The challenge is not simply to finance only what is already green, but to green the rest of the economy

I saw for myself the impact of climate change when I visited Greenland last year. Tonight Spanish TV will broadcast a programme about this trip which I was invited to join by Jesús and Planeta Calleja team. Seeing for myself the ice sheet melting and crashing into the sea was a sobering experience, which brought home to me the responsibility we all have to act – individuals, businesses, governments. And we need to all work together to make it work.

 It’s easy to get depressed about the scale of the task - the need for the world to work together, the sheer scale of the change required if we are to cut global emissions. Although I am an optimist, I am not going to underplay that. Far from it – this is an emergency. If we continue with business as usual there will, in time, be no business at all. But I do believe that if we harness mankind’s creativity, energy and dynamism, and we work together – fast – we can have a positive impact.

 I don’t think that this means we need to trade “going green” with “being more prosperous”. We need sustainable, inclusive growth. Growth that powers and funds investment in green technology. Growth that is shared, so that as our economies and societies cut emissions, communities and countries are not left behind. Bankers talk of stranded assets, such as oil companies whose business models will have to change dramatically if they are to survive in a green future. Of course we must focus on those assets: but the most precious asset of all is people. We need to help reskill and retrain people so they can get jobs in new, green industries and the new digital economy.

 So what does this all mean for us at Santander? As one of the largest banks in the world, and in order to deliver for our people, our customers, our shareholders and our communities on our purpose - to help people and businesses prosper - we have a responsibility to do three things.

 First, help mobilise the trillions of euros and dollars required to finance the transition to the green economy: and, in time and responsibly, assessing the impact, consider our financing of fossil fuels in the future.

 Second, mobilise the millions of people who bank with us – 144 million in total – and help them make green choices.

 Third, mobilise our own teams and change how we operate to reduce our own emissions and impact on the environment.

 Let me take each category in turn.

 Mobilising the trillions

Santander has long been one of the largest providers of finance to renewable energy in the world – including across Latin America. We have financed over 700 projects - from wind farms in Portugal, Spain, the UK, Netherlands, Mexico, Uruguay and Brazil, to solar plants in Italy, Spain, the UK and US.

 The renewable plants we financed in 2018 generated all together enough to power all the households in Chile; or, put another way, all the households in London and Madrid. Meanwhile, last October we issued a €1 billion green bond to fund renewable energy projects.

We now want to go further. One of our key responsible banking targets is to mobilize €220 billion euros in green finance between now and 2030, to help our clients in the transition towards a more sustainable economy.

 I know that some may well point to our financing of fossil fuel clients, and even demand that we divest from these companies and that sector entirely, now.

 Well, it’s worth bearing in mind that Santander is one of the banks with the lowest relative exposure in financing to fossil fuels among its peers (we rank number 31 out of 33 institutions reviewed by Banktrack). Furthermore, we have committed not to finance any energy coal-fired power plant project or new thermal coal mine projects worldwide and not accept any new client in the coal sector.

 Last year, we declined to participate in three transactions involving coal. We need an orderly transition, helping our customers and working together with governments and all key stakeholders.

 And, perhaps most important of all, Santander is a signatory to the UN Collective Commitment to Climate Action, to contribute towards reaching the targets set out in the Paris Agreement.

 The commitment sets out concrete and time-bound actions, including aligning portfolios to reflect and finance the low-carbon, climate-resilient economy required to limit global warming to well-below 2, striving for 1.5 degrees Celsius; using products, services and client relationships to facilitate the economic transition required to achieve climate neutrality and being publicly accountable for their climate impact and progress on these commitments.

 This last point is critical. We are working hard to implement the recommendations of the Task force for Climate-Related Financial Disclosures (TCFD), so that we know – and we make public – how our lending decisions are having an impact on emissions, and what action we propose to take to limit those emissions.

 Finally, as I mentioned above, while we must focus on how to bring down emissions, we need to ensure we do not lose sight of our responsibility to communities who depend on these industries for work.

Although some countries are making progress in decreasing their dependence on fossil fuels, the world as a whole cannot, right now, function without that source of energy. As we make the transition, we cannot, and should not, forget the S of ESG criteria (Environmental, Social and Governance): to make the transition, we need society’s support. The vast majority of companies in the traditional energy sector recognise this, which is why they are investing heavily not just in new technology, but in the transition and the training for the green economy.

 I see our duty as helping our customers – and the communities in which we operate - make the transition. We need to support them to achieve this.

