The Silent Banks
4 years, 5 months, 12 days, 18 hours
9 February 2025
Guest blog by Francisco Uria Fernandez: I am sure that, in the end, the global banking industry will be on the right side of history.
Some days ago, we heard the words of the Secretary-General of the United Nations, Mr. Guterres, in the context of the Davos forum, reproaching some financial entities for their decision to abandon some of the previously reached commitments in the fight against climate change, citing the risk of being ‘on the wrong side of history’.
Upon hearing them, one cannot help but wonder if this is an accurate description of what is happening or if there is something we are missing.
These words can´t be taken in isolation. Some days after then, we heard another speech, in this case, the inauguration of the new President of the United States, Donald Trump, and the decisions that have been made in the immediate days.
There is no doubt that the international banking industry is facing a complex situation where the political environment, public opinion, and, above all, regulatory requirements, will be quite different in various geographies, specifically between the United States and the European Union in everything related with climate change.
A context like this represents legal and reputational risks, against which banks must position themselves adequately, thinking of their shareholders and society.
Firstly, they must comply with the legal and regulatory obligations they already have, trusting that a certain convergence may eventually occur to facilitate their task.
Secondly, they must adequately manage the non-financial risks that exist in their balances, which will force them to continue investing in improving the quality of the data they have.
However, it is equally true that, at the same time, they will reduce their public expressions on the matter, both to avoid gratuitous political confrontations in one geography or another and to avoid facing claims based on commitments they may not be in a position to honour. It is a ‘prudent’ position that I will not dare to censor.
Does the above mean a radical change in their positions on the matter? Beyond public statements, the reality of what we see in our clients worldwide is that they detect the business opportunity derived from the need to finance the risks associated with the climate and energy transition, and they are well aware of the need to undertake long-term projects that will make it possible to gather the essential resources.
It is a conversation intertwined with another common these days, such as the development of artificial intelligence and its potential, another of the main topics of conversation in Davos. The evident need to invest in the medium term in data processing centers and the sustainable energy sources that can make them viable has been also highlighted.
Therefore, although it may be notable that banks are less vocal these days than they have been in the past in defending principles, values, or ideas that the Secretary-General of the United Nations may consider fundamental, the important thing, in the end, is their firm commitment to gather the resources that will be necessary to face a transition that will not be easy, especially in developing countries, and that commitment, with all the nuances that may be pointed out, continues to be there. I am sure that, in the end, the global banking industry will be on the right side of history…and for a number of reasons.
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With thanks to guest writer Francisco Uria Fernandez