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Environmental Finance Editorial: Leo Varadkar’s appearance at a sustainable finance conference at Dublin this week sent an important signal to the financial community, says Peter Cripps

Ireland ratcheted up its efforts to become a leader in the field of sustainable finance this week, after its Prime Minister described combatting climate change as a revolution that would define the 21st century.

Taoiseach Leo Varadkar put in an appearance at a conference in Dublin to give his personal blessing to Ireland’s push into sustainable finance.

Each of the most recent centuries had witnessed its own revolution that had “turned the world upside down”, he argued, with the agricultural, industrial and digital revolutions preceding this one.

Varadkar said the latest revolution is set to offer great opportunities for the country, as well as challenges, and he wanted financial institutions in Dublin to help fund the transition.

“I believe we must align the financial world with the urgent goal of reducing greenhouse gases. We are striving to be a leader,” he told the conference. “Climate change has raised the stakes for our planet but creates opportunities for wealth creation and new jobs, and I want us to be among the first to realise that.

“The results won’t be seen in a year, or a decade, but if we succeed the benefits will be felt for generations.”

It is rare for a Prime Minister to attend a conference on sustainable finance – normally the highest rank that can be hoped for is a finance minister.

It is rare for a Prime Minister to attend a conference on sustainable finance – normally the highest rank that can be hoped for is a finance minister.

Varadkar’s speech demonstrates the importance with which sustainable finance is now being viewed by governments, both to help combat climate change and to equip financial centres with the skills they will need to succeed in a fiercely competitive landscape.

He was joined by four of his cabinet ministers, who all gave speeches outlining the importance of sustainable finance.

They were talking on the same day that a $1.5 billion Sustainable Development Bond from the World Bank was listed on the Irish Stock Exchange. This sent out the message that the World Bank also endorsed Dublin’s push for sustainable finance.

The bond was the first issued by the World Bank to be listed in Dublin for 25 years, an event described as “a momentous day for the Irish Stock Exchange” by Richard Bruton, Minister for Climate Action and the Environment, and a “game changer” for Ireland’s burgeoning financial services sector by Stephen Nolan, CEO of Sustainable Nation Ireland.

The conference and the bond listing are the latest in a series of milestones for Ireland in its quest to develop into a hub for sustainable finance.

Last year, the country became the fifth in Europe to issue a green bond, raising €3 billion.

Ireland’s Strategic Investment Fund (ISIF), its sovereign wealth fund, made a stand last year when it said it would divest from fossil fuels.

Its central bank this year joined the Network for Greening the Financial System, a club of central bankers collaborating to help smooth the transition to a low-carbon economy.

Sharon Donnery told the conference that the Bank was recently given a lecture on climate change from former Irish President Mary Robinson.

“The Central Bank holds eleven green bonds (€271 million) in our investment portfolio. As part of the public sector purchase programme component of the European Central Bank’s monetary policy measures, we also hold six green bonds (€258 million),” she revealed.

The equities component of its investment portfolio is managed in line with environmental, social and governance (ESG) criteria, and an ESG policy for the bond component is “in preparation,” she added.

And minister in the department of finance, Michael D’Arcy, pointed out that sustainable finance is a key part of its financial services strategy, Ireland for Finance, launched last month.

This emphasis on sustainable finance adds another string to Dublin’s bow, at a time when its financial sector is frantically competing with others in Europe to win business from the City of London, which is suffering as a result of Brexit.

As a Brit, I am sad to say that the contrast between the governments of Ireland and the UK is stark. It seems inconceivable that Prime Minister Theresa May would make a speech such as Varadkar’s.

I have never heard UK Chancellor Philip Hammond talk with any conviction on climate change or sustainable finance, although admittedly he has signed up to a coalition of finance ministers to endorse the Helsinki Principles, that promote national climate action, especially through fiscal policy and the use of public finance.

Yes, I know the British government has its hands full dealing with the Brexit crisis, but still….

Meanwhile, a stone’s throw away from the conference, outside the Dáil Éireann (the lower house of Ireland’s Parliament), a group from Extinction Rebellion protested noisily, but peacefully.

The previous week, the Irish Parliament had followed its counterpart in the UK, by declaring a state of ‘climate emergency’.

But the protesters do not feel that Ireland’s economy is undergoing a sufficiently radical transformation. They criticised some of the ministers who had spoken that same day about sustainable finance.

The protesters have a point. For all the revolutionary zeal of its burgeoning financial services sector, research a year ago by NGO Climate Action Network ranked Ireland as the second worst country in Europe, with only Poland faring worse, when it comes to meeting its climate targets.

Partly because of emissions from the agricultural sector, Ireland is set to miss its 2020 EU climate targets, which it was given in 2009 to cut its emissions to 20% below 2005 levels. This is expected to lead to fines from the EU.

This is reflective of a trend I see globally, and not just in Ireland: for governments everywhere, pushing their financial sectors to embrace sustainability is far easier than making the radical changes to their economies that will be needed to address climate change and other environmental and social problems.

Creating a financial sector that is capable of understanding the risks and opportunities associated with climate change will help them in this task. But strong policies will be the real driver of change.

Peter Cripps is the editor of Environmental Finance.

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