As the new decade starts, our CEO, Alex Fraser explains why education in sustainable finance is increasingly important – and what The London Institute of Banking & Finance is doing to help the financial sector transition to a low-carbon economy.
Our rapidly changing climate threatens to cause irreversible damage to habitats and economies around the world.
That threat is, beyond doubt, the defining issue of today and will be for the foreseeable future. How we address the issue will define all of us.
Financial institutions the world over are all rushing to take advantage of what has been described as the biggest investment opportunity in history. They have taken up the cause of responsible economic growth and have ambitions to be leading players in the complex transition to a low-carbon world.
Banks are committed to reducing their own exposure to new fossil fuel extraction and are being very wary about lending to customers whose businesses rely on such activity. There is a big push to become clean lenders and, at the same time, there is a strong and very welcome commitment to increased transparency in the area of sustainability.
Demand on the investment side, particularly from the younger generations, for sustainability-related products is soaring, leading to a rise in the number of green and sustainability bonds. There is also a significant increase in the number of funds that focus on specific sustainability themes such as water, health and waste.
Transparent disclosure and reporting
Though there is opportunity for financial services firms in sustainable investing, there are also major challenges. Data is still very patchy and definitions and disclosure still inconsistent. How do we dig beneath the hype and find out what is really going on?
There are numerous think tanks and well-informed pressure groups that are ready to call out inconsistent behaviour within the financial services industry. That helps, but firms have a central role to play in ensuring transparent disclosure.
If nothing else institutions that emerged seriously damaged from the financial crisis have a clear need to beware of the reputational risks posed by sustainability.
The risk of reputational damage
It is not enough to talk the talk. Financial institutions must walk the walk.
If they say that they are demanding better disclosure from investee companies, then they should be able to demonstrate this. If they claim to be expanding the range of sustainable investment products they offer to clients, then those claims need to be backed up by readily accessible data.
If they are still investing in new fossil fuel extraction, then it is not unreasonable for us to expect an explanation for the reasons behind this.
The transition to a low-carbon economy is extremely complex and the industry is at the start of a corrective turn – not yet fully set on a new course.
I believe that organisations can mitigate the risk of reputational damage by improving the quality of the conversation with their stakeholders during this transition.
Education, education, education
Education will play a hugely important part.
As the City Minister, John Glen, said at the World Conference of Banking Institutes (WCBI) in September last year: “If we are to meet the challenge of climate change then we need to embed sustainable thinking at every stage of professional development from the newest recruit to senior board members”.
The London Institute of Banking & Finance is supporting the agenda both through our educational programmes and our thought leadership.
Certificate in Sustainable Finance
With strong backing from our partner in the United Arab Emirates (UAE), Abu Dhabi Global Market (ADGM), we have recently launched our Certificate in Sustainable Finance. This will allow those working in financial services to build knowledge and expertise in this important and rapidly evolving area.
The Certificate in Sustainable Finance features topics such as risk, investment strategy and policy. It is a blend of academic theory and real-life case studies, delivered by academics and practitioners.
Our Centre for Sustainable Finance is a hub for discussion and debate. We will take every opportunity to engage with other academic institutions, public bodies and financial institutions around the world.
This is a global challenge and our work as educators needs to reflect this.
Alex Fraser became Chief Executive Officer in March 2015 after six years as Chief Operating Officer at Cass Business School, City University, London. Alex was Head of Operations at Schroders in the late 1990s, before being appointed Logistics Director at HM Customs and Excise in 2000. He subsequently worked for a number of organisations in the not-for-profit sector before joining Cass in 2009.
Find out more about our Certificate in Sustainable Finance
Centre for Sustainable Finance