Javier Rodríguez Soler: “BBVA’s sectoral specialization is key to successfully managing decarbonization and supporting our clients”

Javier has been tasked with defining BBVA’s sustainability strategy and identifying and managing business opportunities arising from the energy transition. In the investment banking business, his main mission is to drive transformation rooted in sustainability and focusing on growth in the world’s largest wholesale markets. His business objective is also to accelerate the growth of cleantech technologies on an industrial scale through financing and consulting, because “it is a key ecosystem for the decarbonization of the economy.”

Question: How does BBVA view sustainability and what is the focus of its strategy?

Answer: ‘Colossal’ would be a good adjective to define the investment needed to decarbonize the economy; around $275 trillion needs to be invested if we are to achieve net zero carbon emissions by 2050. Moreover, the urgent need for climate action is forcing us to act sooner rather than later.

In this global context, sustainability is one of our strategic priorities as we look to address three major challenges: combating climate change; preserving and regenerating natural capital; and driving the growth of the communities in which we operate.

I strongly believe that sustainability is a great business opportunity. We have been seeing it for years at BBVA and now we can see that it is even bigger and faster than we thought. In 2023, BBVA channeled more than €70 billion in sustainable business, double the amount invested two years ago, and more than five times the amount invested five years ago. We have increased our sustainable business targets for the 2018–2025 period on two occasions: from €100 billion to €200 billion following an initial review and then to €300 billion following a second review. This mobilization includes not only the climate action we often talk about, but also support for entrepreneurs and fledgling companies, financial inclusion for the most disadvantaged groups, and the financing of social, educational, health and other kinds of infrastructure.

To undertake the major decarbonization projects that the world now needs, we must have large financial institutions capable of competing with the big global players. Large international banks are needed to finance this transition and to accompany and support all sectors on their respective decarbonization journeys.

Question: You mention the need for large banks in order to compete. By acquiring Banco Sabadell, BBVA is aiming to gain in scale.  As head of sustainability and CIB, what do you think this deal will entail? What are the benefits?

A: The deal we have announced ultimately seeks the merger of two large banks: BBVA and Banco Sabadell, so that together they can achieve more than what they could do on their own. This definitely applies to sustainability and to our business dealings with large companies, which synergizes very nicely with Banco Sabadell’s more SME-focused business.

Sustainability and the wholesale business stand to benefit directly from this increased scale. Thanks to this larger scale, we will be able to lend more, invest more in sustainable business, and provide better products to our customers, thanks to a greater investment in technology and human resources.

Much of the growth we are seeing in sustainable business is due to small and medium-sized companies. This can be seen from the fact that sustainable financing in this segment was the fastest grower at BBVA, doubling in 2023 compared to the previous year.

We want to continue supporting and helping businesses in their decarbonization. We add value to this segment and help SMEs from a privileged position with sophisticated products, powerful investments in technology and an extensive international presence (BBVA is present in more than 25 countries), which supports these businesses as they expand into new markets.

Q: How does BBVA help make its customers increasingly sustainable? How is it coming along in the decarbonization of its portfolio?

A: We play a key role in the decarbonization of the economy and all its sectors. 80 percent of our customers are already making progress toward their sustainability plans. They are making progress with the necessary investments and they know we are there for them in their journey; and not only through financing, but also advice, and across all sectors, especially the emission-intensive ones. We are growing our business in key sectors while providing incentives for them to reduce their emissions.

We are part of the Net Zero Banking Alliance (NZBA), which means setting and publishing a series of interim decarbonization targets for 2030 in the most emissions-intensive sectors, as we move ever closer toward the goal of achieving climate neutrality by 2050. We already have intermediate targets for ten sectors: oil and gas; power generation; automotive; steel; cement; coal; aviation; shipping; aluminum; and real estate, the latter in Spain.

In March we published the progress we have made, revealing key improvements in terms of decarbonization of the financing portfolio, especially in the power generation and oil and gas sectors¹ (-24 percent).

We also have sector-specific plans to guide and accompany our clients. These plans include risk management considerations², assessing our clients’ transition plans with proactive advice, and unlocking business opportunities to move closer to the targets that have been set.

¹BBVA achieved a 24.4 percent reduction in emissions financed in the power generation sector over the 2020–2023 period, along with a 24.3 percent reduction in the oil and gas sector (upstream) during the 2021–2023 period.

²Since 2022, the General Risk Management and Control Model explicitly addresses sustainability as a key part of the Group’s strategy.

Q: What role does sustainability play in the wholesale banking business?

A: They are two completely intertwined worlds, in which one cannot be properly understood without the other. Sustainability will be the cornerstone of the global wholesale banking value proposition. At BBVA CIB we are generating business through sustainability and helping our clients to set and manage their decarbonization targets. We achieve this through an advisory model focused on production models and in which industry experts emerge as a key differentiating factor to successfully manage decarbonization and support our clients, given that each industry has its own set of challenges to overcome and may be slower or faster than others.

