Results of the World Climate Conference: What the financial industry has to do with it

The World Climate Conference COP26, which ended mid-November, delivered important results against climate change. We show these and explain what sustainable finance means and what role the financial sector is playing in the fight against climate change.

The goal of the 26th World Climate Conference COP26 in Glasgow was to advance measures to achieve the goals of the Paris Agreement and the UN Framework Convention on Climate Change.

Achieving Net Zero: The contribution of the World Climate Conference COP26

The Glasgow Climate Pact was adopted at COP26 – almost 200 countries agreed to it. Aside from the one-sentence explanation of keeping the temperature rise below 1.5°C, these are the main points discussed by the delegates:

  • Coal will be “phased down”.
  • $500 billion to developing countries in the next 5 years to help them cut emissions and cope with the impacts of the climate crisis.
  • A database, communications and reporting system (Santiago Network) for countries and organisations to identify and catalyze opportunities and mobilize assistance to address loss and damage from climate change.

Some countries and NGOs described the results as “disappointing”. However, most countries agreed that the deal was balanced at this point, given their differences. The New Zealand chief negotiator summarized it as follows: “The text represents the ‘least bad’ result.”

More information about COP26 and its results can be found here.

Explanation of terms: Net Zero

Net Zero (net zero emissions) means that, through various measures, humans remove the same amount of the greenhouse gases they produce from the earth’s atmosphere. Accordingly, net zero means climate neutrality. The goal of global climate policy: to achieve Net Zero respectively climate neutrality by 2050.

Sources: Avenir Suisse and IPCC

What is the connection between the measures mentioned and the financial world?

The importance of sustainable finance

The way the world is currently managing its economy is not sustainable. The ecological level is overstretched and has reached its capacity limits. The financial sector has a central role to play in fighting climate change. On the one hand, enormous sums must be invested to promote sustainable measures, such as renewable energies. This is in order to achieve the UN’s Sustainable Development Goals. On the other hand, huge amounts of money are still flowing into organizations, projects and investments that do not meet sustainability criteria.

What role does finance play in net zero?

One of the key objectives identified in the run-up to COP26 was to mobilize finance. The Glasgow Financial Alliance for Net Zero (GFANZ) was launched to raise standards, drive ambition and ensure that Net Zero commitments are transparent, credible and consistent. Trillions must flow from the private and public sectors for Net Zero to be achieved.

Portrait von Andi Burri

Image source: flickr

“The private sector is realizing that climate risks are very important for their portfolios and they need to align them to a more sustainable way of doing things.”

 

Patricia Espinosa, Executive Secretary of the UN Framework Convention on Climate Change

500 global financial services firms have responded and agreed to align $130 trillion – 40% of the worlds’ financial assets – with the goals set out in the Paris Agreement, including limiting global warming to 1.5°C. An encouraging sign.

In the next article, we will do a deep-dive on the roadmap and the role of institutional investors, governments and cities to financing Net Zero.

Stay tuned.

What is the current status of German municipalities in terms of sustainability?

What is the current status of German municipalities in terms of sustainability?

Now available at Loanboox in the SDG Portal

The United Nations’ 2030 Agenda comprises 17 Sustainable Development Goals (SDGs). They serve to promote sustainable peace and prosperity and to protect our planet. What is so big starts small: Where measures become effective and tangible for people on a daily basis.

Supporting municipalities in their key role

“Municipalities play a central role in implementing the 2030 Agenda. Many municipalities have already set out on the path to a sustainable future, and many more are currently working on strategies and measures,” says Marc Wolinda of the Bertelsmann Stiftung.

In order to support municipalities in impact-oriented sustainability management, leading municipal associations, the Bertelsmann Stiftung and other partner organisations have created the SDG portal. “For example, the portal offers 56 SDG indicators with data for all municipalities with a population of 5,000 or more, SDG measures and a reporting tool,” Marc Wolinda explains further.

