Keynote address by Governor Monticelli at 55th ICMA Annual General Meeting & Conference

As prepared for delivery

“Promoting social inclusion from both sides of the balance sheet”

Good afternoon ladies and gentlemen,

I am honoured and delighted to be here together with such distinguished speakers and before a really impressive audience. 

I would like to thank ICMA’s French Regional Committee, the Chair of the Board, Ms. Mandy DeFilippo, and Chief Executive, Mr. Bryan Pascoe, for inviting me to address the annual conference organised this year in Paris, where the Council of Europe Development Bank, the CEB, is headquartered. 

Following Brexit, many banks have moved crucial parts of their business to Paris, in particular in the areas of government bond trading and SSA coverage. This has injected new vibrance to Paris as a financial centre – indeed, historically, this is the very reason why the CEB is located in Paris and not in Strasbourg.

The CEB is the only multilateral development bank in the world tasked with an exclusively social mandate. For 67 years, it has been financing projects with a high social impact across a widening membership – now counting 42 states, spanning across Europe, from Iceland to Türkiye, from Portugal to Georgia.

In recent years, the relevance of the CEB’s social mission has been reaffirmed over and over again. The climate emergency, the COVID pandemic, and the Russian aggression against Ukraine are among the latest challenges which the CEB rapidly and effectively responded to with its support to the social sector.

With the succession of multiple emergencies and no respite, it is no wonder that “Permacrisis” was selected as the word of the year in 2022, as our societies seem to enter a “new normal”.

While different in nature, these crises have one salient feature in common: they hurt vulnerable people the most. They widen inequalities and corrode the fabric that holds our societies together. They require very costly government responses, burdening future generations with debt.

What’s more, when we ponder on their ultimate determinants, we can see shared roots: a crisis of values, particularly in finance. A renewed and growing tension is emerging between the values of the market and the values of society.

My reflections today revolve around this issue, focusing in particular on what financial institutions can do to ease this tension using both, and I stress both, sides of their balance sheet.

Let me start, as is natural, with the CEB and its financial support to social investment projects. Our loans and assistance – which we provide with remarkable agility, especially in times of crisis –make investments happen to protect the most vulnerable. Indeed, our projects help make European societies more prosperous and cohesive, leaving no one behind. 

Last year, most notably, the CEB devoted one third of its total lending activity, €1.3 billion, to the benefit of people fleeing the war in Ukraine and of their host communities. Moreover, the CEB is just about to start supporting Ukraine directly, following its request for membership, which the CEB’s shareholders quickly accepted at no cost for the country – an important sign of solidarity.

Beyond Ukraine, this year, the CEB has already made significant resources available for relief and reconstruction efforts following the devastating earthquakes that hit Türkiye in February.

Against this backdrop, the CEB has recently launched a new Strategic Framework that will guide its activities for the next five years. This strategy is fully endorsed by the CEB’s shareholders and underpinned by a capital increase, the first one with an injection of fresh resources in the history of the CEB. This stands as a resounding vote of confidence by the membership in the special role that the CEB plays. 

Remaining on the asset side, the CEB upholds social values in its financial investments too, by supporting the ESG activities of other parties. We have expanded up our investment in sustainable bonds so that today it amounts to roughly 20% of the total.

Moving to our liabilities, we also pursue social values with determination on that side of the balance sheet. Last year, more than one third of our funding programme was financed through Social Inclusion Bonds, issued in both euros and dollars.

This brings me back to the issue at the core of my intervention today: financial operators – the CEB, you, all of us – have an essential role to play in aligning the values of the market with those of our society, and this is crucial to secure our collective future.

The received view pictures the role of capital markets merely as the instrument to ensure the efficient allocation of savings, with investors making their choices based only on risk-return trade-offs. 

Yet, we all witness an increasing demand for investments which, while of course mindful of return considerations, focus on ESG issues and public goods, such as climate change or social development. This demonstrates that financial markets can extend their traditional function and help solve global challenges, allocating resources to this effect, “turning values into value”, as Mark Carney would put it.

Indeed, such an approach to capital allocation is critical to driving the change we need to deliver the social safety net and shared prosperity that hold our communities together.

The CEB’s pioneering Social Inclusion Bonds are a fitting example. In 2016, when sustainable bonds were in practice a synonym for just green bonds, we started building up a market in social bonds together with ICMA, which defined appropriate guidelines, and with our lead managers, who believed in this market and who are here eminently represented.

Since then, the market has thrived, and the CEB has obtained many achievements related to it: first institution to issue a COVID bond, first to issue a Ukraine refugee bond, first to complete a full 7-year curve – just to name a few.

The Bank has been equally committed to enhance the transparency and integrity of the social bond market, leading by example in the thoroughness of the reporting as well as updating its approach in a way that is driving the evolution of this market.

These efforts have been particularly rewarding. In 2023, the CEB was recognised as “Best ESG Issuer” and received the award for the “Social bond of the year”. 

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Let me conclude. 

Our societies are now confronted with daunting global and local challenges, with the future of next generations at stake. Like me, all of you appreciate the importance of the contribution that financial markets can make to address them. 

As financial market participants, then, we all have a responsibility to be mindful of this when making decisions regarding not only the asset or the liability side of our institutions’ balance sheet – but both sides.

Fulfilling this responsibility proactively stands as the only way capital markets can sustain the values at the heart of our society and ensure their own legitimacy in the eyes of the public at large.

Thank you very much for your attention.