Published on 06 October 2018

SUSTAINABLE FINANCE

Sustainable finance : Too many obstacles between engagement and action

Toronto and Wall Street have announced plans to launch initiatives geared toward the sustainable finance movement... and may even become leaders. But the movement is joined by some of the largest oil sand producers in the world, and motivation behind leading such a movement is driven by short-term vision. To prove the authenticity of their commitments, Toronto and Wall Street will have to use their leverage to move companies to change.

Taureau de Wall Street face a la fillette sans peur AFP ManuelCohen
The fearless girl facing the Wall Street bull.
@AFP/ManuelCohen

The second edition of the One Planet Summit, led by Emmanuel Macron, recently concluded in New York. The summit opened shortly after the San Francisco climate summit, and preceded the series of events that led high-level backers under Michael Bloomberg's leadership to Paris in November to make new sustainable finance commitments. 

Triggered by the first Climate Finance Day in Paris in 2015, this reflex has, without a doubt, shifted position. It solidified the heavyweights of the world in terms of sustainable finance, and allowed the European Commission to adopt its action plan in March 2018. This led to the green bond market exceeding $2 trillion in 2018. 

Toronto and Wall Street 

One after the other, financial capitals are launching initiatives with names and objectives that are all similar in principle: to promote "green and sustainable finance" and to strive towards the 17 Sustainable Development Goals (SDGs). Most of these initiatives operate within the Geneva-based International Network of Financial Centre for Sustainability, sponsored by the United Nations Environment Programme (UNEP). 

There are about twenty initiatives including the French "Finance for Tomorrow" initiative (in which Novethic participates), and one of the last initiatives to join: the city of Toronto. Toronto released a report on 17 September explaining that Toronto had all that is required to become the leader in sustainable finance in North America, or even the world! Ten days later, Michael Bloomberg announced that he wanted to push for the creation of a sustainable initiative on Wall Street. 

These announcements symbolize the driving ability of sustainable finance as a concept, but also the reputation risk it presents. The visibility of all these commitments, whose impact on redirecting financial flows to a low-carbon economy is already hard to measure, can potentially backfire on issuers. Toronto is a financial center with ten of the largest oil sands mining companies located in Alberta. 

Long-term vision 

Major Canadian investors are not too involved in the climate finance movement. As index management followers, they benefit from very high oil prices and the resulting stock market performance. As for Wall Street, they too have profited from economic "Trumpitude" gains. The Dow Jones rose 37% in the first year, and long-term visions are rare. 

Sustainable finance actors will be judged according to their actions. It is not enough to flash around the Paris Agreement or the multi-coloured SDGs to change the current model and claim their position as true leaders in sustainable finance. Actors must use its leverage to push companies to profound economic change.  

This means transforming dominant practices throughout the value chain, starting with regulating the lobbying of business associations. Their sole purpose is to limit roadblocks of any kind, even if they're meant to protect the climate. 

Anne-Catherine Husson-Traore,  @AC_HT, CEO of Novethic 


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