 For those that propose more radical solutions, we need to be clear and assess what would be the consequences if the world’s financial system stopped financing all traditional energy companies today.

 Mobilising the millions

Much of the attention has, understandably, been on banks financing companies in specific sectors. But as important is what we are doing to help our individual customers “go green “– the second area of responsibility I mentioned at the start. Given our customer base of 144 million is roughly the size of three Spains, there is a lot we can do to help change behaviour.

 We, like our peers, already have a number of products to help individuals make environmentally friendly decisions (such as mortgage discounts for homes with energy efficiency certificates).

 There’s one product I would flag, which was created by our team in Chile. It allows our customers to understand the carbon impact of how they choose to spend their money and gives them two easy options to offset: buying emission reduction certificates or contributing to NGOs.

 In the first case, our partner CarboNeutral buys international emission reduction certificates in the name of the customer. Each one of these certificates equals the tons of carbon that are to be offset thanks to different projects.

Customers can also choose to finance directly reforestation or forest conservation projects throughout the country.

Overall, our customers in Chile can now see, in a blink of an eye, the impact of their decisions on the environment; know how much it would cost to counterweight it; and actually do so with a click.

Mobilising our teams

The area, over which we have responsibility ourselves, is in terms of reducing Santander’s direct impact on the environment. With 200,000 employees, and a responsibility to manage a business across the world, this is an important goal.

 We cut our emissions and electricity consumption by 27% and 36%, respectively, between 2011 and 2018. 43% of electricity used by Santander now comes from renewable sources. We want to go further, which is why we have committed to have all our electricity provided by renewable energies, in the countries where it is possible to obtain renewable energy certificates, by 2025. (We have already achieved this in all of Santander's office buildings and branches in Germany, Spain and the United Kingdom.)

 This is part of a broader ambition we have: to be carbon neutral in 2020. To achieve that, we want to continue to help our teams cut emissions by travelling less and using video-conferencing more. And to achieve our objective of being “net 0” as a company, we will start offsetting our emissions this year.

 My own personal carbon footprint is positive and has been calculated and audited by Ecoterrae (www.ecoterrae.com), with whom we continue to work to increase the efforts to fight climate change.

 By 2025, 100% of our buildings around the world will have the ISO 14001 certification - the core set of standards used by organizations for designing and implementing effective environmental management system.

 The Challenge for 2020: Three Tasks (3Ts)

If you have read this far (and thanks if you have), I want to make a key point.

 Although we have achieved a lot and have set some challenging targets, I and my colleagues at Santander are far from complacent.

 We know there is much more we can and must do. Some of these things are our responsibility alone - like creating new green products for customers, fulfilling the recommendations of the TCFD, or achieving “net 0” as Santander Group.

But achieving more challenging goals and to do so aligned with the responsibility to our shareholders require us to work together – businesses, regulators and governments. We need governments and multilateral organisations across the world to go onto the front foot.

Yes, a lot is already going on: for example, we are a founding signatory of the UN Principles for Responsible Banking, and are active member of the UN’s Global Investors for Sustainable Development. Meanwhile, at a multilateral level, organisations – most notably the EU – have set some ambitious targets. But given the scale of the challenge, this year we all need to make rapid progress, and turn words into action.

To unlock the trillions of dollars required to combat climate change, from a banker’s perspective we must ensure risk is priced effectively, as that will help create certainty for investors.

To do that, we need a robust taxonomy not just to stop “green washing”, but to identify what assets and sectors we must foster and which we should help on the transition.

 To be robust, the taxonomy must be built on reliable and comparable data; and, we need international standard setting bodies to pick up the pace on this on agreeing to a common, global approach to the principles of the taxonomy. Finally, the challenge is obviously not simply to finance only what is already green, but to green the rest of the economy. The transition must be, to repeat, just – not leaving people and communities behind.

 Three tasks – Taxonomy, transition, trillions - three ts for the Twenties.

We need to up our ambitions and the pace of change. And we need to be mindful that, as climate change is a global challenge, respecting no borders, we must move as one, mindful of the differing needs of developed and developing nations, but conscious do nothing is not an option. 

Each of us has a responsibility to speak up and to act. Finance has a critical role to play. More banks should sign up to the UN Principles for Responsible Banking, and help use the muscle of the world’s financial system to tackle this existential threat.

So, this is why I went with Jesús Calleja to Greenland to see and share with you the impact that climate change is having. And it is why Santander will continue to fulfil its responsibility to support the transition to the green economy.