By Simon Thompson, Chief Executive, Chartered Banker Institute
This essay originally appeared in the Social Market Foundation and Chartered Banker Institute’s “Pathway to COP26” essay collection.
As contributors elsewhere to these essays rightly argue, mainstreaming green and sustainable finance requires a raft of substantial and significant changes right across our financial system, and indeed in business and society more broadly. Both “greening finance”, and “financing green” necessitate a whole series of continued policy, regulatory, fiscal, market, consumer and social changes at global, regional, national and local levels. System change, in short.
Our finance sector is expected to play a leading role in the systemic transition to a sustainable, low-carbon world. This is set out explicitly in the Paris Agreement, where Article 2.1 (c) requires signatories to make flows of finance consistent with low greenhouse gas emissions and climate-resilient development. Whilst global, regional and national financial institutions and regulators – and financial firms large and small – have key roles to play, so too do individuals. In fact, as individuals, we hold the key.
Finance is built on pillars of financial and human capital, although too often we emphasize the former at the expense of the latter. Financial institutions are led, managed, operated and overseen by individuals, however. And they can – and do – change through individual leadership and action. The change we seek in mainstreaming sustainable banking and finance needs to be led by increasing numbers of finance sector leaders and professionals with an understanding of the critical role of our sector in supporting the transition, coupled with the knowledge and skills of finance to be able to develop and deploy products, services and tools that can mobilize capital and support clients and customers in their transitions.
We need, therefore, to equip our finance profession – our finance professionals – with the green and sustainable finance expertise (the knowledge, skills, values, attitudes and behaviours) necessary to effect change within their institutions, and across our sector more widely. This requires more than a small number of green and sustainable finance specialists; to mainstream green and sustainable finance, we must also mainstream green and sustainable finance skills. The finance profession, including accountants, actuaries, bankers, financial analysts, insurers, investment managers and risk managers are fundamental to the definition and integration of professional and technical standards within institutions, and across the financial system.
At the Chartered Banker Institute, we’ve taken the lead with the launch in 2018 of the Certificate in Green and Sustainable Finance, the global benchmark qualification for green and sustainable finance professionals. We’ve been joined, since then, by 12 UK-based, global professional bodies representing more than one million professionals, the UK Government and the UK’s new Green Finance Institute in the Green Finance Education Charter. This is a significant, collective commitment to integrating green finance and sustainability into a wide range of professional qualifications and continuing professional development for accounting, business and finance professionals worldwide. The Charter also forms an important part of the UK Government’s “Pathway to COP26”, leading up to the global climate summit in Glasgow in November 2021, and we aim to attract many more signatories from the UK and internationally before then. Green and sustainable finance skills will, through the commitment of the Charter’s signatories, move to the mainstream of professional education – and equip current and future generations to lead our sustainable finance revolution.
There is a strong moral case for this, of course. But there is an equally strong commercial and strategic case for investing in green and sustainable finance skills, reflected in its emergence as an important topic for discussion amongst HR Directors and in boardrooms more broadly in financial institutions around the world, due to a variety of factors and pressures:
- Regulatory pressure, as climate-related risks become an increasing priority for central banks and regulators;
- An understanding more broadly of the impact of climate risks on business, the economy and society;
- Customer pressure, as consumer demand for more sustainable production, operations and consumption grows; and
- Pressure from colleagues, particularly younger colleagues, who want to work for organizations contributing to the development of a low carbon, not a high carbon world.
At present, green and sustainable finance may still be characterised as something of a niche, albeit a highly dynamic and fast-growing one. I don’t believe this will remain the case for much longer, however. It’s true that, at present, many institutions have small, specialist climate and/or sustainability teams. But we’re already seeing green finance move into the mainstream. In some banks, large teams of commercial relationship managers are advising companies on how to move to more sustainable production and services. Rather than have a small, sustainability team and separate funds, fund managers and other investors now integrate ESG factors into all investment decision-making. COVID-19 has increased demand for knowledge of and ability to apply sustainable finance principles in banking, insurance and investment contexts, and such principles will, indeed are, increasingly become part of the mainstream of finance. It won’t be long before all finance professionals are, by virtue of their education and training, sustainable finance professionals, leading the systemic change we need to protect people and planet.
This essay originally appeared in the Social Market Foundation and Chartered Banker Institute’s “Pathway to COP26” essay collection.
