UTC

While many companies have recently accelerated their sustainability efforts, BBVA stands out among large banks in terms of its organizational structure, geographic scope, and commitment to scouting innovative sustainable companies around the globe, in the fintech sector and beyond.

Javier Rodríguez Soler, who previously served as president and CEO of BBVA USA until the subsidiary was sold to PNC in June, leads the bank’s new sustainability department as its global chief.

Rodríguez Soler notes the bank’s new focus area is a “part of the highest level of the organization” and reports to the CEO. In an organizational structure that BBVA says sets it apart from its peers, the “business heads co-report to the global head of sustainability within the group.”

According to its overall S&P Global ESG score, the bank ranked in the top 1% of all assessed companies as of November 2021. 

As more governments and corporations ramp up their decarbonization targets, the question of how to finance their climate transitions is becoming more urgent. And as disclosures remain voluntary in many parts of the world, Rodríguez Soler shares his thoughts on how banks can support these climate targets.

This conversation has been lightly edited. 

Which factors are driving BBVA to become more sustainable: shareholders, climate change, or customers? 

Javier Rodríguez Soler: Everyone is playing a key role. Banking regulators, if we talk about risks; the market [pressure for disclosures]; employees who want to work for a sustainable company; society in general, which is really demanding new answers from the private sector. Banks are moving fast to tackle this change head-on, involving the whole organization because sustainability and climate change affect all businesses.

Sustainability is the biggest transformation in human history and, at the same time, is a great business opportunity for banks. It is the biggest transformation in human history both in terms of the size of the investment required and also in terms of the scope: This revolution impacts all industries and all geographies.

Path To Zero Pt. 3-BBVA Javier Rodriguez Soler
Javier Rodríguez Soler, BBVA’s global head of sustainability, at a Money20/20 event in Las Vegas.
Courtesy of BBVA

One of the big announcements at COP26 was the creation of the ISSB [International Sustainability Standards Board]. Does this spell a new era for global ESG guidelines?  

The International Sustainability Standards Board delivers a global baseline of sustainability-related disclosure standards, which is key to enable investors to evaluate opportunities as well as risks. Also the states and governments will include it in their regulations.  

The ISSB will incorporate sustainability impact metrics in as far as they are material for the financial value of businesses, but one of the major challenges is the lack of a global reference framework. Despite there being multiple initiatives, frameworks, standards, and guidance tools to measure impact, it is urgent to build a global system to establish a universal language that facilitates companies’ work. We really need to converge to foster data consistency, comparability, and quality. 

Of course, BBVA plans to comply with the task force’s guidelines. In fact, BBVA published in June 2021 an update of its report on the risks and opportunities of climate change in accordance with the Task Force on Climate-Related Financial Disclosures (TCFD) standards, which is the baseline of it. 

Among the COP26 announcements or commitments, did anything surprise you? 

The COP26 ended with a mixed diagnosis: positive due to the broad commitments agreed by governments and the private sector that keeps feasible the 1.5º goal, but negative because they are still insufficient and, mainly, the uncertainty about their fulfillment. There are no sufficient incentives or mechanisms of coercion beyond moral persuasion.

On the positive side, important progress has been made by the private sector. The private sector cannot be blamed for the lack of climate ambition in general and the financial system in particular. More than 450 firms across 45 countries—including BBVA—have already committed to net zero by 2050 under the umbrella of the Glasgow Financial Alliance for Net Zero. More importantly, all firms will report their progress and finance emissions annually under a voluntary moral coercive effort.  

Another big issue has been the lack of ambition to scale up the financial contribution from developed countries to emerging economies. In Paris, it was agreed to mobilize $100 billion a year, and, according to the OECD, only $80 billion has been achieved. We cannot succeed without the emerging countries. We need more ambition, more multilateralism, and a robust framework to implement it. It is very urgent that this critical topic is properly managed in the next COP, in Egypt. 

How many people are currently part of the new sustainability department? 

