How can global finance…help the globe?

The Stamford, CT trading floor of the Swiss bank UBS. UBS received recognition in the 2015 "Sustainability Yearbook."

The Stam­ford, CT trad­ing floor of the Swiss bank UBS. UBS received recog­ni­tion in the 2015 “Sus­tain­abil­i­ty Year­book.”

Much of the world’s econ­o­my moves dai­ly through thou­sands of com­put­er screens scat­tered across foot­ball-field size trad­ing floors in New York, Lon­don, and Hong Kong. Can this immense net­work of mon­ey and infor­ma­tion help lead the changeover to a sus­tain­able plan­et? A few recent events show new focus from the busi­ness world towards the cen­tral chal­lenges of cli­mate and the future of life on Earth. 

Last week, Apple closed a giant deal that will provide solar pow­er for its stores and offices in Cal­i­for­nia, and is hint­ing at an Apple elec­tric car project. Richard Bran­son, CEO of Vir­gin, led a group of busi­ness lead­ers to ral­ly for zero emis­sions by 2050. “Tak­ing bold action on cli­mate change sim­ply makes good busi­ness sense,” accord­ing to Bran­son. A new glob­al cal­cu­la­tor was launched, that allows users to take con­trol of ener­gy and economies through 2050 to show the effects of our choic­es today. (Shell and Cam­bridge Uni­ver­si­ty have pub­lished their approach­es on the sys­tem, and now it can be your turn.)

And at the World Eco­nom­ic Forum at Davos last mon­th, Nicholas Stern, British econ­o­mist and author of a bench­mark report, told his audi­ence at Davos that he was wrong in 2006: the risks from unchecked cli­mate change, if we do noth­ing, are greater than he expect­ed. 

Jamie Car­pen­ter reports from a recent dis­cus­sion host­ed by The Earth Insti­tute Columbia Uni­ver­si­ty, titled “The Field of Sus­tain­able Finance: Foun­da­tions and Future Growth.” The sub­ject could not be more time­ly and the event was packed.

Why didn’t any­one tell me that mon­ey is what makes the world go ‘round?” said pan­elist Son­al Mahi­da of Prin­ci­ples for Respon­si­ble Invest­ment as she described her tran­si­tion to the finan­cial sec­tor.

“Sus­tain­abil­i­ty as a stand-alone issue will be gone in the next five years, it will be com­plete­ly main­stream.”
Sus­tain­able eco­nom­ics is one of the key top­ics in today’s envi­ron­men­tal pub­lic dis­course. Even with the mod­ern con­cept on triple bot­tom line, peo­ple-plan­et-prof­it, finance still receives par­tic­u­lar empha­sis. And the job mar­ket for those who under­stand how finance may help guide sus­tain­able deci­sions may be heat­ing up.

The Earth Insti­tute and Columbia University’s School of Con­tin­u­ing Edu­ca­tion took on this dis­cus­sion recent­ly by host­ing a talk, “Field of Sus­tain­able Finance: Foun­da­tions and Future Growth.” Five pan­elists of mixed back­grounds in pri­vate finance, gov­ern­ment, and NGO’s approached the talks with their own exper­tise and pre­dic­tions for the future. For one: peo­ple with expe­ri­ence with both Wall Street and Green­peace may be need­ed, as mar­kets rapid­ly begin to rec­og­nize plan­e­tary lim­its.

Satya­jit Bose, the asso­ciate direc­tor of Columbia’s Sus­tain­able Man­age­ment grad­u­ate degree pro­gram, intro­duced the evening’s event by describ­ing some of the sub­fields of sus­tain­able finance along with his hopes that “there will be no sus­tain­able man­age­ment in the future” – and that’s because, by neces­si­ty, all finance will be sus­tain­able, and so the term will become redun­dant. 

Sus­tain­abil­i­ty as a stand-alone issue will be gone in the next five years, it will be com­plete­ly main­stream,” agreed pan­elist Kev­in Park­er of Sus­tain­able Insight Cap­i­tal Man­age­ment. Michael Davis of Calvert Invest­ments echoed Bose’s sen­ti­ment and said “it’s absolute­ly inevitable” to have sus­tain­able finance be ful­ly imple­ment­ed in the near future. Davis con­tin­ued to say that mul­ti­ple objec­tives can be reached – eco­nom­ic, social, and envi­ron­men­tal – espe­cial­ly regard­ing what he called “rad­i­cal demo­graph­ic shifts in the econ­o­my,” attribut­ing fac­tors like the num­ber of wom­en in the work force increas­ing.

Some senior finan­cial man­agers may be resis­tant to change due to their per­son­al eco­nom­ic suc­cess in an old­er sys­tem that did not include envi­ron­men­tal met­rics, accord­ing to Mahi­da, but younger man­agers com­ing in implic­it­ly under­stand ESG –envi­ron­men­tal, social, and gov­er­nance- fac­tors. “We’re liv­ing in a dif­fer­ent world than we did 15 years ago,” said Mahi­da.

(See City Atlas inter­view with Bloomberg LP Direc­tor of Sus­tain­abil­i­ty, Cur­tis Ravenel, for his thoughts on how Bloomberg data works to include ESG met­rics in busi­ness ana­lyt­ics.)

 

A finance student uses a Bloomberg terminal, which can carry environmental metrics. (Univ of Leicester)

A finance stu­dent uses a Bloomberg ter­mi­nal, which can car­ry envi­ron­men­tal met­rics. (Uni­ver­si­ty of Leices­ter)

Opti­mal returns is a prime con­cern for investors, and devi­at­ing from that con­ver­sa­tion can be dif­fi­cult. Park­er spoke how there is still a per­cep­tion gap among main­stream investors, but it is slow­ly get­ting chipped away as envi­ron­men­tal and social fac­tors are now con­sid­ered to have an impact. “Issues that were treat­ed as moral issues are now being treat­ed as mate­ri­al issues” said Park­er, before sum­ming it up with an under­state­ment: “Ignor­ing envi­ron­men­tal risks is prob­a­bly a bad idea.”

We all buy in, but not every­one buys in,” said pan­elist Amy Spring­steel of Voya Finan­cial. Spring­steel said the cur­rent research on the mat­ter is good but not enough to con­vince every­one. More involve­ment from stake­hold­ers as well as a mul­ti-angled approach will be nec­es­sary to make the jump from rhetoric to imple­men­ta­tion. 

Davis, who had pre­vi­ous­ly worked in the U.S. Depart­ment of Labor, said “This is a place where the U.S. is not in the lead.” Spring­steel believes the NYSE will help push US traders who now have to meet EU reg­u­la­tions. Whether in terms of change com­ing from gov­ern­ment man­date or a social par­a­digm shift, Spring­steel remained hope­ful. When it comes to shift­ing the empha­sis of our finan­cial sys­tem in favor of the con­tin­ued health of our soci­ety and plan­et, Spring­steel said “Efforts of the few can real­ly move boul­ders.”

For more about the pan­el, see “Days of Green­wash­ing are Over” at the Earth Insti­tute blog State of the Plan­et.