Why cash-rich investors must transform their thinking to Green

Dr Rhian-Mari Thomas is CEO of the Green Finance Institute. At the Green Horizon Summit she told financiers they must rapidly open their eyes and minds to recalibrate their thinking. There are both huge needs and new opportunities to invest in Green. These are her lightly edited remarks given on 11 November 2020.

Clean energy infrastructure is very labour intensive, especially during the early stages. For every million dollars of investment, you can generate 7.49 full time jobs in renewables infrastructure, 7.72 in energy efficiency. That compares to only 2.65 full time jobs in fossil fuels.

The International Renewable Energy Agency (IRENA) recently tabled an ambitious stimulus programme which could create 5.5 million or more jobs over the next three years compared to a business as usual approach.

Such an initiative would allow the world to stay on track for creating the 42 million renewables jobs that the agency’s global renewables outlook projects for 2050.

Nature creates jobs too.

Some 1.2 billion jobs in sectors such as farming, fisheries, forestry, tourism are all dependent on the effective management and sustainability of healthy ecosystems.

And nature based solutions provide some of the most job intensive activities. They include reforestation, ecosystem or watershed rehabilitation and restoration, management of invasive species, and the use of agro-ecological approaches in food production.

All new finance must be Green finance

To channel capital towards these sectors and finance the developments needed to support these new jobs we need to develop and broaden our skills in financial services.

Christine Lagarde, President of the European Central Bank, said at this Green Horizon Summit that finance needs to become green finance. That means embedding the implications of climate change and depleting natural resources into every department of every financial institutions.

That means not just the relationship managers, the credit officers and Investor Relations, but also the Strategy Team, HR, comms and marketing as well as the operations, finance and Treasury functions. We need climate literacy all the way from the boardroom to the grad scheme.

New Green skills and awareness needed urgently

The KPMG Eversheds report being launched today reports that only 25% of board level executives interviewed felt that they have the necessary skills to address climate risk.

It is a monumental undertaking. But the consequences of failing to do so not only impact financial stability. They impact the stability of our climate as well.

So at the Green Finance Institute we have been speaking recently to those in the finance industry and academia about the skills needed for green finance jobs and how to fill that skills gap. We will publish our findings in December.

Unsurprisingly, we’ve heard of the need to marry financial expertise with science and engineering. Increasingly we see the need for financiers to familiarise themselves with biodiversity, and the risk posed to supply chains and business models from depleting natural resources.

Without doubt, we also need financiers to develop policy expertise. This is both to inform investable policy and to respond to a rapidly changing policy backdrop.

We’ve heard over the past few days the need for better data, standardised data, decision useful data. It’s the lifeblood of the markets.

But without knowledge, data will only ever just be another set of numbers. So that’s why we need financiers who can interpret the data through their understanding of policy, regulation and science.

I also see that in order to mobilise capital towards the programmes and projects that will pivot our global economy, we need project management skills, stakeholder management skills, the ability to lead broad groups of stakeholders, sometimes with really differing agendas and operating styles towards defined outcomes.

‘What got you here won’t get you there’

Above all, we need financial institutions that nurture those who think differently.

Those who are comfortable dealing with uncertainty and ambiguity; those who are able to make sound judgments through collaborating and applying new knowledge, rather than extrapolating from historic trends that aren’t representative of a future that will be disrupted by climate risks and new technologies.

That adage that what got you here won’t get you there has never been more applicable than when we consider the challenges of greening finance and financing green.

So at the Green Finance Institute we recognise the need to support finance professionals to build and broaden their skills.

That is why we’re so pleased to be co-hosting this summit with our investors the City of London Corporation, as well as with the World Economic Forum. Why in July this year, in conjunction with Her Majesty’s Government and 12 professional bodies, including the Chartered Bankers Institute, we launched the world’s first green finance education charter.

The signatories collectively have more than two million members within the financial sector globally. Together the twelve bodies have committed to integrate green finance and sustainability into their core curricular. The aim is new qualifications and the continued professional development of their members as well as encouraging the adoption of global and national standards, plus engaging with the public and private sector around emerging best practices.

When the charter was launched, I said green is one of the most exciting, creative and fast growing areas of finance. The skills required to drive the agenda will be increasingly sought after as the global economy shifts to net zero.

On day three of this whirlwind Green Horizon Summit, following hours of inspiring statements, announcements and speeches by global leaders, and with yet more to come, I’m even more convinced of that statement.

I hope you agree.

You can watch Dr Rhian-Mari Thomas’s full presentation at 58.30 minutes in.