Once again, students are walking out of class to protest environmental injustice. They do not list more consistent, equal, and relevant information for making decisions on their list of wants.
The information is crucial, to be explicit. The goal of limiting temperature increases to 1.5 degrees Celsius is supported by trillions of dollars through numerous financial alliances since they are unable to continue without it.
However, there is a misguided narrative in the sustainable financing space that confounds accountability and openness. The kids—your future employees and associates—and much of society want to see responsibility. One requires the other, but the connection—or lack thereof—between both creates a significant roadblock to achieving a common goal: a sustainable economy with sustainable funding.
At the recent Accelerating Climate Solutions conference at the Harvard Business School, professor Deb Spar stated, “To have accountability, you need to have responsibility to some entity… The best thing we still have is governments.
Future capital and our cumulative future
To be clear, there is a lot of exciting energy surrounding openness, a critical stepping stone on the road to responsibility.
The Taskforce on Nature-related Financial Disclosures should release its final recommendations by the end of 2023, as should the International Sustainability Standards Board, and the Securities and Exchange Commission should release its final environmental disclosure guidance.
Being open does not guarantee that a company will always take the necessary steps to prevent environmental collapse.
We have a lot of faith in the market because of the paradigm we operate under, which was built on a voluntary, market-led reform model that is fuelled by carrots.
Markets are unconcerned with future generations, non-financial aspects of living, or vulnerable populations in the developing world. They merely look for prospective capital clients; this is what they do.
The temptation of short-term earnings maximisation by European oil and gas business is working against the financial interests of long-term financiers, as argued in an article by Adam Matthews, chief accountable financial investment officer at the Church of England Pensions Board, as well-captured by Tom Gosling of London Business School: “Markets do not care about vulnerable populations in the developing world, about future generations, or about non-financial interests.” They merely look for prospective clients to circulate money; it’s what they do.
No market for virtue
Energy companies looking to take the lead in the energy transition have not been rewarded by the market in Europe. Bernard Looney, who works for BP, is probably not indifferent to the effects of a fossil fuel-fueled environmental breakdown, but when Brent Crude in Europe reaches $128 per barrel, it makes sense to put the breaks on his company’s transition to net zero.
The World Wildlife Fund’s president and CEO, Carter Roberts, captured the crucial situation nicely when he spoke at Harvard’s Accelerating Climate Solutions conference back in the day: “Corporations are engines of progress at their best and engines of devastation at their worst. Every CEO will say, “I can’t arrive until they do their thing,” referring to the decision-makers, for one minute.
How much will we let the market race after future revenue sources at the expense of future need is the question, to which I have no answer. Without realising that clarity only requires action when it produces comparable impacts in the market, overstating the value that openness can give as a lever for change won’t be beneficial to anyone in the medium or long run.
Going back to Gosling, he said, “Who’s to say they aren’t remedy because evaluation?” The market is assuming that federal governments lack the guts to push legislation in any way close to what is required to limit global warming to 1.5 C.
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