I was invited to participate in the Sustainable Finance Leaders Dialogue in Paris on October 25th, organised by the BMW Foundation. It was part of a series of Responsible Leaders Dialogues on Sustainability as an intellectual run-up to the international Munich Security Conference (18-20 February 2022). The Dialogue addressed the question of how to strengthen the power of green finance with a more efficient and better adapted policy framework to speed up the race to net zero.
The Responsible Leaders Dialogues offer a stage where sustainability champions from policy, business and civil society gather to exchange, to share insights into their own work and how it advances the Sustainable Development Goals, and to discuss how to push further the boundaries of responsible leadership.
I was invited to the Dialogue with other sustainable finance leaders to share insights from Economist Impact´s work on green finance and the World Ocean Initiative’s work on blue finance. The meeting took place at the Collège des Bernardins in Paris during the Paris Climate Finance Week. The working session convened around 20 sustainable finance leaders (including CEOs, CIOs, CSOs, activist investors, OECD directors).
The theme of the overall meeting was “Leveraging Real Impact Beyond ESG Investing through Investor Engagement in Europe” and I participated in the working session on “Tools and enablers to boost Sustainable Investor Engagement in Europe”.
Key insights
• Investment stewardship is a key tool by asset managers to check how investment is aligned with climate goals
• Divestment is not a good strategy, it is better to work with companies (use data to drive change)
• ESG investing should not be separate of what’s material; we need to look at what’s good for the planet that also creates economic value
• Impact measurement is increasingly important: SASB and International Integrated Reporting Council (IIRC) have merged to become the Value Reporting Foundation; Impact Multiple of Money process: screening, check goals, put value on impact; and Impact Management Project (IMP)
• Gaps in measuring social impact: not enough insights through ESG rating systems or frameworks of organisations such as the Sustainability Accounting Standards Board or the Task Force on Climate-related Financial Disclosures
• SDGs as a framework: translatable for an investment manager
• But: commitments need to be translated into concrete steps
• Engaging storytelling required to translate ESG into real-world impacts
• Need for intentionality: intentional desire for investment to have positive social and environmental outcomes
• Need to overcome risk aversion / bankability challenges of climate investments (e.g. through blended finance, first-loss funding)
• Stewardship process: clear common guidelines and best practices are required, taking account of (1) changes in market standards; (2) evolving governance practices; and (3) insights gained from engagement over the prior year
• Economist Impact survey highlights need for ESG expertise at board level: regulation should require asset owners to have at least one trustee/board director with ESG expertise
• There needs to be more transparency of asset managers’ voting records
• Index investing: investment stewardship activities are the mechanism available to asset managers to integrate and advance material sustainability-related insights
• Private equity and venture capital: more direct influence