01 July 2024

Industrial sector: Sustainability, the main driver of change in business models

Beatriz Roa, Global Sector Head of Industrials & Transportation

The industrial sector is of vital importance on a global level. In Spain it represents 15.31% of GDP, contributes 13.6% to national employment and is a key driver in innovation and the development of new technologies. However, it faces a major challenge: Achieving climate neutrality by 2050.

The global industrial sector has been affected in recent years by multiple challenges: geopolitical events, market volatility, natural disasters... Far from overcoming these difficulties, companies continue to face other added challenges such as operating in a sector which is key to achieve the commitment to net zero emissions by 2050. The latter is a major goal, where sustainability sets the tone for any strategy through the transformation of production models, such as in the automotive sector or for the high energy consumption required by the steel and aluminum output processes.

In order to meet the requirements of regulators, investors and public players to become more attractive in the search for capital market financing, many companies in this sector demand specialized knowledge, significant investment  in innovation (enables them to accelerate their process of sustainable transition), and a deep understanding of their strategic plans and business models. Faced with these requirements, companies need close and expert advice, to support them in the definition of specific finance solutions, in the implementation of the sustainable transition process, in the establishment of specific indicators to measure these sustainability efforts, and in understanding and providing the appropriate frameworks that foster technological innovation in order to move forward.

BBVA CIB's unique approach lies in the fact that the firm plays a key role in understanding industrial clients, in addition to leveraging its global footprint to identify dynamics in other markets and transfer that knowledge across geographies, translating these sustainability components into specific financial solutions. It is precisely at this point that BBVA's sector specialization model responds to the needs and challenges presented by this sector. When we talk about industrials, we mean the sector that encompasses all subsectors and companies primarily linked to aviation, shipping, automotive and their entire associated value chain, the production of steel and aluminum, as well capital goods, which are all component manufacturers that support many other sectors. A diverse sector, due to the breadth of each subsector. 

Beatriz Roa, Global Sector Head of Industrials at BBVA CIB, explains: "At BBVA CIB, we are able to provide innovative solutions that help clients implement their decarbonization strategies. The spectrum of clients in the sector is quite wide with different degrees of maturity for the transition, so it is necessary to adapt the product offerings to the client's specific needs. This also means developing technological knowledge, to understand and be able to finance certain projects. This is a key element that we are working on precisely through the investments into the equity funds made by the Bank. They allow us to get closer to the intended innovation, while also allowing us to generate points of contact between clients and startups in certain verticals".

How industrial companies approach sustainability

The industrial sector is one of the sectors facing the most challenges with regards to sustainability, as companies are typically carbon-intensive. In addition, technology and regulation play an important role in defining the strategic plans to reduce these emissions. In those geographies where there is regulatory support, progress is much greater than where there is not, and this makes the plans and their execution much more tangible. In addition, approximately 55% of the technologies to supportdecarbonization are already economically profitable, but there is still 45% that, although viable, are not economically profitable for different reasons (lack of scale, high production costs, speed of implementation, etc.).

BBVA CIB, in its advisory role, supports the investments of these types of companies in their efforts to become more sustainable, and goes a step further in understanding the regulatory framework and the technological capabilities necessary to support these changes. In the words of Beatriz Roa: "The main news and our differential approach as advisors has to do with how we understand these stakeholders, how we support them in obtaining financing and, above all, how we understand this regulatory component, which is playing a very important role in defining the future strategies of these companies. We leverage our advisory ecosystem to connect companies with each other and help them navigate that technological uncertainty."

Finally, Roa states that for the industrial sector, sustainability is deeply rooted and is at the heart of the strategy. "We are very focused on the decarbonization component and the associated financing opportunities because clients in the sector have to implement very relevant CAPEX plans where bank funding plays a key role."

In an increasingly demanding business environment focused on long-term sustainable growth, BBVA CIB adopts a highly specialized sectoral approach, and thus becomes an essential strategic partner in the sustainable transition of its wholesale clients, especially those who are in an early phase of adopting more sustainable practices in their business models.