Joy Williams on The Sustainable Finance Conference in Montreal
Sustainable Finance Summit – blog report
This year's sustainable finance summit, held last week in Montreal, proclaimed its theme to be "Time for Action: Sustainable Finance Serving the Real-Economy Transition". On the one hand, the panels were incredibly varied, which kept the conference interesting, but has made it difficult to summarize a cohesive takeaway. On the other hand, panels did bring to light a couple of insights on the role of finance in the real economy that I hadn't thought of before. As a long-time veteran of climate in finance, I was very heartened to hear a positive tone and outlook on climate opportunities from finance professionals.
When we talk about the role of finance in enabling the real economy transition to net zero, the emphasis is usually on the large emitters and reducing their emissions to zero. One of the key messages that I'm involved in crafting in my day job at GFANZ* is that finance's role is to move money to where it's needed. In the context of the transition, the money is needed to support climate solutions, enable companies committed to aligning, and to transition (or the word at the conference was transform) high emitting companies to net zero. This focus on high-emitting companies still holds true and the panels had a thread of seeing this type of financing as an opportunity. A concrete example of this was Mark Carney's discussion of Brookfield's investing in Australian coal plants with an eye to manage the emissions down as quickly as possible. As one panelist said, our job is not to make money, but to move money to who needs it and we make money from doing that well.
The other role that was discussed by many panels, and Desjardins CEO Guy Cormier particularly stood out on this point, is that there is a huge role for finance to support small and medium enterprises (SMEs). Cormier implied that this was as important as tackling the high emitters. All SMEs are part of another company's value chain. As large companies commit to reducing scope 3 emissions, these SMEs will be key to that success. Definitely a good takeaway for all the financial institutions regardless of their client base, but especially for those who serve local businesses.
While it's been a while since we've gathered in person, I noted a distinct shift in tone at this conference. There was very little (if any!) justifying or explaining the relevance of climate change, nature, just transition and other sustainability topics to finance. A shared outlook from a number of the panelists and attendees was wanting to know how to move faster and how to do more. Pre-Covid, there would still be at least a panel or a keynote solely focussed on risk from a tactical sense, i.e., for individual financing or investment decisions. In fact, the politicization of ESG in the US was only mentioned twice in panels! Instead, discussion last week was more on a strategic level on how to integrate these topics into finance on a broad scale with an emphasis on opportunities.
The challenges to moving faster and doing more were not addressed head on, but I did draw a couple of conclusions based on discussions I had.
The first was on human capacity. For the panel I participated in, our moderator asked each of us to relate how we ended up working on nature or climate in finance. Only David (Acting Exec. Sec, Convention of Biological Diversity) on the panel had been working in this area from early on. The rest of us all came through a circuitous route - me from engineering (I used to work on fighter jets), Lorraine (SVP and CSO, EDC) from a risk background, and Andrew (VP, Climate Product Specialist, MSCI) from human sciences. This highlighted to me that while lack of climate or nature expertise in the finance professional teams is still a real issue, there are resources amongst peers in the industry. The issue might be finding these people who have a non-traditional finance background and empowering them in your own organization, as well as engaging with peers across the industry.
The second was the issue of partnership. To date, partnership has mostly meant co-investing. Many panels highlighted that it should be much more than that. Some examples covered the tension between public and private finance and the roles that each could play to bring new technologies and services to market - an area much mentioned, but not widespread as a solution. But others expanded the discussion to how finance in general could support clients in the transition by bringing knowledge and experience and non-financial support to smaller clients with less in-house resources. I was reminded of other partnerships such as between non-profits (WWF-Canada was in attendance) and finance, or the real-economy and standard setters and finance. While finance has always said that we are not going to solve climate change alone (often, I feel, with the purpose of setting expectations), really leaning into partnerships means more than everybody just "doing their part".
In closing, there were two phrases that panelists used that stuck with me:
• "You can't scale cute" - one-off, niche financial solutions or products are just not cutting it anymore. The sector would welcome some that can be rolled out broadly.
• "I work for the planet and just happen to be employed by [name your financial institution here]" Purpose behind what we do everyday is so important in helping to find the solutions we need.
To end on an optimistic note, I think finance is ready to make some real progress on climate this year as the recognition of legitimacy of the issue is at an all time high.
*The views here are my personal takeaways from the conference not an official position from GFANZ. GFANZ is a global coalition of leading financial institutions committed to accelerating the decarbonization of the economy. To learn more, please visit www.gfanzero.com.
I thank Joy Williams for sending me her views on the recent conference in Montreal.
I would urge my readers to read more about the Glasgow Financial Alliance for Net Zero (GFANZ) here and understand their mission and what they are doing to accelerate the decarbonization of the global economy.
Previous to joining GFANZ, Joy worked for almost six years at OTPP as a Principal, Climate Change Risk and she really knows her stuff.
In her comments above, she clearly states the overwhelming focus remains on large scale transition economy projects and gave the example Brookfield's Mark Carney gave on investing in Australian coal plants with an eye to manage the emissions down as quickly as possible.
But she also highlighted comments from Desjardins' CEO Guy Cormier on the need to support small & medium sized businesses (SMEs) who are part of the value chain of large companies and will play a critical role in reducing so-called scope-3 emissions.
Just how exactly large institutional investors can play a role to help SMEs reduce their emissions -- and pay returns in the process -- is unclear to me.
Even the large scale projects Brookfield and others are embarking on carry their own set of risks and while I'm all for "accelerating the transition economy," I'm also cautious and know it will not be a linear process (as CPP Investments CEO John Graham has noted).
So, yes, we need scale in the transition economy but we also need to figure out ways on how SMEs are going to take part in the process to reduce emissions without hurting their competitiveness.
We are still in the early innings of a major transition but I try not to get carried away with big proclamations and measure success through outcomes, not empty words and promises.
Below, a candid conversation with Mark Carney is a renowned economist and the former Governor of the Bank of Canada and Bank of England. He is now a key player in the world’s battle against climate change, as the UN Special Envoy on Climate Action and Finance.
I also embedded a panel discussion focused on the new opportunities for jobs that are being created by the EV transition and the skills, training and workforce development that will be required to support it.
The panelists are:
- Daniel Breton, President & CEO, Electric Mobility Canada
- Maddy Ewing, Consultant, Dunsky Energy + Climate Advisors
- Alana Baker, Senior Director of Government Relations Automotive Industries Association (AIA) Canada
- Emma Jarratt, Executive Editor, Electric Autonomy (Moderator)
Take the time to listen to this discussion because at the end of the day, investing in the transition economy without investing in the workforce needed to sustain it is just plain wrong.
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