SDG portal now integrated on Loanboox

With one click on the SDG portal linked on the platform, all the goals already pursued by the municipality appear with stored indicators. The information, which can be accessed quickly, is an added value for investors as an orientation, since the importance of sustainable financing is becoming more and more important.

For municipalities, a whole catalogue of measures and examples for the implementation of the SDGs is available as inspiration for their own sustainable development. In addition, there is the possibility of comparison with other municipalities as well as the documentation of their own sustainable development through a reporting function.

Background knowledge

These are the 17 Sustainable Development Goals (SDGs) at a glance.

New budgetary crisis? – Communal finance report 2021 of the Bertelsmann-Stiftung

The Corona-Crisis in Germany had a massive impact on everyone, including communes. They needed a large financial assistance package from federal and state governments. The generated surplus is solely based on those aids. Without them, the biggest deficit in history would be standing in the budget books!

Meanwhile, the communal investments reached an all-time high. Whether or how these can be realized, is not predictable. Find out more.

The communal finance report published by the Bertelsmann Stiftung analyses, which financial burdens for communes arose during this crisis and what impact the governmental financing aides had.

Do you want more details? You can download the entire report from the Bertelsmann Stiftung for free.

Happy Birthday Direct loan!

Happy Birthday Direct loan!

One year ago, Loanboox and Deutsche Kreditbank AG (DKB) launched the “Direct Loan”. The summary: With more than 200 loans totalling 2.5 billion euros, we were able to support municipalities in obtaining liquidity quickly and unbureaucratically.

A product that turns classic processes around

On 31 March 2020, Loanboox and DKB will jointly launch a fundamentally new, digital solution for taking out and granting municipal liquidity loans. What exactly is so new about this solution? It is no longer the municipality or the municipal corporation that obtains the offers in the traditional ways by telephone or in writing. With the direct loan, it is the other way round. The lenders proactively post their offers, i.e. loan conditions with different terms and corresponding interest rates, on a daily basis. The municipality can compare the offers directly online. After selecting the desired volumes and terms, the loan is bindingly concluded on the platform. This is quick and, above all, transparent.

Positive resonance

53 municipalities have already used the direct loan, including cities such as Frankfurt am Main or Mönchengladbach. They all benefit from the advantages. “The direct loan ensures market transparency. The daily updated offers are comparable at a glance and can be concluded directly online if required,” says Rainer Lohse, treasurer of the city of Frankfurt am Main. Smaller municipalities such as Wipperfürth have also had positive experiences. Michael Berger from the municipal treasury: “The direct loan product gives me a direct, daily updated overview of the conditions available on the market”.

 

Keeping up with current developments

Is everything really online? No, because the direct exchange with our customers is and remains important. Thanks to their feedback – from both investors and municipalities – the functions of the online direct loan are constantly being optimised. And above all, the support we offer in case of questions remains personal.

If you would like to contact us, we are available by phone (+49 221 9865420) or via Mail (direktdarlehen@loanboox.de).

Challenge and Opportunity: Theses on Municipal Development after the Pandemic

Once a quarter, the members of Loanboox’s Market Industry Board exchange views on current topics related to municipal financing. In the virtual March meeting, Norbert Portz from the  German Association of Cities and Municipalities was a guest. He shared his knowledge and experience and presented inspiring trends on the possible development of cities and municipalities after Corona.

There are about 11,000 cities and municipalities in Germany, large and small, structurally weak and structurally strong. What unites them all – despite the differences – is the question of the “aftermath” and what effects the pandemic will have.

Thesis 1: Inner cities develop new structures

It is foreseeable that online retail, which has increased by 20% in 2020, will remain at a high level. This has an enormous impact on local retailers and on the structure of city centres.

Inner cities are the mirror of society and represent its change spatially. They are home, offer identification, are points of attraction for residents and tourists. Much of this is lost through the closure of department stores and retail outlets as a source of footfall. New concepts of use and adapted structures are needed.

