The finance industry does have its share to play in a ‘just transition’ to a low carbon and more ‘doughnut-ty’ economy. This is a given. I have written repeatedly about it.
In most contexts, the finance industry is characterised and promoted as a ‘driver’ of said transition. But is that really so?
After all, the by far and distant most frequent tenor in ESG (the finance industry’s term for all things ‘sustainability’) is predominantly about risk. With a bit of luck maybe about opportunity. But basically never about ethics, ‘doing the right thing’, fairness, or indeed – and to use a more colloquial term – ‘great-grand children fitness’ of business and society.
Risk thereby is the dominant conversations and assessment topic. Opportunity the lesser and often ignored sibling of the same.
With that in mind, in us undoubtable: The finance industry’s ESG discourse is opportunistic. As indeed all it’s actions and views have been, and as indeed the the industry’s clockwork is set out to be and function. Opportunistic.
Because the truth is that the finance industry as a whole is first and foremost interested in which industry, or business, is eventually going to die. And which one is raising and coming out atop. ESG is merely another tool they can use for that very purpose.
Of course that does not hold true for quite all players. Some players – such as the Swiss Ethos Group (founded in 1997) have been about pushing the boundaries ever since their creation. And in the more recent pass Engine No. 1 has been pushing hard along the same more future-oriented lines.
There is a value of course to this opportunism – at least now that seemingly every single financial industry player is trying hard to get not only on the band waggon, but indeed getting as close as possible to the engine: the floor is being raised. And the walls are coming closer.
The challenge: the floor has been very low indeed, and the ‘box’ extremely spacious so far to say the least. Finally the truly bad apples get to feel a bit of heat underneath their backsides. But we’re far away from anything close to Paris or SDG achievement trajectories.
The finance industry’s opportunism could even be seen as the biggest hurdle in getting close to a suitable climate-compatible (and just) trajectory. Simply because they see it all as a trade off, and the decision is usually taken in favour financial returns on the short-term – a realised opportunity – rather than any stringent goal deliverables on climate or social impact.
The finance industry was built to be opportunistic – that’s indeed part and parcel of its DNA, and for many decades also its strongest attribute through which (some) innovation and economic shifts were made possible. But it was also built to be one dimensional (it is in the name: ‘finance’ industry).
Opportunism is no longer good enough.
I wonder what a multi-dimension alternative to the finance industry might look like.
One that while still revolving around investment and returns to some extent, but is focused in equal proportions on the tangible outcomes in more globally relevant dimensions.
