Young financial professionals propose their sustainable finance strategies.
On the Hudson River in New York City, over 600 people from the corporate finance and sustainability, asset management and banking worlds gathered to discuss the state of sustainable finance and environmental, social and corporate governance (ESG). For two days in June, they took part in the first in-person GreenFin event.
Among the hundreds of attendees were nine students and young professionals of color who took part in the Emerging Leaders program, which aims to elevate, cultivate and support the next generation of sustainable finance and ESG leaders. (The program was sponsored by Bank of America during this cycle.)
Photo: Amayah Harrison / GreenBiz Group
The cohort was made up of corporate social responsibility analysts, undergraduate student and master’s candidates, an investor and more. They’re based in New York City, the San Francisco Bay Area, Toronto and other parts of the United States and Canada.
At the conclusion of GreenFin 22, we asked them, “If you were on a green investment team at a firm (venture capital, philanthropic organization, bank, etc.), what would you spend your money on/invest in?” (Some of them also shared their experiences at the conference.)
Corporate Social Responsibility Analyst and Assistant Vice President at Bank of the West
Attending GreenFin 22 as an Emerging Leader was an amazing experience — learning about the multiple ways to approach ESG investing and sustainable finance, such as through pension funds, private equity and venture capital. After the conference, I became more confident in the career path I am taking in ESG, and I have met people who have given me great advice about this career path.
Through the panels, one that stood out to me was the part of the keynote on “Visible Leadership on the Path to Net Zero.” The panel reiterated the importance of carbon emissions reduction as a part of decarbonization. Throughout the conference, I also learned about the importance of data tracking in the context of Scope 3 carbon emissions. In order to track Scope 3 reduction targets, we need to have adequate data.
If I were on a green investment team at a firm, one of the technologies I would focus on is Internet of Things (IoT) because of its potential to better track data that is relevant to carbon emissions, such as energy efficiency and electricity usage. Companies can use IoT in its buildings, such as smart thermostats and lighting, to control and track energy consumption. According to the U.S. Energy Information Administration, buildings account for about 40 percent of U.S. energy consumption. I believe that through IoT, there is potential for collaboration, such as that of Salesforce’s Net Zero Cloud and AT&T IoT connectivity, to enable the direct monitoring of emissions causing activity.
Analyst at CPP Investments
I would invest my money in the renewable energy space, as it would help drive large-scale impact with rippling effects across all touch points from energy generation to energy usage. Currently, our society heavily relies on energy to function, and this reliance will only increase over time. To achieve a more sustainable future, we need to invest in the areas that have the biggest potential for impact. Investments in the renewable energy space can be used for research and development or informational knowledge campaigns. The possibilities are numerous.
Student, Bachelor of Science in Environmental Science (Social Science and Policy) at Emory University and Fellow at True Ventures
My interest has always been in climate tech, so being within that space I would say that my investment interest would be in protein alternatives, built environment and climate intelligence. I have always been fascinated by natural capital and the future of food and am personally excited for what will be the next frontier for food ecosystems as the climate drastically shifts as well as the large market potential. On the other side, the importance of climate intelligence for purposes such as measuring energy efficiency and risk mitigation is going to be vital in assisting companies in contextualizing what ESG actually means for a firm.
I would also consider, given the open-endedness of the question, that being within an ESG/green investment team also helps implement investments internally, improving stakeholder engagement through not only the C-Suite but the entirety of a company. Putting investment into resources such as better reporting and metric infrastructure, diversity, equity and inclusion initiatives, and training for investment professionals are incredibly important.
Summer Associate, Morgan Stanley Global Sustainable Finance Division
The 2019 Intergovernmental Panel on Climate Change report estimates that the total net GHG emissions from Agriculture, Forestry, and Other Land Use between 2007 and 2016 represented 23 percent of total net anthropogenic emissions globally. Given its large and potentially growing contribution to global emissions, I would invest in funds with ties to natural capital aimed at protecting, restoring and enhancing ecosystem services.
Often overlooked, investing in natural capital is a strategic tool for reducing climate risks, biodiversity loss and improving the resilience of communities to natural disasters and food insecurity. Investment products such as sustainable bonds (municipal and green bonds), alternatives including private equity and private capital funds, public equities and commodities exist in the space. Some funds report on their impact, and my investment strategy would be to select funds with measurable targets and critically assess their goals and [projected] impact.
From an investment standpoint, the World Economic Forum estimates that over half of the world’s total GDP involves activities that are moderately or highly dependent on nature. This, in addition to rising regulations and policies such as the Taskforce on Nature-related Financial Disclosures makes nature-based investments viable. There are several interdependencies between climate and nature. Investors can play their part in fighting climate change and preserving biodiversity by allocating their capital towards nature-based investments.
Master’s Candidate at Bren School, University of California, Santa Barbara
After learning from and interacting with the many speakers and attendees at GreenFin 22, I left the conference with a better understanding of the importance of having a broadscale approach towards sustainable finance. Building a broad coalition of stakeholders who are engaged early and often throughout the investment process will ensure that the impacts of all externalities, both positive and negative, are assessed and understood. This holistic approach to green investment will broaden the arena and help bring critical innovations to market while engaging the communities that are impacted most strongly by climate change.
