Holistic approach to the energy transition

The ongoing low-carbon transition comes with its challenges and opportunities, which differ sector by sector, and country by country. However, in addition to the environmental perspective, also the social dimension of this global transformation must be considered. Roberta Marracino, Head of Group ESG Strategy and Impact Banking at UniCredit, discusses the importance of taking a holistic approach to the energy shift to ensure a just transition for all.

What are the challenges and opportunities for banks in this transition?

Our number one priority is to support our clients and communities on this journey. It is a daily commitment, fully integrated in our offer of ESG products and advisory. The challenges are many and they differ from client to client. The individuals and companies we work with have different starting points to their energy transition journeys as well as resources they can dedicate to the effort. Our job is to support them with information, tools, education, and solutions that can help transform their business in line with the global climate pathway.

In many sectors, not just energy, but also steel, cement and others, innovation will be key to achieving decarbonisation. According to the International Energy Agency’s Sustainable Development Scenario, the electrification of transport, industry and buildings combined with the deployment of renewables in power generation accounts for around 40 per cent of the cumulative reduction in emissions by 2070. Meanwhile the shift towards alternative fuels, bioenergy, and hydrogen accounts for around 20 per cent, and the deployment of carbon capture utilisation and storage systems for almost 15 per cent.

Innovation is needed to bring new technologies to the market and improve emerging ones so that the necessary decarbonisation strategies can be rolled out. This is also where the business opportunities lie.

According to industry data, climate technology is attracting significant venture capital funding, over USD 30 billion in the first nine months of this year. Banks cannot afford to stay behind and miss this opportunity. Therefore, we must continuously scout the market to identify and support clean energy and other relevant low-carbon innovations, which can help accelerate the transition for both, our clients and our communities.

How do you concretely help your clients and communities in this respect?

Supporting our clients, communities, and the real economy with ESG advice and a tailored offer is extremely important, particularly in the current recovery phase. It is also true that there is no one size fits all solution and banks like ours need to offer sector specific advice and products to all our different client segments leveraging on our ESG competence teams.

As an example, in Germany, UniCredit is the only bank with an ESG advisory tool, called the Sustainability Industry Heatmap, for small and mid-cap clients aimed at increasing clients’ ESG awareness, identifying action areas, and offering a systematic approach to sustainable business opportunities

Banks have an important social function, which goes beyond lending. We must support the entrepreneurs, the young, the more vulnerable to help our communities grow. Supporting SMEs, for example, is a key part of this and will help us achieve not just a more sustainable, but also a more inclusive and equitable society in the long-term.

SMEs are increasingly asking for a different advisory approach from banks. They want to learn and understand how to change their business model, not just receive financing for the transition. This is a great business opportunity, and our credibility depends on our ESG commitment and capability to adjust our own business model accordingly.

Our Social Impact Banking programme, which is dedicated to achieving a more equitable society everywhere we operate, is another example of what we are doing as a bank and a social actor. In addition to microfinance and impact financing, the programme provides entrepreneurs and companies dedicated to social impact with training and tools to achieve their ambitions. Education, awareness, and advice are very important in this transition and recovery period, and this is why we must work together in open dialogue to achieve our common goals on climate and social equity.

What does a just transition look like?

What we mean when we talk about a just transition is taking a holistic approach to all aspects of ESG that must be considered when we transform industries. In particular those that are harder to abate like steel or cement. We must remember that these sectors still employ a huge number of people worldwide, which makes supporting their transition extremely important to mitigate social risk and truly make this a just transition for all.

This requires working together cross-industries to define common standards of action and a specific framework for the transition of the harder to abate sectors. Steel is one such example where UniCredit is part of the Steel Climate-Aligned Finance Working Group that aims to drive necessary innovation to meet the sector’s target emission levels in a viable and responsible way. Furthermore, we are also supporting a dedicated project in Germany aimed at accelerating the decarbonisation of steel production thanks to innovative technology.

How are you supporting innovation and technology as a driver of the energy transition?

Our role is to spot the most promising ideas and allocate financing as well as provide support through know-how and networking, to help relevant businesses grow.

One way that UniCredit is doing this is through specific business engagement initiatives dedicated to innovation. For example, in Italy we have a platform called UniCredit Start Lab that gives innovative start-ups the opportunity to present their projects to sector specialists that select the best ideas to be granted support and financing.

Last summer our Clean Tech Commission awarded several innovative ideas. The first prize went to GetPlus and their modular electric vehicle with the aim to optimise infrastructural capacity and cut costs as well as traffic. Other companies that were rewarded include Green Independence that aims to democratise access to renewable energy, Anemotech that has developed a printable fabric, which passively absorbs micro-air-pollutants, and Wesii, focused on aerial thermography inspection and analysis for the solar industry.

In addition to start-ups and emerging companies, we are also already working with different clients that operate in the clean technology sector across our markets. This sector is growing rapidly, and we expect the EU Recovery Fund to provide a further catalyst for its growth. As an example, in Italy, of the EUR 235 billion in the national recovery plan (NRRP), close to 70 billion are intended for green energy, 25 billion of which for renewables, including over 3 billion for hydrogen, and 30 billion for sustainable mobility. Furthermore, the Italian government expects the NRRP to have a significant impact on economic and productivity growth raising GDP in 2026 by 3.6 percentage points.

The banking system has a huge responsibility in this context to continue being an important contributor to economic recovery, guiding financing in the right direction. And we must identify the right business opportunities to do so, including innovative technologies that can transform a variety of sectors, not just energy, but also steel, cement, and the automotive industry, always in a holistic way.