Certainties in an uncertain world: digitization, innovation and decarbonization

We are living in a moment of upheaval, full of uncertainty.

Just as we were barely recovering from the pandemic, the invasion of Ukraine darkened our skies once again. A great human tragedy that has taken the lives of thousands of people. UNHCR, the UN Refugee Agency estimates that seven million Ukranians remain outside of their country because of the war.

The invasion and related sanctions are also having major economic repercussions, putting the energy supply of much of the continent at risk and fueling inflation that is already at its highest point since the introduction of the euro. Governments and European institutions (including the European Central Bank ) are taking exceptional measures to address this situation, such as energy restrictions, the temporary suspension of certain market rules and rapid interest rate hikes. In this uncertain time, growth prospects are declining, along with the expectations and confidence of families, businesses and companies, feeding into the recessive cycle we have entered.?

We are also facing significant geopolitical change, with renewed tension between China and the U.S., and all blocs questioning their external dependence for strategic matters like energy, food, raw materials, defense, technology and data. A new operating paradigm that will inevitably have a negative impact on international trade and globalization.?

The pressing need to respond to this uncertain, complicated context decisively (especially to alleviate its effects on the most vulnerable) should not make us forget three of the biggest trends that have been profoundly transforming the economy and society, and which I feel? will continue to set the course of the world in the medium and long term: digitization, innovation and decarbonization.?

Lockdown was the final boost to the gradual digitization of the economy and society. BBVA was a pioneer in the financial sector in the last decade, investing heavily in the digitization of its business. It proved to be a very wise move to remain close to customers during the pandemic, when they needed it most. We saw record growth in transactions on digital channels, which have more than doubled in the Group over the past two years. In 2021, we reached a new all-time high, adding nearly nine million new customers around the world - 40 percent of which were acquired on digital channels. This year, we are surpassing this customer acquisition rate, with 5.3 million new customers in the first six months. Of this amount, more than half joined the bank on digital channels, when just six percent of customers signed up remotely five years ago.

But innovation is much more than digitization. We are immersed in an unprecedented wave of disruption, driven by technologies that are transforming our way of life, such as cloud computing, artificial intelligence, robotics and blockchain. These still incipient technologies are experiencing exponential growth and their value is expected to multiply in just a decade, replacing traditional activities in the process. At BBVA, we want to take advantage of the opportunities that are emerging from this wave of innovation and put them within everyone’s reach. We aspire to be the bank of the companies that are defining the future, young companies that are finding new ways to meet customers’ needs and undertaking significant change in all industries and in society.?

Without a doubt, the third trend, decarbonization, is the most disruptive and relevant to the history of humanity. Halting climate change requires a titanic effort: reducing global CO2 emissions to zero by 2050, less than 30 years from now. A challenge that requires drastic changes in habits and behaviors, and especially, profound transformation of productive models in practically all sectors of the economy. At the same time, this challenge also poses an opportunity because this transformation depends on colossal investments of approximately $275 trillion (1) per year - the equivalent of eight percent of global GDP until 2050 - to roll out new technologies in virtually all sectors. And not just in the developed world: emerging countries must join this race to decarbonization because it represents a huge opportunity for their growth and development. However, these countries lack the necessary resources and? the capacity to attract foreign capital. The developed world should support them. Without the emerging countries we will not be able to decarbonize the planet that we all share, and they will suffer the negative effects of climate change to a greater extent.??

The challenge is so massive that private investment will be crucial. This investment will come if it makes sense economically and if the right incentives and regulation is in place. And this is what will occur because nearly half of the required investment is already profitable. There is no doubt in my mind that interest in decarbonization will only grow, as we were able to see at the 2022 #BBVASustainabilityForum, held recently at our headquarters.?

At BBVA, it is very clear to us: sustainability is at the heart of our strategy. We have created an area that reports to the highest executive level of the organization, with the aim of making BBVA the leading bank for clients seeking to finance sustainable solutions for their business. We set the goal of channeling €200 billion between 2018 and 2025 in sustainable financing (we had reached €112 billion as of June 2022), and these efforts are already producing tangible results. I am especially proud of the fact that we are currently ranked first among global banks in the Dow Jones Sustainability Index.?

For Europe, how different would its position regarding the invasion of Ukraine have been if it had greater energy independence from Russia. This conflict makes it all the more necessary to tackle decarbonization with greater ambition. Moreover, we have an excellent lever to accelerate the process: the Next Generation EU public funds. It is crucial that they reach the best sustainable projects as quickly as possible, especially those driven by SMEs, so that the transformation really permeates the economy right down to its roots. These funds are a unique opportunity to modernize the economy and society. As banks, we? want to be an ally in channeling and multiplying their impact, providing additional financing and advising clients to assess the potential of their projects. Spain has an enormous advantage: it has natural resources such as the sun, the new oil, to export energy to Europe.

It is critical that the current uncertainty does not divert the attention of governments, companies and societies. We must embrace these trends with determination and perseverance, while protecting more vulnerable groups so that no one is left behind, thus providing a better future for the coming generations.

Full text published in Spanish in El Mundo.

(1) ?$275,000,000,000,000