My sustainability journey…is just starting.

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This has been an exciting sustainability journey to me…I have enjoyed it as much as I was challenged by every step, and this is just the beginning!

During the first year all I had in mind was that sustainability needed to be explained in business jargon, with a well-built case for those who are not convinced with climate change arguments. In my daily life I work in the financial sector and have found a lot of skeptics about climate finance and the importance of facilitating access to finance to those that care about climate change.

Since I started at CISL the climate finance world has grown and numbers increased exponentially, however, in emerging markets there are still barriers to get this moving forward. I started with identifying (through the analysis paper-AP) what could be the role of the institution I work for in enabling the Mexican banking sector to finance energy efficiency. This role, as I summarized it in the AP, was threefold: regulatory support, financial services and capacity building.

As I was coming deeper into the barriers and opportunities, I realized that sustainability should be easy to understand, and that maybe it was not as complicated as we, ourselves, were putting it. Sustainable finance should be simple. What does it really mean to have sustainable (climate-related) practices in the banking sector? Well, since almost ten years ago the Conference of Parties (COP) has been trying to bring a concept for climate finance, until in 2015 the COP21 referred to climate finance as “the resources that should be allocated by the countries’ governments and private sector, to finance activities that can mitigate the impact of climate change”. Based on that, I defined the areas upon which the banking sector could be supported, trained and assessed in terms of sustainable or climate finance, so that banks can easily understand at least a portion of what a bank can do to mitigate the impact of climate change. I defined four main areas, which I cover in my dissertation (Eco-efficiency, environmental risk management, products and services offering, and strategic commitment). 

I still don’t know if the concept (these 4 main areas) can be mainstreamed but at least there is a strategy to focus on. Having identified these areas is as important as challenging, because, with those definitions in place, we need to work on how we can provide the support and training required for the institutions to be able to deliver on those areas: how the bank needs to operate to manage environmental and social risks, offer products and services that embrace the climate risks and opportunities, and how this is reflected internally in their own treatment with stakeholders and the creation of policies and procedures.

One of the main challenges I have identified through my dissertation’s survey, is that there is a lot of room for improvement in strategic commitment in the banking sector in Latin America. One of the most recent topics covered at CISL is “Culture and employment practices”, which reflects upon organizational culture for sustainable success. So revealing to me! This is key to understand and increase strategic commitment within the banking sector. How can I help translating this into actions? Sustainable finance is indeed about financial performance, greater growth, lower risks, the business case, and about strategy. But here is a new concept to me: culture, top-down and bottom-up approaches, from an individual employee to a manager and CEO to really get a sustainable outcome .

As Nadine Exter states in her paper: “Culture eats strategy for lunch”, and I am now very much aware of the need to understand, support and work in sustainable organizational culture. My journey has been challenging and it doesn’t stop here, on the contrary it has just begun. I would like now to direct my efforts into understanding and potentially defining tools to help create that culture from within and support the delivery of the sustainable purpose of the financial institutions.

I want to keep doing everything I can and working my hardest to keep moving climate finance forward. The environment provided by CISL is inspirational, and so too does the experience shared by each member of this Cohort.  I can’t wait to listen to (and read) my CISL colleagues’ dissertation presentations, all looking very interesting and nurturing for the work I want to pursue. This is what makes us greater, to keep learning from each other, to keep sharing and supporting each other. This is what I value the most about this sustainability journey we have all embarked a couple of years ago. What’s next?

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Sustainable production and consumption in Latin America

May I start this note with the reflection of ¨what is not measured is not managed¨. 

As we have been sharing during the workshops and through the readings, there are tools available to promote sustainable production (and consumption) in different ways, but there is still some work to do to increase the use of such tools. 

I always come back to what I can do from my side, working with financial institutions in Latin America. And I think that this very time there is a key role for banks to play in the region. Latin America is a gold mine for agriculture, which represents a relevant percentage of CO2 emissions at global level.

The capability to reach farm small holders is very limited, and we must seek for ways to promote sustainable production. From the banking point of view, there are institutions specialized in corporate, SMEs and micro finance, and is in there where the opportunity raises. 

