Guest article by
Minister Mona Neubaur
in the Börsen-Zeitung, special supplement "Wirtschaftsraum NRW"
Minister of Economic Affairs Neubaur: Joining forces for transformation with the Fin.Connect.NRW initiative
For decades, international industrial companies and small and medium-sized enterprises from North Rhine-Westphalia have been the driving force behind the German economy. Now we are setting out between the Rhine, Ruhr and Weser rivers to become Europe's first climate-neutral industrial region and a pioneer on the road to climate neutrality. The contribution of the financial sector on this path to the future is of great importance. After all, considerable investment is required.
It is the biggest, most challenging and most exciting project of our time: under the difficult conditions of a time of staggering crises, we must tackle the transformation towards climate neutrality and sustainability, pave the way and increase the pace. Putting the industrial state of North Rhine-Westphalia on the 1.5-degree path is a task of epochal proportions - in terms of the scale of the challenge, but also in terms of the scale of the opportunities. This is because the ecological and economic perspectives coincide at this point: The future success of business models depends on whether and how green they are. Anyone investing in resource conservation, sustainability and green technology today is not only taking the path that climate change has set us as a human challenge, but also the path that promises entrepreneurial success. The capital markets have long reflected this. The will, knowledge and willingness to take risks are there, innovations and investments must follow suit.
In a calculation from 2022, the German Economic Institute calculated that the investments in the economy in North Rhine-Westphalia alone would require up to 50 billion euros a year to achieve the climate targets by 2030. In addition, around 17 billion euros per year will be needed for digitalization - because we are actually undergoing a "twin transformation" with the path to climate neutrality and the transition to a digital society.
As the Ministry of Economic Affairs and Climate Protection in North Rhine-Westphalia, we support companies in taking on their transformation tasks and investing in the future. Our goal is ambitious and can only be achieved as a joint project: We want to develop North Rhine-Westphalia into Europe's first climate-neutral industrial region, a leader in innovation and competitiveness. State funding alone is not enough to achieve this. This is why we also need to mobilize private capital.
The need to invest meets financial market players who are increasingly looking for sustainable investment opportunities. The desire for transformation is reflected on the capital markets. A large number of investors are looking for investment opportunities that not only generate a return but also have the greatest possible positive social and environmental impact. The high demand is based on an even greater pressure to act: of the ten biggest risks to the global economy identified by the World Economic Forum in its Global Risk Report 2023 for the year 2033, six are attributable to man-made climate change. In the top four places are a lack of measures to combat global warming, a lack of measures to adapt to climate change, extreme weather events and a loss of biodiversity. This and the extreme rise in fossil fuel prices as a result of the Russian war of aggression against Ukraine show how urgently investment in transformation projects is needed for our future prosperity.
Investments in new plants, production methods and infrastructures are essential. Companies and players on the financial markets are facing enormous challenges. This is because the huge investments will only be possible with the right financing.
In order for investment decisions to be made effectively in terms of sustainability, a uniform definition is required. With the EU taxonomy and the ESG criteria, the European Union has created a uniform framework that defines sustainability criteria. In this way, funds are channeled into sustainable companies and technologies, while at the same time supporting the Green Deal, which is intended to help Europe achieve sustainable growth and lead it to climate neutrality.
For North Rhine-Westphalia as an industrial state, investment in the transformation is essential - it will determine our future as a successful business location in Europe. We can build on an excellent basis for this: In our state, we can look to numerous credit and financial services institutions, a strong insurance industry and Germany's largest state development bank. This combined strength is needed to cover the enormous financing requirements of companies for the transformation towards climate neutrality in North Rhine-Westphalia.
This insight forms the basis of our Fin.Connect.NRW initiative, with which we want to leverage the potential of North Rhine-Westphalia as a financial center for future investments. The Fin.Connect.NRW platform consists of banks and savings banks, insurance companies, the stock exchange, private equity companies, NRW.BANK, academia, consulting firms and, last but not least, the real economy. This diversity is the particular strength of the initiative, from which it can develop a special impact for North Rhine-Westphalia. The common goal is to expand North Rhine-Westphalia's financial ecosystem and to take transformation financing a significant step forward through the cooperation of financial center players. After all, ideas, technologies and innovations for a climate-neutral future can only be rolled out on a broad scale by companies if successful financing is available.
A large proportion of companies' financing requirements are provided by their principal banks. At the same time, NRW.Bank also plays a central role as the state's development bank with its extensive range of support services. In addition to loan financing, equity can also represent a bottleneck factor. Fin.Connect.NRW is considering how such obstacles can be removed most effectively and how capital market instruments can be better utilized. The accuracy of fit also plays a major role. This is particularly the case when companies invest in technologies that have not yet reached market maturity. Here it is crucial that the risk is adequately shared between the house bank and the development bank. Another question that arises in this context is the extent to which it is possible to finance basic innovations that have yet to be developed and made marketable by companies. Here, too, it is important to find an adequate division of tasks between state start-up financing and private investment.
In addition to all these issues, Fin.Connect.NRW is working to raise awareness of the topic of transformation consulting among companies, especially SMEs. This is because small and medium-sized enterprises in particular, which are global market leaders in their respective niches, benefit from information and consulting services.
With the focus on all of these questions, it is now time to deepen the Fin.Connect.NRW financial center initiative in order to further strengthen transformation financing in North Rhine-Westphalia. Together with our cooperation partners, we will expand the financial ecosystem and bring together the overarching players in order to find answers, identify solutions and position North Rhine-Westphalia for the future - climate-neutral and sustainable, innovative and competitive.
PDF-Download: Guest article by Minister Neubaur Börsen-Zeitung
Further guest contributions:
- Learning from crises: using tried-and-tested structures for the transformation process in NRW
- Applying the EU taxonomy between theory and practice
- Transformation financing for digitalization and sustainability: 2023 is the year of investment!
- Steering back from the crisis year into transformation mode!