The important design characteristic is that the global sustainability business area is completely embedded in the whole organization, meaning that it has direct links with all support and control units, but at the same time it is also a business unit. This is different. Business heads co-report to the global head of sustainability within the group.

As all employees and group areas integrate sustainability in their day-to-day activities, the sustainability area will support them by the design of the group’s sustainability strategic agenda and the definition and enhancement of sustainability working plans from the different global and transformation areas. 

In setting up this department, what was your biggest challenge? 

The biggest challenge was to ensure the full alignment of the different business units [corporate, commercial, and retail] in the different geographies, which by definition need to take advantage of this enormous opportunity at a different pace. 

The new sustainability area is a part of the highest level of the organization, the global leadership team, and reports to CEO Onur Genç. Additionally, and considering the highly strategic and transformational nature of the area, it also reports on those fields to the group chairman. 

In that regard, giving visibility to the function signals [its high] priority and commitment to all the internal and external stakeholders, and is very helpful to ensure a companywide effort around sustainability.

In terms of ESG taxonomy, what can banks around the globe do to avoid greenwashing? 

It’s important to have robust standards which comply with expectations. At BBVA, we are using the European Union’s taxonomy, but also integrating the specificities of emerging markets and ensuring we support the transition of the whole economy. 

In 2020, 26 banks, including BBVA, tested how the EU’s taxonomy on sustainable activities could be applied to core banking products. Common criteria for determining which products are sustainable could allow banks to drive sustainable financing for the entire economy. 

The banks are called upon to play a key role in advising and channeling funds to large corporations, as well as to small businesses and households. The EU taxonomy represents a key step in this direction. The pilot project, promoted by the United Nations’ Environment Programme Finance Initiative and the European Banking Federation, is an excellent way to start testing and enhancing its applicability. 

We recommend recognizing the specificity of banks vis-à-vis investors when implementing this taxonomy. On the one hand, our activity goes beyond corporate clients, and it is necessary to define how to use [this taxonomy] to finance small businesses or families. On the other hand, banks are increasingly promoting products such as loans linked to sustainability indicators. All of this will require the development of common criteria in order to apply the taxonomy to them as well.

Are U.S. institutions beginning to take sustainability and climate change more seriously? 

In terms of international regulation, Europe is at the cutting edge. The European Central Bank and European regulators have been working on this for longer. 

Although now the U.S. is catching up. The U.S. regulation is becoming more holistic, including not only impacts but risks.  

ESG criteria are becoming mainstream, so we need to have a common taxonomy, common structures, and common rules. As was recently announced at the G20, the SEC and international supervisors should coordinate as much as possible. 

What motivated BBVA to partner with the venture capital firm 500 Global (formerly 500 Startups)? 

We chose to develop this program with 500 Global, a company which we know well as we were investors in their first fund. They already have investments in 77 countries, and we as an international bank are interested in what is happening in Mexico, the rest of Latin America, Turkey, everywhere in the world. So with this collaboration with 500 Global, we will be able to be connected not only with innovation in financial services, but even more importantly for sustainability, with innovation in all different sectors of the economy that need to decarbonize. 

We believe it is paramount for BBVA to stay close to the innovation ecosystem in the U.S. and specifically in Silicon Valley, and to have a platform to deliver market intelligence and commercial opportunities to the bank on a global level. Through our partnership with 500 Global, we will gather insight and learnings on key domains of strategic interest for the bank, and obtain early intelligence on relevant trends and new disruptive businesses and technologies. 

Where do you expect the next sustainable fintech unicorn will come from? 

This is a very good question, but a very hard one to answer. We are seeing greater activity in terms of innovation in Europe and the U.S., but there are interesting projects in all regions and countries, so it is difficult to predict. 

What is sure is that there will be many sustainable tech unicorns appearing on the scene in the upcoming years. In the future, we will keep exploring fintech and sustainability, with special emphasis on the intersection of both worlds.

This story is part of The Path to Zero, a series of special reports on how business can lead the fight against climate change. This quarter’s report highlights how governments and private industry are approaching the biggest challenges and opportunities in the sustainability space.