Have you ever asked yourself “WHY are you working in the financial sector?” or “What is the PURPOSE of your job?”. Julie Becker believes the financial industry should ensure social prosperity for everyone. Listen to her reasoning and vision for the finance of the future.
TRANSCRIPT: I know what you’re thinking, that I’m going to give you a ‘gloom and doom’ lecture on climate change. But this is not just climate change. This is everything change. We have now reached a point where our actions threaten our own existence. We can no longer simply sit back and watch. We simply must act now!
Now, I hear you thinking: “We work in the financial sector, dealing with numbers from behind a screen – there isn’t much we can do?” But I believe, to understand the present, we need to learn from the past.
And 10 years ago, Wall Street was also on fire. Chaos was in the air, everything was falling apart. Markets from all over the world were crashing. What started out as a financial crisis soon began to contaminate other economic sectors.
For me, it was more than a financial or an economic crisis. It was an identity crisis, one that has still not been solved and it has now come back to haunt us with a new generation and their quest for purpose. These people have critical minds, they question everyone and everything; they put their trust in their peers and how they see things. They value their own opinions rather than those of financial advisors. They want to belong to a community and share a common vision; they are seeking meaning in both their jobs and their lives.
So what better moment to stop and ask ourselves “What are we doing? Is this really our PURPOSE?”
Our purpose is to ensure social prosperity for everyone in our society.
Through the millions of transactions we facilitate on a daily basis, we give stakeholders access to money. This money pays for hospitals, schools, transportation, utilities, infrastructure, medicine, pensions, homes – you name it. So, why couldn’t it pay to make sure our grandchildren will be able to get fresh drinking water from the tap at any time of the day? Why couldn’t it pay to make it possible for them to play outdoors in clean air without having to put on a mask?
I am here to tell you that not only could this happen but it has to. It has to happen for the sake of future generations and for the sake of business. I am not saying let’s go hug trees, what I am saying is let’s invest in what makes sense today. And given the current environmental crisis, it makes sense to invest in what will have a positive impact tomorrow. Sustainable investing is not a fad; it’s a business opportunity.
The social impacts of climate change are expected to slow down economic growth, to prolong existing poverty, and even create a new poverty traps. The United Nations speaks of a USD 2.5 trillion annual funding gap by 2030, which we must close if we want to deliver on the Sustainable Development Goals. This amount to three-quarters of Germany’s GDP in 2017.
What we need is a significant reorientation of the entire investment chain: a transition to a financial system that promotes long-term profit optimisation, rather than short-term profit maximisation; we need a financial system that focuses on sustainable social development rather than exclusion and inequality; we need a financial system that encourages sustainable environmental development rather than ongoing environmental degradation.
As I said, our purpose is to ensure social prosperity. How we do it is a matter of perspective.
I work for an exchange. I am a service provider, like many of you in this room. Our core business is the listing and trading of debt securities. Our activities have served well our purpose for over eight decades. We helped enhance global wealth, but soon we came to a point where we had to ask ourselves “how do we make it last?” In 2016, we decided to create a green exchange – the Luxembourg Green Exchange. We were the first and we still the only one in the world to have a platform that only displays green, social and sustainable projects; green, social and sustainable securities.
These are bonds, but also investment funds that raise money to finance green, social or sustainable projects. The Luxembourg Green Exchange is the wall of fame for issuers who decided to go the extra mile.
There’s a benefit for investors, too. Not only can they compare similar products, but they can also keep track on how issuers deliver on their commitments – through reporting.
The money raised helps to expand electricity networks in Africa, build railway connections in China or hospitals in South-East Asia. It helps improve the quality of water and sanitation in Latin America. It helps climate change refugees rebuild their lives.
Let me give you an example: one of the World Bank’s green bonds displayed on LGX or Luxembourg Green Exchange, raised funds to provide electricity to isolated communities in Peru. Thanks to their investment in photovoltaic systems, 43,000 rural households now have access to electricity. That means a total of 174,000 people, roughly the equivalent of the population of Heidelberg, here in Germany.
There are so many projects that could make a real difference, all they need is money. As the vice-president of the European Parliament recently said – “The glue of all of this is money because without money, you can dream but with money, you can act.” For investors, let’s be clear, there’s a financial return, a market-conform return.
Once again, our purpose is to ensure prosperity and make it last.
Let me give you a scenario: let’s say next time you talk to your banker or investment manager they not only ask you about the level of your risk aversion as part of your MiFID profile, but they also ask you about your sustainability preferences. Would you know how to answer? Would they even be able to explain what that is?
The international community has managed to build momentum around the Paris Agreement and the UN Sustainable Development Goals. There has been a rush to involve as many stakeholders as possible and this is a good thing. The struggle to have everyone around the table agree that we need to act now is nearly over.
Of course, you could always go on Twitter and read some nonsense like: “The concept of global warming was created by and for the Chinese to make U.S. manufacturing non-competitive” but that is part of another story.
Our challenge now is make these concepts – green, social, sustainable ESG, SRI, CSR – understandable to everyone. We need to educate our clients and ourselves; we need to offer and expect full transparency to and from our stakeholders. We need greater standardisation of sustainability terms; we need more disclosure of relevant sustainable and social data. We have the technology to help us gets the message out. We are seeing governments and international institutions collaborate and speak the same language.
Are we all moving at the same speed?
Unfortunately, not yet. We are still in a transition and it will take more time. Some of us are well on the way to fully integrating sustainability at the core of our business, while others are lagging behind. However, it’s really important to be inclusive rather than judgemental. We need to encourage the others and show them the way forward. This is not a “good guys vs. bad guys” debate, it’s a journey and we all have to make it to the end, so every step matters.
As a matter of fact, this transition will be the defining feature of the financial system for the next ten years. But it will also be a source of significant opportunity. I trust that at the end of it we will no longer talk about “sustainable finance”. All finance will be sustainable by default because everyone will want to know where their money is going just like me, just like you, just like all of us. If we are to meet our goals, there is simply no other way.
Our purpose is to ensure social prosperity and make it last for our children, and our grandchildren.
Let’s face it: we won’t be able to say we didn’t know!
Julie Becker
Member of the Executive Committee