From the corporate point of view, and taken into account the implementation of equator principles, the banks could play the role of requesting corporate businesses to implement sustainable practices in their value chain. For example, providing financing to a big food and beverage corporate would be a good means to request application of sustainable practices in the supply chain. There are ways of identifying sustainable practices and measure applicable to the different stages of the chain, from energy efficiency at the premises of multinational distributors, to efficient transport and certified crops. 

Banks could also play a role from the SMEs perspective, by creating incentives for the implementation of cleaner production measures, which would also mean more competitive businesses, with lower operation costs and additional cash flows.

Looking at this from the microfinance perspective, there is a clear need to train and sensitize farm small holders in sustainable practices. There are already green certifications in the market, but also a number of practices that could be easily implemented at the farming level. Banks have a established set up to reach every customer in this segment, and actually be even friends of them. There is little credit information about these clients, and the business is run based on personal information, trust and friendship. Credit officers constantly meet the clients, share experiences and advice on how to run the business. 

This structure and business model allow banks to play a key role in promoting the use of certifications, the implementation of sustainable practices, the financing of sustainable production. 

Don’t want to be too optimistic, but even with the persons segments, there are ways to promote form the banking sector the sustainable consumption. Credit cards are a fantastic tool to icnentivize consumers to buy responsibly. Lower interest rates, discounts and rewards are just a few ways to get the market aware of the need to recognize sustainable products and buy responsibly. 

And coming back to the initial reflection, banks could start measuring the impact of such operations, from the very production of goods in the agricultural sector, for example, all the way through the distribution and wholesaling….and why not, how the end consumers are making decisions on final consumption. Let’s start. What do you think?

Sustainability and Simplicity

Simplicity – A personal leadership opportunity to promote climate finance

Some months ago when I started the CISL Program I was really keen to build up my knowledge and technical skills to become a sound leader. I initially stated some very specific goals, like quantifying the opportunity for banks to become greener, which I got more or less sorted. Then I thought that I really needed to understand who my counterparts are when talking to a bank, and try and classify them as pioneers, settlers or prospectors, which I am not giving up to, but have found very difficult to complete so far. My findings to date point towards sustainability still being mostly price driven, which I quite understand given banks lack the knowledge and capacity to push for sustainable projects to finance, whilst in need of performing (well) in a very competitive market. So, no matter who is your counterpart, bring the numbers in, and you have at least opened the door for a conversation about sustainability. No numbers, no deal.

I have been promoting sustainability as a competitive edge with companies (small and medium enterprises -SMEs) in the agricultural sector, food and beverage, etc., as well as building companies, as a way to create the demand for banks to supply finance. The conversation goes about energy and water consumption, efficient land use, increased productivity, the bread and butter for the companies, very common terms, simple to them, easy to understand.

But, Am I doing the same with banks?

Lately, I have been promoting green bonds as the financial mechanism for banks to fund themselves to, in turn, finance green assets, and I have been asked in almost every meeting: “What are green bonds?” and then I realize that I failed to explain the concept from scratch, starting from understanding what green means and how this is translated to the banking business. And then the explanation goes almost exactly in the same way as with companies… which is absolutely unintelligible for bankers.

So here comes my next challenge to get my personal leadership opportunity sorted: Simplicity.

Simplicity is the name of the game. Of course, there will always be more questions and arguments, but the one issue I need to overcome is to get people to listen: people very often do not get the message just because I use too complicated terms or just not the right ones. People stop listening when they stop understanding, and whatever portion they actually get, they cannot repeat to others (to convince others for example) as there is no a continuous link between the different ideas, facts and actions needed to take.

I have recently gone through a personal situation that led me to think about using a common language with your counterpart. During the last weeks I have been in and out of the hospital and had to talk to a number of doctors that believe I understand everything they say. There, from the bed, I realized how difficult it is to understand and repeat what the doctors say to me. It is not about disbelief about medicine or their knowledge or even the facts coming from the tests, it is about really understanding what they mean in simple words, for me, someone that has nothing to do with the medical profession.

This I have translated to bankers and even my own investment colleagues, when I use very technical and complicated words that have nothing to do with the usual banking or investment business. I am not saying we need to stop educating banks about climate change, I’m saying that to get the door open we need to start with simple understandable concepts. Then, once the bank is ready to take the next step, capacity building should come gradually.

