How can global finance…help the globe?

Can global finance rapidly shift gears to trigger a new wave of sustainable investing?

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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.

[pullquote align=”right”]“Sustainability as a stand-alone issue will be gone in the next five years, it will be completely mainstream.”[/pullquote]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.