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Third International Round-Table Meeting on Finance and the Environment New York, 22-23 May 1997

28 May 1997 - It is with great pleasure that I welcome you to this round-table meeting on commercial banking and the environment. It is amazing to think that this is already the third UNEP Meeting of its kind.

Let me begin by thanking those of you that have assisted us in structuring the agenda, in identifying key areas of interest, as well as spending the time and effort to make presentations or serve as panelists during the next two days. I would also like to take this opportunity to express my thanks to our host, Columbia University. We are also grateful for the financial support received from Bank of America, Credit Suisse, HSBC Holdings Plc, Royal Bank of Canada, Salomon Inc, Swiss Bank Corporation and Wiese Leasing.

This morning, we have over 350 participants from commercial and investment banks, bank associations, insurance companies and industry from around the globe, gathering in this meeting. This level of interest among bankers from industrialized, transitional and emerging economies underlines the key importance you place on the credit, investment and operational implications of the green agenda.

Our meeting will explore the challenges the financial services sector faces in relating the environment to financial performance. We need to confront the issue of exactly how environmental performance impacts on corporate value. As you all know, a tremendous amount of effort is currently underway in assessing the environmental links to the financial services sector. It includes the interest among rating agencies, capital market and others in environmental risk. It includes greater targeting of investment funds towards the multi-billion dollar market in green goods and services.

For 25 years, UNEP -- which serves as the environmental conscience of the United Nations and the world -- has worked closely with industry in developing environmental management strategies. Since 1991, we have worked with a small group of commercial banks in trying to understand and catalyze industry awareness in the environmental agenda. We are aware in UNEP that commercial banks cannot, and should not be expected to act as environmental policemen, monitoring and enforcing regulatory compliance among borrowers. That is not the role of lenders. However, we do believe that -- as key economic actors -- the more you know about environmental risks and opportunities, the better. The more closely the financial services sector integrates environmental considerations into everyday economic practices, the closer we move to realizing the economic imperative which underlies sustainable development.

There is now a very clear realization that sustainable development will not, and cannot, be achieved, by governments acting alone. We need the expertise and resources of the private sector. Not as a matter of corporate philanthropy, but rather because it is the business self-interests of the private sector to understand and capitalize upon the rapidly moving national and international environmental agendas. Thus both Governments and particularly the private sector have an interest in sustaining the biosphereþs capability to regenerate life , without which economic activity would be impossible. Particularly for the financial services sector, change, anticipation and adaptation to customer needs and market trends is a matter of competitive survival. In sum, governments and the private sector can make many valuable positive contributions to achieving sustainable development while also enhancing corporate value.

Despite ongoing international efforts to establish and maintain funds for global environmental initiatives such as the Multi-lateral Fund and the Global Environmental Facility, it is clear that these will never be enough.

Despite these multi-lateral efforts, the real contours of environmental opportunity remain squarely with the private sector. In terms of locus of financial capital the private sector is already five times larger than the public sector. In 1995, Overseas Development Assistance amounted to US $ 58.9 billion, whereas foreign direct investment was estimated at US $ 325 billion. With the growth and increasing globalization of the world economy this proportion is growing at a phenomenal rate. This, added to increasing domestic investment means that it is imperative that attention must be paid to the issue of environmental responsibility within the investment and development process, if sustainable development is to become a reality.

The Financial Services Sector is the most important contributor of private sector credit. Investment in the provision of environmental goods and services has become big business, because attractive returns are possible. For example, US$ 300 to 600 billion is expected to be spent globally by the year 2000 on pollution control goods and services; US$ 1 trillion will be needed for new power generation capacity in developing countries and countries with economies in transition alone between 1993 and 2000, a substantial portion of which is available for renewable energy projects; and US$ 250 billion is expected to be spent on energy efficiency projects over the next 20 years.

The private sector harbours skills, environmentally sound technologies and economic resources, and generates employment opportunities, all of which can significantly contribute to sustainable development. The Financial Services Sector, through its lending and investment practices, can substantially either preserve or degrade the natural environment. As the most important contributor of private sector credit, the signals you send to your clients about the relationship between environmentally sound management practices and credit lending rates are an important element in building sustainable development.

UNEP is neither a financial agency, nor a lending institution. Yet, we are convinced that the greening of the financial services sector has a primary and critical role in building sustainable development. Although any policy and business change is gradual, it is imperative that environmental considerations be integrated into how business decisions are made, day in, and day out. Not as a matter of good public relations, but because it makes solid business sense.

These next days will be full of interesting debate and discussion and I am very interested in hearing your views. I am also interested in any specific proposals which might come forward, and which UNEP can address in working with our partners. This may include a clearer understanding of your specific information needs.

For the past five years, we have worked, supported by the Bank Advisory Group, to increase environmental responsibility in this sector through promoting the Statement by Banks on the Environment and Sustainable development, and through regular Round- tables such as this. We have raised the awareness of and interest in this Initiative to the point where we believe there is enough impetus within the industry itself to move into the next phase. Whatever you decide to do I would like to assure you that UNEP will remain an integral part of the process and will continue to support the Initiative.

In order to meet the needs of a truly global initiative, to reflect the increasing concern of the financial services sector in integrating environmental considerations in their operations and to maintain relevance to current business practice, the Statement has been revised. A copy of the revised Statement has been included in the conference material given to you. We will be having a signing ceremony at the Reception tonight, where we look forward to a number of new signatories.

I look forward to on-going participation, comments and inputs especially in the break-out sessions. We obviously have a very busy agenda ahead of us. There are over 60 people who are scheduled to speak over the next two days. The reason that we have approached so many of you to make presentations is very simple: I think that the best guidance and advice to bankers about environmental management strategies comes from practitioners. Peer review and input is far more persuasive than advice from people that do not face the kind of business pressures which are you experience on a daily basis.

I want to wish you well in the discussions and look forward to the outcomes.

Statement by Ms. Elizabeth Dowdeswell,
Executive Director, United Nations Environment Programme

Wednesday 28 May 1997
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