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Expertise and innovation are ESG buzzwords that are often overused, but for a long track record of consistently producing high-quality work and clever ideas that are helping to advance sustainable finance, Natixis is the winner of IFR’s ESG Insight Award.
The influence of Natixis’ Green & Sustainable Hub has been felt around the market since it was created in 2017 and the quality of its output continues to position the bank at the cutting edge of new topics and themes.
In 2023, the topics addressed included "green enabling" ie, comparing low-carbon technologies; nature-based solutions and methods; a just transition; the UN’s Sustainable Development Goals; sovereignty and sustainability; climate and inflation; greenwashing and greenhushing, the latter being when companies underreport or hide their ESG credentials; adaptation and resilience; and financial sponsors – to name but a few.
Further research and work followed in new areas such as coal exit strategies; securing critical metals and minerals for the energy transition; creating databases for avoided emissions; and decommissioning fossil fuel assets – in addition to more familiar topics such as regulation and impact.
The GSH is a 40-strong team of ESG and sustainable finance experts that oversees multiple activities. The unit helps to develop the bank’s ESG franchise and revenues and steer and monitor its climate trajectory, a role that it has refined in the last seven years.
“We’ve spent a lot of time designing our offering and understanding where we want to be and trying to define where our right spot is,” said Orith Azoulay, global head of the GSH.
This expertise is shared with clients as financing, advisory or investment ideas with a deep green and sustainable footprint for equity, fixed income and credit, and the information it generates is shared with the market in an open-source format to increase industry knowledge.
The GSH is also responsible for content creation. Natixis places a strong emphasis on the quality of the team's output which it sees as a way of “safeguarding the bank’s green integrity and protecting it against the risk of greenwashing”.
The unit has broad research capabilities spanning regulatory intelligence, market and investor insights as well as methodological innovation. It looks at sustainability from many angles and can offer insight, analysis and solutions to global ESG concerns, such as the war in Ukraine.
The Center of Expertise – the innovation arm of the GSH – investigates ESG topics, such as biodiversity, and generates flagship reports; frameworks and methodology developments; thematic sell-side market research; and investor surveys.
Regulatory work in 2023 included a comprehensive report in May on the European Union’s Green Bond Standard and a full update in September to the bank’s "New Geography of Taxonomies". Its work on methodologies included a way for public development banks to measure and manage their contribution to the UN’s SDGs.
The GSH is also involved in helping to define market guidance for sustainable finance. Natixis co-led work leading up to the update in September of the International Capital Market Association’s Climate Transition Finance handbook and also co-chaired an SLB working group.
Azoulay is the driving force behind ICMA’s new “green enabling activities” taskforce, which she is co-chairing, that will benchmark low-carbon technologies and compare the benefits of climate solutions.
As a result of GSH work, Natixis is often early on big-picture developments. This includes its "green weighting factor", a proprietary tool that was introduced in September 2019 to allocate capital to financing deals based on their climate impact, which effectively colour codes the bank's balance sheet.
The green weighting factor easily predates work on sector targets by members of the Net-Zero Banking Alliance, giving Natixis an edge over its peers. It reduces analytical risk-weighted assets by up to 50% for green deals and increases RWAs by up to 24% on deals with a negative ESG impact to prioritise capital allocation.
“To me, the incredible strength that the green weighting factor is giving us is the machine and change management. We’re seven years down the line of every deal being screened against climate, and four years down the line of every business line having a yearly colour mix budget,” Azoulay said.
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