SUSTAINABLE TRANSFORMATION | Spanish family businesses must invest 140,000 million until 2030 to be sustainable

Extreme temperatures and weather events are already a reality, and Spain is one of the most vulnerable economies to climate change within the European Union. Your transition towards a sustainable system depends on the Family businesses, which constitute 89% of the country’s business landscape and 57.1% of the private sector’s GDP, but it will not come cheap. The bill to undertake the sustainable transformation of family firms will rise to approximately 140 billion euros until 2030, according to estimates by the consulting firm Valora. And, despite suffering the effects of climate change in their activity and in their accounts, only 36% of them have launched initiatives to combat it.

These are conclusions from the report ‘Family business and sustainable financing: it is time to step up’, prepared by researchers Daniel Domínguez, Fernando Liz and Renata Fernández, which highlight the lack of preparation of Spanish companies in the face of climate change. “Companies are among those that have taken the least measures to mitigate identified threats, ahead only of Irish and Hungarian companies within the EU,” the authors note. This statement contrasts with the awareness of the business community on this issue: Nearly 80% consider that climate change has an impact in terms of physical risk in its business, above the European average and countries such as Lithuania or Denmark, where the percentage is 50%.

The little preparation extends to the financial level. The climate risk resilience reviews carried out by the European Central Bank (ECB) in 2022 revealed that 60% of commercial banks in the Monetary Union still did not have a climate risk stress testing framework. Of them, only 20% take it into account as a variable when granting loans. Most financial institutions plan to incorporate physical and/or transition climate risk into their testing framework, but in the medium term.

ESG investing

If, according to data collected by the European Investment Bank, Spanish companies are among those that invest the least to reduce their greenhouse gas emissions, what is wrong? According to the Valora report, it is due to “the lack of resources and incentivesas well as the lack customer demand“. Another factor is the difficulty of access to the technologies necessary to undertake sustainable transformation. And the ability of a small company to adapt to these difficulties is not the same as that of a large firm. Even so, the authors of the report focuses on investment: most of it is allocated to protecting the company’s activity against climate change, not adapting to its effects.

One of the most important focuses of the items aimed at accelerating the sustainability of companies is energy. Spanish companies are in the top of the list of European countries that more proportion of your investments aims to improve your energy efficiency (fifteen%). According to the National Integrated Energy and Climate Plan (PNIEC) of 2023, national companies must invest around 250 billion euros until 2030, mainly in renewable energies and energy efficiency.

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However, once energy saving measures have been addressed, a gap opens up regarding other issues. Although Gartner estimates suggest that more than $3 trillion will be issued globally (30% of the total) in bonds linked to ESG initiatives, the truth is that 26% of the companies questioned by the CEOE admit not knowing What will be the exact investment in these issues, 34% affirm that these investments will not exceed 1% of their turnover and 8% indicate that they do not have any planned investment in ESG or sustainability aspects for this year. According to the Valora survey, 90% of Spanish family businesses They admit that they must increase your ESG investments in the current decade and banks are also beginning to integrate these factors into their credit risk models.

The greater investment flows and the consolidation of sustainability as a strategic factor to boost the profitability of companies leads us to expect that there will be big trends in this area. Specifically, the authors of the report point to an incremental development of products aligned with ESG criteria, and in the financial field, the flourishing of products with social criteria, with circularity and natural capital. Furthermore, it will be more necessary than ever to track the results of your investments, which is why Valora expects a boom in ESG data intelligence, such as reporting or value creation, as well as the integration of financial and non-financial metrics to joint management. Finally, there will be greater structuring of consortia and clusters around immature ESG technologies that will help reduce commercial risk for investors.

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