Curmi & Partners

Enabling Socially Beneficial Projects through Capital Markets

By Beppe Jaccarini

Capital markets serve as crucial enablers for channelling funds towards projects that yield substantial benefits for society, and our financial industry plays a pivotal role in providing sustainable companies with access to much needed capital. In this article, we will explore how the capital markets can facilitate this shift towards a greener economy in Malta, and their importance as sources for raising funds that drive societal progress.

The capital markets have the potential to play a transformative role in Malta's journey towards a green economy. As highlighted by Environment Minister Miriam Dalli, there is a significant opportunity to redirect the idle €24 billion currently sitting in Maltese bank deposits towards green investments. Dalli emphasized the crucial role of the financial industry in supporting Maltese investors to seize this capital opportunity and channel it into greener business ventures.

As catalysts for economic growth, capital markets unlock opportunities for companies to secure the financial resources necessary for expansion and innovation. Sustainable enterprises, with their steadfast commitment to environmental, social, and governance (“ESG”) considerations, require substantial funding to materialize projects that positively impact society. Capital markets offer diverse mechanisms such as initial public offerings and bonds, empowering these companies to raise the required capital and foster economic advancement.

A heightened awareness within financial markets regarding sustainability and responsible investing has led to the emergence of strategies like ESG investing. These strategies integrate non-financial factors into investment decisions, directing capital towards companies that prioritize sustainable practices and yield positive societal outcomes. Capital markets play a pivotal role in attracting investments towards such ventures, creating a virtuous cycle where investors actively support businesses aligned with their values, amplifying the impact of sustainable practices.

Capital markets can tap into this demand by offering green bonds, which are still yet to gain real popularity as a means of financing renewable energy infrastructure, energy-efficient buildings, and other sustainable initiatives. On the local MSE Green Market, qualifying issuers would need to invest in projects that contribute towards renewable energy, energy efficiency, clean transportation, climate change adaptation and green buildings. A green bond issuer must ensure that the bonds satisfy the four core components of the Green Bond Principles (“GBP”) established by the International Capital Market Association.

Moreover, by redirecting investor funds towards local equity and bond investments, particularly those with an inclination to contribute positively to Malta’s sustainability outlook, we can unlock significant funding for transformative projects, creating a ripple effect of positive impact on the environment and society. The benefits to our social wellbeing will be substantial, ranging from improved air quality and enhanced public health to reduced energy costs for households and businesses.

Beneath all this lies the remarkable potential to create significant job opportunities and stimulate economic growth in Malta. In fact, a report by the International Renewable Energy Agency (IRENA) reveals that for every $1 million invested in renewable energy, about 7.5 jobs are created, surpassing the job creation potential of traditional energy sectors.

The redirection of idle bank deposits towards green investments aligns with Malta's commitment to the United Nations' Sustainable Development Goals (“SDG”). While the country has made significant progress in achieving its SDG targets, challenges related to renewable energy, climate action, and sustainable infrastructure evidently remain.

In conclusion, the capital markets have the potential to be a driving force in propelling Malta towards a greener economy. With a substantial €24 billion currently lying dormant in bank deposits, there is a remarkable opportunity to redirect this capital towards projects that will propel us towards a more sustainable future. The time has come for Malta to harness the potential of the capital markets and pave the way towards a brighter and sustainable future.

The information presented in this commentary is solely provided for informational purposes and is not to be interpreted as investment advice, or to be used or considered as an offer or a solicitation to sell/buy or subscribe for any financial instruments, nor to constitute any advice or recommendation with respect to such financial instruments. Curmi & Partners Ltd. is a member of the Malta Stock Exchange and is licensed by the MFSA to conduct investment services business.