Innovation in Sustainable Finance

If you’re wondering what effects population growth has had on the environment, take a look at side-by-side photos of Alaska’s Muir Glacier taken in 1914 and 2014. The snapshots provide alarming visual evidence that the dense ice has retreated significantly over the last century.

Hakan Lucius, Head of Corporate Responsibility at European Investment Bank, displayed these images during a recent #WebinarWednesday event on sustainable investing. NICSA members can replay an archived version of the event — which was moderated by Sachin Vankalas, Director of Operations and Sustainability at LuxFLAG— by clicking here.

Lucius said there is no country on earth today with major human development that exists within sustainable environmental limits — and the investment industry certainly has a role in that.

“The question ‘What is sustainable investment?’ is answered easily: If your investments are part of the solution, then you are sustainable,” he said. “If you are part of the problem, then you are not. You have to know what your money does.”

Vankalas agreed, adding: “Any investment which takes into consideration environmental, social and governance principles can be considered a sustainable investment.”

Catherine Banat, Institutional Portfolio Manager at RBC Global Asset Management, said she has observed a growing awareness among U.S. investors when it comes to sustainable investment initiatives. “A few years ago they were in the learning phase,” she said. “I think now we see people moving to action.”

Banat pointed to the United Nations’ movement around sustainable development goals (SDGs), which came into effect in January 2016 with a mission to “create a universal call to action, end poverty, protect the planet and ensure that all people enjoy peace and prosperity.”

“The direction I think we’re going is toward sustainable development goals and product to support a broader asset allocation philosophy that aligns with sustainability in general,” Banat said.

Anthony Eames, Vice President, Calvert Research and Management, echoed Catherine’s comments about the increasing number of investors interested in sustainability efforts. “Back in 2011, only about 20 percent of S&P 500 companies in the U.S. issued a sustainability report or any transparency into how they manage these issues,” he said. “By last year, in 2017, that’s up to about 85 percent.”

Luciusshared his perspective from the European market. “Just having an exclusion list is not sustainable investing — that’s the minimum, and it’s a blunt instrument,” he said. “It’s all about including a better understanding of the environmental and social effects of your investments.”

The key, he said, is to go beyond the financial statement — i.e., sustainability reporting. “Within the EU we have a sustainable finance action plan where the European Commission is coming up with legislative proposals. The requirements will be to integrate ESG into decision making.”

Aniket Shah, Head of Sustainable Investing at OppenheimerFunds, said his firm is using sustainability to inform investment platforms in a comprehensive way. “What we are doing as a firm is both ESG integration across various investment platforms as well as new product development within active, passive, and private markets,” Shah said.

Banat said regulatory trends are important, “but from a U.S. perspective, we’re seeing market trends pushing forward on this more. I believe, in the US, that market trends are more powerful in driving change,” she said.

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