We also have plans to strengthen our long-term competitive position in existing businesses, along with plans to develop new businesses. Examples here include the reverse factoring business linked to sustainability, carbon markets, or new clean technologies, aka ‘cleantech’, which we leaning strongly toward.

Our investment in top-tier capital climate funds is critical to our success in this journey and we have already invested more than €100 million in cleantech projects through six fund managers who in turn have invested in over 160 companies. Ultimately, this will allow us to gain knowledge, be part of a growth ecosystem, generate new banking relationships and finance innovation in decarbonization.

Q: You’ve talked about strengthening BBVA’s position in existing businesses and also developing new businesses. Where do you now see opportunities?

A: Sustainability is all about innovation. In that sense, there is no doubt that technology will be key to decarbonizing the economy. That’s why we’re doubling down on our commitment to financing and investing in clean technologies globally. Our goal is to multiply the innovation and growth of cleantech and that’s why we created a specific unit some time ago; a global unit with specialized teams based in New York, London and Madrid, offering financing and advisory services. We will look to combine innovation and growth through cleantech.

Our cleantech support initiative focuses on four key technologies or vectors: hydrogen and biofuels; energy storage; mobility; and carbon capture technologies.

Spain and Spanish companies have the opportunity to lead cleantech investment in Europe, but to succeed, they must be given a more favorable environment in which to invest, innovate and become more competitive, as well as the support of large financial institutions that can compete in the European and international arenas. It's not just about scaling up and deploying those technologies, which already make economic sense and are competitive and therefore ready for mass deployment. We also need to invest in innovation in those technologies that are in the early stages and need to level up to an economically viable phase where they can become viable in hard-to-abate sectors.

Q: Beyond sustainability, which is clearly a central pillar of BBVA CIB’s value proposition, what further plans do you have to continue growing in this business?

A: At CIB we are working to turn sustainability into a genuine competitive edge, though we also have other complementary plans.

First of all, we want to build our presence in key wholesale markets where BBVA does not have a branch network for retail customers. We’re talking about increasing the current weight of developed markets and countries with strong currencies, such as the US and the UK, though also ramping up our business in regions or countries such as Asia, Brazil and Chile. And this is also closely related to sustainability. Brazil, for example, where we are strengthening our business, is a leading country when it comes to sustainability given its wealth of natural resources and its immense biodiversity. It is also the country with the highest CO2 absorption capacity in the world. So preserving its natural capital should be a priority for the country’s main companies and BBVA can offer services and advice that generate huge high added value in terms of sustainability.

Brazil and Chile also happen to be key countries for strengthening our cross-border service, which we already offer to large corporate and institutional clients in Latin America and which is another priority of BBVA due to the growth opportunities it presents. Many of our wholesale clients have specific needs arising from their internationalization, which BBVA looks to cover through local and global customer and product specialists working as a single team. In 2023, the cross-border business accounted for more than 35 percent of BBVA CIB’s total revenues and grew by more than 30 percent during the year. These figures showcase our ability to harness BBVA’s geographic diversification and global outreach, and to capture the business of corporate and institutional clients outside their home countries.

The third of our priorities is to strengthen our relationship with institutional clients: banks, insurance companies, asset managers, public sector and financial sponsors. We are expanding our product range globally to cater to the specific needs of this customer segment and bringing in local and global bankers with the aim of being the go-to bank for institutions across BBVA’s main geographies, and in international markets with the products that our clients require.

Markets such as Brazil, Mexico and Chile are experiencing increased demand for complex financial services, including mergers and acquisitions (M&A) and financing for infrastructure and energy projects.

In the United States and Europe, cleantech investments are growing, which presents further opportunities for us to advise on M&A transactions, IPOs and equity financings.

Q: You live between the US and Europe, so you must be familiar with the incentive programs on both sides of the Atlantic (IRA in the US and Net Zero Industry Act in the EU). What differences do you find between the two models? What would you say is the key feature of the European model?

A: Governments have a key role to play in creating an enabling environment for investment. This is what they have done in the United States with the IRA and this is what we should do in Europe with the recently approved Net-Zero Industry Act (NZIA), which Spain should now implement with a new and ambitious industrial policy. In my opinion, it should have three essential features, which have already been clearly addressed by the US regulations.

First, the necessary certainty for companies and institutions to invest in sustainability, which will also make them more competitive. Second, the need to ensure relevant and adequate incentive schemes. And last but not least, this new industrial policy must allow for more agile, fast-track permitting with less red tape, following the example set by certain northern European countries, such as the Netherlands or Denmark, which have embraced a “one-stop shop” model for key investment projects.

At any rate, the recently approved European NZIA is a step in the right direction and should help the continent compete at the highest level, position itself in the global race for decarbonization technologies, and ensure that it makes a valuable contribution to the fight against climate change.