Beyond business-as-usual: Sustainable Investment game changers

Sustainable investing is on the rise globally, but it's clear that investment levels are nowhere near where they need to be for global climate and sustainability goals to be met.

Business-as-usual is not an option, so Climate Action asked a range of sustainable finance experts: What game changing ideas can take sustainable investing to the next level?

Willem Schramade, Fund Manager NN (L) Global Equity Impact Opportunities, NN Investment Partners:  

Anything that makes total value - as opposed to merely financial value - more visible can be game changing. The two main catalysts I see for that are:

1) A serious carbon price. I think we’ll get it in some form in the next five years or so. This is no longer a fringe topic as even central banks, parliaments and mainstream media now talk about it. It’s a clear game changer as it changes incentives throughout the entire economy.

2) The rise of alternative sustainability data providers driven by artificial intelligence (AI). Whereas mainstream sustainability data is based - and hence dependent - on company reporting, AI approaches can assess sustainability performance based on external sources like media reports, academic research and other parts of a company’s supply chain. This can dramatically improve the relevance of sustainability ratings and address fundamental questions about companies’ societal value add and their preparedness for the transition to a more sustainable society.

Patrick Uelfeti, Deputy CIO, PUBLICA:  

A change in perception by the public and politicians in favour of a broad-based deployment of carbon pricing mechanisms to promote competition among corporates and governments would be game changer for sustainable investment. 

Willemijn Verdegaal, Co-head Climate & ESG Solutions, Ortec Finance:

We have really noticed a current knowledge and awareness ‘gap’ among investors: no one is currently analyzing climate change from a systemic risk perspective. Ortec Finance’s research over the past year has shown that it is key for investors to take the systemic nature of climate change-related risks and opportunities into account. Climate change will not only affect companies at an individual level, but will also fundamentally impact how the economy performs as a whole.

Currently, most investors seem to focus on managing climate risk by engaging with, and potentially divesting from individual companies and other holdings. ‘Stock-picking’ is likely to be insufficient to manage the broader, knock-on effects on the economy since GDP, interest rate and inflation are seriously impacted by climate change. If we picture investors as mountain climbers then they are currently focusing on choosing the right handholds (companies) to climb up the mountain face, but they are forgetting to check if the actual route (the assumptions around macro-economic development) they have planned out is the correct one. No climber, no matter how strong the individual handholds, is going to reach the top if they are climbing on the wrong route all together!

Mario Nava, Director, DG FISMA, European Commission:

I would say creating a common language, a common understanding of what is green, or more precisely, of what makes a substantial contribution to environmental sustainability.

This is exactly what the European Commission proposed last May: to establish a legal framework in the European Union that facilitates investments in environmentally sustainable activities – what we call an EU taxonomy. Our legislative proposal is currently underpinned by rather complex technical work. This will need time and precision to develop. But once in place, an EU taxonomy would provide us with a common understanding and be the reference point for green investments as well as for green financial products.

Gregor Paterson-Jones, Special Adviser and Independent Consultant:

Major upcoming elections could potentially be game-changing for sustainable finance, possibly the US election and Indian elections. The experience curve in the battery storage industry is also potentially game-changing. 

 

Willem, Patrick, Willemijn, Gregor and Mario are all speaking at the Sustainable Investment Forum Europe on 12 March in Paris. Throughout the day, delegates and speakers will identify and discuss what game changers are needed to spur sustainable finance. Do you have a sustainable investment game changer? Post it on social media and tag #SINVEU