Towards a sustainable financial policy

More and more cities and municipalities are paying attention to the Sustainable Development Goals, as evidenced by the Flemish SDG report from VVSG. While financial choices also reflect ecological or social aspects in the vision of the city or municipality, the SDGs are barely visible in the financial policies of our cities. Forum Ethibel is assisting both Ghent and Bruges in making their financial policies more sustainable.

Our ERSIS study shows that approximately half of the Belgian financial market exhibits sustainable characteristics. Furthermore, studies have been proving for years that investing in sustainability does not mean lower returns. The upcoming 2024 elections present a good opportunity for cities and municipalities to integrate sustainability into their investment policies.

Two Flemish cities set a good example. The city of Ghent has been collaborating with Forum Ethibel since 2020. "We have long been attentive to sustainable financial policies in Ghent," says Tom Vyncke from the city's finance department. "As early as 2004, the city placed a symbolic amount in a savings and term deposit account at Triodos Bank. This was based on our own research and comparisons; at that time, there was no talk of a sustainability framework. However, I first came into contact with Forum Ethibel during that period. One of the city's sustainable savings accounts is certified by Forum Ethibel and is with VDK."

A second step was taken in 2007 when the city began questioning the sustainability of its investments, especially the pension reserves of the city and the Public Centre for Social Welfare (PCSW). For this, the administration relied on the sustainability frameworks of Ethias for the bond portion and Candriam for the stocks.

In 2011, a framework for savings was established, using both positive and negative criteria. "During those years, we systematically increased the minimum sustainable treasury resources. Many of the criteria and strategies we installed at that time were taken from Forum Ethibel's annual ERSIS study on sustainable savings and investments. I now receive it annually, and it remains a very interesting tool to stay informed about the latest developments."

"From 2018, we expanded the initial criteria and also applied them to our investments. We used several general strategies, such as excluding companies based on the ten principles of the UN Global Compact and excluding certain controversial activities. We aligned ourselves with the Towards Sustainability label, the label for sustainable funds from Febelfin. The overall objective was to have as many climate-friendly investments as possible with the lowest possible CO2 emissions. At that time, we also started with completely fossil-free stock investments for a portion of the reserves. Since 2021, we have been working to make the entire reserves fossil-free."
"In 2021, we established a financial sustainability committee that meets four times a year. In addition to colleagues from the city's environmental department, there is also a Ugent specialist, for example. And Sofie Versmissen, as the permanent representative of Forum Ethibel."
The financial sustainability committee has been given specific tasks. "The committee provides advice on investment decisions in the context of making and keeping our investment portfolio fossil-free. We actually go further than, for example, the Towards Sustainability label. In addition, the committee works with the asset manager on new sustainability reporting. This should enable us to assess the ESG impact of investments to help achieve the city's overall sustainability goals."
"It is a definite advantage to have Forum Ethibel on board. Firstly, because as an independent non-profit organization, you can provide your vision without bias," says Vyncke. "Forum Ethibel is an expert in many of the aspects that come into play, and the input from Sofie and her colleagues also helps to translate theoretical concepts very concretely into practice."
Vyncke sees sustainable financing becoming more and more the standard in the coming years. This is a new aspect where Forum Ethibel is at the table with us: "Sustainability in the financial world has gained momentum in recent years. Forum Ethibel follows all these new developments with and for us so that our sustainability framework remains relevant. And they keep moving: we are now looking to develop a general framework for green loans and credits."

In 2020, Bruges was the first Flemish city to be awarded the Transparency ID from Forum Ethibel. The certificate describes how cities or municipalities deal with finances and on which policy domains they focus. It highlights the motivation of the administration for good financial management and transparent communication about it.

"A more sustainable financial policy was a clear policy choice, explicitly stated in the governing agreement. The city fulfills its VVSG commitment 'global goals, local focus' in terms of the seventeen Sustainable Development Goals (SDGs). Naturally, the financial aspect is an important part of this," says Jan Dhiedt from the financial department of the City of Bruges.
For the Transparency ID, Forum Ethibel examines the financial flows at the Bruges Group: City, PCSW and Police Zone Bruges. "We not only monitor financial investments but also map out climate policies and social aspects. Every year, we review the financial situation on December 31 or the annual accounts of the three organizations. Thanks to this snapshot and the annual financial audits that follow, the City can make comparisons and demonstrate whether and how the policy becomes more sustainable," says Sofie Versmissen from Forum Ethibel. "We have now issued the Transparency ID for the fourth time."

"General trends, specific accents - such as targeted investment choices or investment products - can be made clear to the people of Bruges thanks to Forum Ethibel's screening in a transparent way," concludes Dhiedt. "The city administration sees this certificate as a confirmation of the current approach and the ambition to handle finances well in the future as well."

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