Sustainability matters

From Paris to New York
The fight against climate change is rightly on everyone's lips at present. The fourth record summer in this still relatively new century ensured that it is not only environmental activists, scientists and isolated media or politicians who are highlighting climate issues. The topic has finally become part of the mainstream. For many people, their enjoyment of the nice weather is tempered by worries about the future. Melting glaciers, plastic waste in our oceans, floods in Asia, hurricanes in Florida and the Gulf region or people wearing shorts in Greenland are there for everyone to see and experience – in the here and now. Such news are almost the order of the day.

The world is confronted with some very big challenges. The climate situation and outlook is alarming. There is a severe and urgent need for action. We need to transform the economy and change our behaviour  quickly and decisively. Only in this way climate change can be combatted successfully and the climate goals of Paris don’t remain just lip service. No single country, no single company, no single institution can solve all issues and challenges – the issues are too complex and have a global dimension.

The required transformation will cost astronomical sums of money. To achieve the Paris Agreement an additional investment volume of around EUR 180 billion is needed in the EU alone. A substantial part of it must come from the private sector. The banking sector is challenged and plays a central role in mobilising and channelling these financial resources. Having said that, sustainable finance offers huge opportunities for the financial services sector all over Europe, but not to act in a sustainable manner will equally entail great risks. The EU Commission has recognised that and is currently with its very comprehensive regulatory package clearly setting the pace in the area of sustainable investments. The Taxonomy as part of the reports published by the European Commission’s EU Technical Expert Group on Sustainable Finance (TEG) published on 18 June marks a milestone in the Commission’s ambition to make the financial sector a powerful actor in fighting climate change and meeting the sustainable development goals (SDGs) by further aligning the industry with the Paris Agreement and the UN 2030 Agenda for Sustainable Development. The Taxonomy itself virtually forms the centrepiece of the reports. Through establishing a common language which has been missing so far, the Taxonomy will provide clarity when discussing “green”, “responsible”, and “sustainable” products and practices among financial actors as well as wider stakeholders. Hence, the Taxonomy will be an important tool to help investors and other financial actors contribute to the transition to a sustainable economy and engage in a dialogue with companies.

Every contribution counts
Sustainability has always been an important concern of the Liechtenstein banking centre. It is therefore a logical consequence that the LBA welcomes and supports these developments. The upcoming regulation and the taxonomy in particular will provide important guidance and enable to make better-informed decisions so that more responsible investments can be made. The financial intermediaries will be put in a position to live up to their role and responsibility as trusted partners and advisors in the best interests of the clients.

The commitment of the Liechtenstein Bankers Association to sustainable finance is part of its long-term strategy. In this context, the LBA joined the International Network of Financial Centres for Sustainability (FC4S) in April 2018. The FC4S Network is structured as a partnership between financial centres and the United Nations Environment Programme, which acts as its Convenor and Secretariat. The objective of the network is to exchange experience and take common action on shared priorities to accelerate the expansion of green and sustainable finance. The long-term vision of the FC4S Network is rapid global growth of green and sustainable finance across the world’s financial centres, supported by strengthened international connectivity, and a framework for common approaches. The FC4S currently consists of various members from more than 25 countries worldwide.

However, sustainability is more than “just” climate protection. The UN recognized this early on. In 2015, it adopted the 17 so-called Sustainable Development Goals (SDGs). They provide a shared blueprint to achieve a better and more sustainable future for all and recognize that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests. Hence, the Goals address all global challenges we face as society in itsbroadness . They interconnect and aim at leaving no one behind.

A shared responsibility of the private and the public sector
The Liechtenstein Government published its first interim report on the implementation of the Goals in July this year, highlighting that sustainable development has been for a long time and still is a key priority for them. By consistently promoting solar energy, Liechtenstein has been the “solar world champion” since 2015 with the highest per-capita installed photovoltaic capacity. Every municipality is strongly committed to increasing energy efficiency and has been awarded “Energy City” which led to the fact that Liechtenstein has become the first “Energy Country”.

In two other areas, Liechtenstein launched public-private partnership initiatives of a unique and pioneering character. To mark World Water Day, on 22 March 2017 the “Waterfootprint Liechtenstein was launched. The principle behind the project is straightforward: “Drink tap water. Donate drinking water”. With this campaign, Liechtenstein is aiming at becoming the first country to provide access to clean drinking water to one suffering person for every resident in Liechtenstein which means to improve the living conditions of around 37,500 people in need. The Waterfootprint initiative is well on its way to achieving this target. To date a total of more than 22’000 “water footprints” have been activated. The government, schools, all municipalities and numerous companies, amongst them all the big Liechtenstein banks as well as the Bankers Associations, support the initiative by refraining from purchasing bottled minderal water and using only domestic tap water.

Collaboration & cooperation across countries is key
The second lighthouse project is the so-called “Liechtenstein Initiative” to end human trafficking and modern slavery. The project is a partnership between the Governments of Liechtenstein, Australia and the Netherlands along with the United Nations University Centre for Policy Research as well as a consortium of banks, philanthropic foundations, and associations. The Liechtenstein Bankers Association and its members are part of these supporting organisations – for good reasons.

The United Nations (UN) assumes that today more than 40 million people either live in captivity, are exploited by forced labour or suffer another form of serfdom. Some 25 million people are pushed into forced labour, 16 million of them in the private sector. Although 58 percent of the people who work as slaves live in India, China, Pakistan, Bangladesh and Uzbekistan, around one million people in Europe also live in conditions similar to slavery. The goods produced often end up in normal sales channels, for example as textiles or food. The International Labour Organization of the United Nations estimates that around 150 billion US dollars are traded annually worldwide through slave labour and human trafficking. And this is where the financial sector comes in. It can be associated in various ways with modern slavery and human trafficking. This can be done, for example, by handling money generated from such practices, or by financing goods and services whose supply chains include modern slavery or human trafficking. According to studies, modern slavery and human trafficking are the most common predicate offences to money laundering and terrorist financing in the world today.

Banks have to drive the change
In light of the global nature of the activity and the need to access financial data to identify abuses, the involvement of the global financial sector in this fight against modern slavery and human trafficking is essential. Liechtenstein’s financial community and regulatory authorities have considerable expertise in combating illicit financial flows and hence can play a pioneering role in tacking human trafficking and modern slavery, be it through the promotion of a high due diligence standards, the development of responsible investments or the promotion of inclusive financial technologies. For this reason and being aware of this responsibility, the Liechtenstein banks and the Liechtenstein Bankers Association decided to actively support the "Liechtenstein Initiative". The Commission has been holding several global consultations since September 2018 to discuss the sector’s approach to anti-slavery and anti-trafficking compliance; responsible lending and investment; and financial sector innovation. Experts from around the world present their research and initiatives at these meetings. Based on these consultations a catalogue of measures is being drawn up that places the global financial sector at the centre of worldwide efforts. This catalogue should not only serve to take action against those who enrich themselves illegally and at the expense of others. Recommendations are also made to financial institutions as to how they can protect themselves against investments and these transactions. In September 2019, during the 74th Session of the UN General Assembly, the Commission has released a blueprint for accelerated action to address modern slavery and human trafficking.

It is time to ban unworthy working conditions and forced labour. This would also contribute to more climate protection. Why? Legal jobs can be regulated in such a way that less environmental pollution or waste of resources occurs. The circle to the “Paris goals” closes and the holistic approach of Liechtenstein makes even more sense.