Interview with Thomas Garnier, Originator in the Green & Sustainable Hub, and Serge Demirdjian, Green Captain and Director in the Real Estate & Hospitality Industry Group, at Natixis’ Corporate & Investment Banking arm.
At Natixis, the Green & Sustainable Hub’s cross-asset team in charge of developing financing and investment solutions in the ecological and social transition arena helps press on with the vital issue of energy transition by working closely with Green Captains, who raise awareness of this issue with the company’s 16,000 staff across the various sectors they cover.
How does the Green & Sustainable Hub work?
Thomas Garnier: “The hub is a center of expertise, managed by Orith Azoulay and based in Paris, New York and Hong Kong. Our role is to support issuer and investor clients in originating and structuring their green and sustainable finance solutions, whether bond issues or funding for green initiatives. We also undertake scientific-type research as we truly listen to the market and offer structured investment solutions for our investors on specific environmental themes, such as water management, climate and real estate.”
What exactly does your role as Green Captain involve?
Serge Demirdjian: “The team is managed by Orith Azoulay, Global Head of Green & Sustainable Finance at Corporate & Investment Banking, and is based in Paris, New York and Hong Kong. Our role is to support the bank's clients on financing, investment and advisory, and we do this by leveraging our strong expertise and paying close attention to investors' needs, so we can provide innovative products with a positive environmental and/or social impact across several sectors such as real estate.”
Is the green finance market mature?
S.D.: “Very strong demand for buildings with lower energy use initially came from tenants as they are increasingly aware of their environmental impact, then the financial markets – equity followed by the debt markets – developed their offering to address this demand. The issue of maturity is a relative one when you think that 50% of office buildings in the greater Paris area are more than 30 years old.”
T.G.: “We have been seeing the emergence of the green bond market over the past several years, and more recently green bank financing. Large companies are finding this type of funding makes greater sense, and they all hope to derive some advantages from using this type of instrument. On the real estate segment, volumes are not yet really significant, but we are seeing greater interest from our financial partners and are setting up the required systems inhouse to promote financing for green assets.”
How do you stand out?
S.D.: “Following on in this strategy, we are working to introduce the Green Weighting Factor here at Natixis (GWF) to align our financing deals on the Paris agreement (NB: this aims to keep the rise in global temperatures at no more than 2 degrees above pre-industrial levels). This indicator color-codes assets ranging from dark green to brown, encouraging originators to finance assets with a more positive environmental impact by making a clear distinction in profitability. However, it is important to remember that we will have to follow market norms, and so we can only significantly reduce our margins if the market factors in this same distinction either of its own accord or as a result of regulation.”
TG.: “If we want to keep the rise in global temperatures below 2 degrees, then substantial worldwide low-carbon infrastructure investment is required, and we are far from these amounts at this stage. This is a huge challenge for real estate in France and worldwide: it is obviously not the only sector involved, but it is one of the largest in terms of CO2 emissions. So if we want to meet the targets set, then the green finance market will need to step up a gear and, in this respect, the technical expert group's work on developing a green taxonomy and creating a European green bond market standard will be crucial.”