I have come across clients and colleagues asking the same things again and again, just as I have been doing with my doctors. I didn’t understand why they asked the same so many times. But I did the same thing with the doctors, because I just don’t get it, it is too complicated for me.

If the doctors repeat to me a hundred times the same concept with the same very technical and unrepeatable words, I’m sure I would finally get it, but by the time I do it, it might be just too late for me to make a decision about it. Same with climate, there is no much time left to repeat our complicated story a hundred times, we need everyone to take actions now.

Simplicity. Simplicity. Simplicity.

So far, I have been trying to make appealable numbers out of sustainability. I think this is necessary in the banking industry, so that’s fine. But now, my plan to take things forward is to convert complicated climate terms into simple banking words. Simplicity will be my personal challenge to have more impact from my role within the institution, as a client facing professional and as a person delivering my climate mitigation urgency message.

 

The transition to a low (or no) carbon economy

In order to achieve a low carbon economy, there is a number of steps that regions, countries and sectors need to follow. But we need to bear in mind that such steps should fit the status and capabilities of each of the stakeholders and, in some cases, preliminary activities could be needed in order to achieve the expected results.

There are places where climate change is not the everyday bread, and therefore, time is needed to either raise the environmental awareness or develop the necessary tools to drive the markets forward, to create the societies that demand lower carbon economies or enforce climate change policies. While it can be true that is “better and easier” to do something today than to postpone our actions, it is also true that knowledge varies from region to countries to sectors, and the understanding of “how to do it” can be limited.

In order for this transition to be efficient, countries need to strengthen local data on carbon emissions and priority sectors, because without such information, it is easy to just move in the wrong direction and create confusion in the markets.

There is a close link between businesses and government, and both are needed to make it work. Practices that demand businesses to shift their model, also need increased information and engagement of policymakers, not only to use the environmental (carbon) language but also to speak the private sector’s key words: productivity, competitiveness and why not, cost. Such cost could be a rationale of lowering operational costs by means of being more efficient, or could be a pollution cost that businesses will need to pay if no action is taken against carbon emissions. It would be relevant to translate environmental needs into economic feasibility for businesses and social responsibility.

Motivation and cooperation, would be driving forces. The role of the government could be to deliver accurate information on the environmental impact of certain sectors and businesses, while also providing a solutions framework. Governments need to go beyond the conventional and be creative on how to motivate businesses to engage in meeting low carbon economy targets. On the other hand, businesses have to realize that environmental consciousness is a growing mindset and actions need to be taken to meet expectations of the society, their clients. But also that their roles as cooperators with the social movement and governmental commitments will bring about “good for all”, for the planet, countries, businesses and people.

Businesses alongside with government and the society, would be more than capable of making this transition to a low carbon economy. Alignment is key. Each ones’ voice is powerful. We just need to work together towards it.

Sustainability as a business opportunity

I have been working full time in sustainability for the last 13 years, from different angles. Started with zero carbon houses in a developed country, then moved to green building regulation in a developing country and now I am concentrated in convincing banks to commit and be part of the world’s battle against climate change.

I was, at first, convinced that zero carbon houses was the way to go, for everyone. It was good for the environment. I was thinking about the positive impact, not the cost attached to it and therefore, how accessible this solution was. After some years, I thought that maybe if it was mandatory to have green buildings, then the developers, builders and buyers would be obliged to compromise in one way or another, to have a green building stock. Then I thought, who is going to finance this? And that’s how I ended up working with banks, trying to close the loop by getting banks to finance “green”.

This has been a very interesting journey. Started by understanding the strategy, needs and barriers of a large bank in a developing country. For starters, I selected one bank to pilot the design of green business lines within the bank. It would have been very useful at that point to know more about motivational values. I, unconsciously, selected a pilot bank that ticked all the boxes for me: strong corporate social responsibility department, environmental and social risks team reporting to the CEO and with an innovation Unit, amongst other strengths. This was a “Pioneer” bank! So the process was kind of easy. I talked about climate change, environment, responsibility and innovation, and they listened, understood and went for it. I finished the project thinking that that this could be “easily” replicated across the region. Well, it was not the case. Not all banks are pioneers, and actually most of them are “settlers”, and words like climate change would just not work for them.