As proven in Cleantech 1.0, which refers to the first broadscale mobilization of capital towards technology-based climate innovations that aimed to address environmental issues, there will not be a silver bullet to address such a complex and intertwined issue as climate change. More importantly, the impacts of climate change will disproportionately impact disadvantaged communities and, as such, including those voices in the investment process will be a crucial step towards investing in meaningful innovations. These themes were frequently addressed by speakers and panelists at GreenFin and will only grow in importance as the sustainable finance space continues to evolve.
VC Investor and Kellogg MBA
What should I invest in? On my morning walk in Georgia’s record-level summer heat, this question was top of mind. I will be joining a VC investment team in the fall and hence, will soon look at thousands of startups to find the few to fund.
The International Energy Agency states that “almost half the [CO2 emission] reductions come from technologies […] currently at the demonstration or prototype phase.” And that means that “major innovation efforts must take place this decade in order to bring these new technologies to market in time.”
Luckily, that innovation is all around us — both nature-based and engineered — and I’m energized to collaborate with motivated founders to build something world-changing.
Climate change is an umbrella issue, meaning that climate technologies often develop at the intersection of multiple industries. Several areas that I’m drawn to are the overlaps of climate with built environment, agriculture and healthcare – specifically, women’s healthcare or femtech.
During GreenFin’s Investing in Gender and Climate session, it became clear to me that gender equity and climate are interwoven — we cannot invest in one without the other. Yet, when I looked around the room full of climate investors, I noticed mostly women — where were the men?
It is obvious that we need diverse expertise, leadership and purchasing power to sustain our society and advance our climate goals. That is, we need the 48 percent of our population that aren’t women to invest in the 52 percent that are.
Women-led startups generate 63 percent more value for investors and recover in half the time as men-led startups. Additionally, women-led teams generate 35 percent higher return on investment. Investing in women just makes sense. Yet only 2 percent of VC funding backs women today.
The reality is that we have a growing population and a warming planet. This mounting pressure comes at an inflection point in human history, challenging us to restructure our systems to enable future generations a habitable home. Investing in women is an investment in climate. As a VC, this is where I believe my dollars will really count.
Senior Associate at International Venture Philanthropy Center (IVPC)
Sustainable finance is rooted in equity. Therefore, if I were on a green finance team, I would prioritize investments in human capital.
The finance sector, as the largest provider of private capital, holds enormous power in advancing the transition to a net-zero, low-carbon economy. For investments to be truly sustainable, however, their decision-makers must reflect the makeup of the world in which we live and take into consideration voices across the entire value chain. The pandemic has shown us the interdependencies of people, planet and profit, and much remains to be done to bridge social, racial and gender gaps. For instance, women of color are consistently underrepresented in leadership roles across all facets of finance — especially within the nascent field of sustainable investing. Moreover, fostering a diverse workforce would allow institutions to be aware of how environmental issues affect different stakeholders and communities. By emphasizing the “S” in ESG and engaging a broader ecosystem, the financial industry can unlock the potential of green investments to mobilize more private capital to finance the climate crisis.
Social Impact MBA and MA in Sustainable International Development Candidate, The Heller School for Social Policy & Management, Brandeis University and Strategy & Development Intern at Humanity Cash
I would invest in scaling the production and distribution of biochar, which has the potential for large-scale carbon removal and storage. As someone who has long revered the regenerative magic of our planet, I’m drawn to nature-based approaches to carbon removal. Nature-based solutions are both abundant and scalable, but also provide tremendous opportunities to rebalance degraded ecosystems and incentivize environmental stewardship.
Biochar is technically a hybrid nature-based/engineered carbon solution since it captures carbon stored in plants, diverts biowaste from landfill, and is then produced via a mechanical heating process called pyrolysis. However, its production lifecycle is carbon negative and it has regenerative properties that improve soil health. I’m attracted to biochar’s potential to naturally scale circular agricultural practices and its diverse array of use cases. It can be applied to soil, used for cattle feed, or even integrated into roofing material, which expand the potential co-benefits that come along with the baseline carbon capture.
While parts of biochar production feel inorganic, its origins are rooted in indigenous knowledge and wisdom. The Indigenous people of the Amazon made terra preta through similar processes long before industrialization degraded global soil quality. It is abundantly clear that we cannot reach net zero by 2050 without active removal of carbon emissions from our atmosphere. I would invest in technology that brings us closer to regenerative ways of being with the land
Former Graduate Capstone Consultant at Boston Consulting Group and recent Master of Public Administration Graduate
If I were in a green investment team within a bank, I would finance batteries in emerging markets close to the equator. Currently, solar panels are able to provide massive amounts of energy in these geographies. However, because of lack of energy storage, solar-heavy emerging markets are subject to a steep duck curve, where there is a surplus of energy by daytime and a lack of energy at nighttime. If such a duck curve were to even out, energy prices at peak hours would fall, making energy more accessible to the bottom of the pyramid, and thus increasing overall total energy consumption. As such, overall revenue for energy distributors would increase, making it feasible for them to pay back lenders.
This is a simple explanation for a more complex project, but batteries are a lesser known type of deal that many investors still see as “risky” but which have a huge potential for increasing access to energy in solar-heavy emerging economies.
This article originally appeared on GreenBiz.com as part of our partnership with GreenBiz Group, a media and events company that accelerates the just transition to a clean economy.