The future lies in functional mixing

Some medium-sized cities are setting a good example – and did so even before Corona. In Chemnitz, for example, a former department stores’ was turned into a museum and in Neuss into a theatre. Others are opting for a mix of uses for the department stores’ property, including retail, gastronomy, education, housing and parking. Potential new tenants for retail shops in the shopping malls could be craft businesses, kindergartens and creative people, for whom the inner city location is becoming attractive due to falling rents. Falling prices also offer opportunities for affordable living in the city and new work concepts.

But a change of use entails other adjustments. Noise protection and making opening hours more flexible are just two examples. Other things also need to be considered: a good pedestrian and bicycle infrastructure, public transport connections and accessibility by low-emission private transport. Attractive, safe and clean public paths and squares with seating and sufficient play facilities for children are equally important.

The municipalities, with their economic promotion and city marketing, play a key role in shaping the inner city transformation and are faced with major tasks.

Rathaus Deutschland

Thesis 2: Working from home strengthens the metropolitan hinterland

Working from home will continue to be recognised by many companies as an equivalent form of work in the future. There will be no complete return to compulsory office presence, according to surveys and studies. The resulting effects will be enormous, especially in the conurbations: vacant office space and buildings in the city centres and their conversion are one thing, moving to the countryside is another.

The dream of a house in the countryside – and more seclusion

Whether Cologne, Frankfurt, Hamburg, Berlin, Munich, Stuttgart or Düsseldorf – the rural areas around the major German cities are booming. There, one can combine the advantages of rural life with those of proximity to the big city: larger flats or houses with gardens, better access to childcare places and nature right on the doorstep, coupled with urban cultural offerings and medical care. Working from a home office also means that it is no longer necessary to drive into the congested city centre every day. This creates freedom and leisure.

Rising property prices reflect this trend. With the exception of Düsseldorf and Frankfurt, the prices of condominiums in the surrounding areas have risen more strongly on average since 2017 than in the metropolises themselves, according to a study by the Sparda banks and the Institute of the German Economy (IW) in Cologne. Moreover, it comes as no surprise that demand for the purchase of single-family homes in particular has risen sharply since the beginning of the pandemic.

A good infrastructure without ifs and buts

The small and medium-sized towns and municipalities benefit from the love of the countryside. But here, too, concepts are needed for the further development of structures. The expansion of public transport and connections to the metropolis, broadband internet and fibre optic cables, ensuring medical care and the expansion of kindergartens and primary schools are important criteria when it comes to choosing the right place to live.

In general, the “after” becomes a social and cultural task for society as a whole that goes far beyond commercial points of view.

Talking about commercial viewpoints: If you are interested in open market operations and how municipalities can benefit from the ECB’s cash injection, then continue listening or reading here.

Interest rates and inflation – Daniel Stelter’s economic forecast

Interest rates and inflation – Daniel Stelter’s economic forecast

How do cities and municipalities get through the Corona crisis? What do capital providers and investors need to be successful? And what advantages does digitalisation bring? In the loanboox.asks. series, we talk to experts about topics like these. Daniel Stelter kicks off our audio talks.

The forecasts for 2021 are mixed. On the one hand, highs on the stock market – on the other hand, dampened economic expectations due to the ongoing Corona pandemic. And on top of that, central banks are pumping massive amounts of money into the markets and keeping interest rates low. We talked to the economic expert and author Daniel Stelter in loanboox.asks. about how all this is connected. He says:

The economic consequences of the Corona crisis will keep us busy for a very long time.

Listen to his assessments in the following audio:

Niedrigzins und Inflation - ein Ausblick auf 2021 mit Daniel Stelter

by Simone Franzke

About the person:

Daniel Stelter is a macroeconomist, strategy consultant and author. In his podcast “Think beyond the obvious” he looks behind the scenes of economic and financial policy and explains important connections.

No time to listen to the audio now? Then simply download the article.