Building the “new normal” of modern finance to achieve net-zero
In a post-COVID world, what will the priorities be around redesigning and redeploying finance to stimulate the economy? How can business and political leaders combine efforts to tackle both the climate and economic challenges that lie ahead? What role does standardization need to play to accelerate the integration of ESG into investment decision making?
These are a few of the burning questions tackled last week during edie Sustainable Investment Conference 2021. The event was arranged as a part of edie’s Countdown to COP26 Festival – a six-month program of digital content and events which will unite thousands of business leaders, sustainability and energy professionals, policymakers, academics, and green groups in the run-up to the COP26 climate talks.
We attended the conference and enjoyed two days together with corporates, asset managers, and asset owners, among other key stakeholders, for a frank and open discussion around disclosure priorities, roadblocks, and innovations.
Here are our key takeaways from the conference:
Mainstream investing should become impact investing, with science-based targets being the tool to get there. Companies will have to work a lot harder and get more uncomfortable to achieve what we know we have to do. Which will involve more generous sharing of impact data by investors and a culture shift from short-termism, where high rewards have been achievable in the dirtiest of industries.
Leading global professional service businesses report a rapid increase in climate related interest during the last 12 months. Their clients often see ESG reporting and monitoring as a burden due to lack of global standardization, too many acronyms, complex systems, and difficulty navigating.
Net-zero targets are becoming far too easy to say – they need to be backed with interim targets, costed roadmaps, and proof of progress. COP26 should help cement the strategy that business can evolve around, but fortunate countries need to help the developing world comply with standard frameworks.
As the EU's taxonomy embeds, we see the UK adapting it for their situation. Canada and Russia are also working on their taxonomies using the EU as a foundation.
Fintech and Big Data have a role to play in the transition to net-zero. It will allow for more of a forward thinking and live set of data around ESG. This is very exciting for investors as, until now, the very nature of the data has been very backward-looking and focused on historical positions. Technology allows for live news, ESG stories, and forward-looking carbon implication forecasting that builds on the GHG Protocol.
Sustainability data and frameworks need to mature to the same level as established financial frameworks used by companies so that investors can rely upon them and understand the activities of these investments from which to make decisions – just as they do already with standardized financial data. At this point, sustainable investing becomes “business as usual,” an EBITDA equivalent for sustainability isn’t here yet, however.
Huge desire to see a price on carbon agreed at COP26. Significant initiatives and policy changes such as this will help mobilize vast amounts of capital and allow the attack of things like green energy and the carbon market.
Find out more about edie Sustainable Investment Conference 2021 here.