Societe Generale wins this year’s award for the world’s best bank transition strategy in recognition of both its internal and external momentum.
Those internal goals are important: the bank has committed €300 billion to support sustainable finance from 2022 to 2025, having previously pledged €150 billion between 2020 and 2025.
It is also working to ensure that it implements the highest environmental, social and governance standards for its own corporate behaviour. The implications of this range from its London headquarters being classified as outstanding by the Building Research Establishment Environmental Assessment Method (Breeam) to its work with cloud consultancy Qarnot to lower its carbon emissions.
Shortlisted
- Morgan Stanley
- DBS
SocGen understands that using its own expertise and capital to bring in other parties is essential to meet the scale of the challenge.
“We want to leverage on this type of partnership that we have established with Qarnot, which reduces our carbon footprint for some of our computing power needs by 80%, as there are many other financial institutions and corporates that have similar requirements,” says Eric Bonnin, strategic adviser, energy transition and sustainable finance, at SocGen.
This collaborative approach is at the heart of SocGen’s transition strategy. An example of this is its work with the Clean Hydrogen Energy Fund, to which it is exclusive financial adviser. Clean is the world’s largest equity fund dedicated exclusively to hydrogen technologies. It brings together energy companies that used to compete in research and development into emerging tech and it harnesses financial investors to grow the fund to sufficient scale.
It has already secured commitments of €800 million, and SocGen has been able to use the immediacy of the net-zero transition challenge to drive cooperation.
The need for speed in the transition to net zero also creates other pressures that are breaking down traditional business models. For example, transportation manufacturers traditionally never took technology or financing risk with regards to their supply chains.
Now, however, public commitments from original equipment manufacturers (OEMs) to reduce carbon emissions have led many companies to become equity partners in H2 Green Steel – the first large-scale steel producer based on a fossil-free manufacturing process. European OEMs such as Scania embraced this €2.5 billion project simply to ensure access to the green commodity.
SocGen, leveraging its own co-leadership role within the Steel Climate-Aligned Finance Working Group, brought together new pools of capital to finance this change.
The French bank’s ability to harness new models of cooperation isn’t restricted to the private sector. One of its biggest achievements of the past year was Greenlink Interconnector, which links the national power grids of the UK and Ireland and enables increased access to low-carbon energy supplies and better management of demand and supply spikes. SocGen was financial adviser, lender and interest-rate hedge provider on the project.
The bank also innovated on financing to harness renewables in other geographies. For example, in China it closed the first decentralized power generation project financing related to the energy sector for the TEESS joint venture between Total and Envision Group – essentially ensuring that smaller-scale renewable energy is commercially viable.
“It was a complex process to enable all the financing institutions to be able to look at different types of credit risk involved in this deal – we’re talking about this decentralized power generation in China in favour of small and medium-sized enterprises – but it’s a very important template to be able to bring smaller renewables projects to the market and on to the Chinese grid,” says Bonnin.
Sandrine Enguehard, head of impact finance solutions at SocGen, says it has also been a leader in adapting traditional financial instruments. It has experience in green and sustainability-linked bond (SLB) structures. In the past year it brought the Republic of Chile to market with the $2 billion SLB that was the first ever by a sovereign.
The next frontier is investing in biodiversity”
Eric Bonnin
Enguehard believes that SocGen has been able to develop a leading transition strategy due to the bank’s longstanding expertise in traditional power and mining. These sectors are the nexus of net-zero initiatives – hence the bank’s leadership in hydrogen as an innovative strategy for lowering carbon emissions from hard-to-abate industries.
“As a bank, we have been active in the energy sector for a long time,” she says. “Now we are able to leverage this technical expertise to push energy transition into many industry sectors.”
SocGen has realigned internally to face the energy transition, which Bonnin believes, “is probably the largest-ever business opportunity we’re facing since the industrial revolution, worth about $115 trillion by 2050.”
The bank has set up 12 ‘transversal’ groups that use existing industrial expertise from different industry and sector groups to advise on and structure new financing solutions to support net-zero projects.
SocGen is working hard at preparing itself for the next stage on the transition path, which is going beyond net zero and incorporating biodiversity.
“The next frontier is investing in biodiversity,” says Bonnin. “We are working on defining biodiversity and establishing methodologies to assess the biodiversity impact of an activity, as well as establishing metrics around nature-based solutions.”