Most banks need solid predictions, are risk-averse, their business is to make money not to save the planet. I have been talking to a number of banks, trying to understand what are ultimately the drivers or barriers for them to become green, and one thing I am more clear now, is that we need to speak their language. Banks don’t need an environmentalist to convince them, they need numbers that support why they should change their business model for a sustainable one.

The last day of workshop 1, during the peer coaching session, I shared my sustainability challenge: to build a business case for banks to become green. The aim was to show banks the numbers, the business opportunity arising from being sustainable. An opportunity to grow their portfolio, enter new markets, attract new clients, maximize the client’s capital needs, etc., the language they need to hear.

I have been so fortunate to have a great team working with me in the last months, and we have been able to build a first draft of a business case for a bank, which reflects numerically the business opportunity available if they develop a green value proposition for their clients. There is still a long way to go and a steep learning curve for us. We need to present it, get feedback, add other variables, improve it, etc. It might be all wrong, but at least we have started thinking about it.

Now, during workshop 2, I learned that it is not only about the message (whether it is a business case or a climate change argument), but also about how we deliver it. So here comes another challenge: Communications. Is this bank we are presenting the business case to, a settler, a prospector or a pioneer? How shall we approach it and how shall we talk to the financial sector in general? What are the drivers? Who should be the messenger? Madonna, Al Gore, Mark Carney, Lise Kingo?

Dongtan, a greenwashing failure or a capability development success?

There is a growing need to build environmentally and socially sustainable cities, also called eco-cities, to home the increasing number of people coming to live in urban areas, which accounts to 54% of the global population today, and it is expected to reach 66% by 2050, according to the United Nations.

Dongtan City, a sustainable urbanization planned just 9 miles away from Shangai, China, was one of the first eco-city projects back in 2005. The project, a “renewable powered, car-free, water-recycling” city, was led by China’s public investment arm, Shangai Industrial Investment Company (SIIC). SIIC, hired consulting firm McKinsey to support the selection process of the different needed practices, including the design and engineering. Finally, SIIC appointed Arup, a 50-year old global firm of consultant engineers based in the UK, who had the responsibility of the design and sustainability aspects of the project.

Being the first eco-city project was of great global importance and as such the agreement between SIIC and Arup was not only widely publicized but also got significant political support, to the point that the agreement was formally signed at Downing Street with presence of the China’s and UK’s Prime Ministers.

For years Arup was working on the “urban design, planning, sustainable energy management, waste management, renewable energy process implementation, economic and business planning, sustainable building design, architecture, infrastructure and even the planning of communities and social structures” ( Arup and SIIC Sign Accord to Develop Further Sustainable Cities in China”, available at http://www.greenprogress.com/green_building_article.php?id=579) for Dongtan, becoming one the most knowledgeable parties in this niche market. However, despite the appropriate research, the professional work, the knowledge developed and the efforts of the firm, after some years of quietness from SIIC, the Dongtan Eco-city design didn’t take off as expected. It was delayed, put on hold, stalled.

Communication agencies, media and the general public criticized the whole intention referring to China and Arup as the winners of green-washers of the year, a fiction story, a too-good-to-be-true story. From here, probably one can say that they put the cart before the horse, so shame on them. But it would also be true that a city master plan and even more the construction of a new eco-city would take many months before it can show the results…and not sure if everyone was ready to wait until the project came true to announce it to the world.

The point here is that the obvious failure of implementing Dongtan, whatever the reasons behind were, actually the project also deployed knowledge and somehow expertise on building cities that are environmental, social and economically sustainable. Dongtan was an opportunity for Arup to enter a nascent market, learn and replicate, the latter being certainly a difficult one but evidently the project represented the possibility to better understand how to create sustainable cities. And for China itself, home to 1,3 billion people and expected to build hundreds of cities over the next decades, this was a first learning experience, and in fact, China is nowadays building a significant percentage of the eco-cities in the world.

Soon after Dongtan, in 2006 Masdar city’s project started with Foster + Partners, in 2007 was the turn of Sino-Singapur Tianjin Eco-city (this time a collaboration between Chinese and Singaporean governments), in 2008 Nanjin Eco-city was launched and in 2009, the World Bank Group launched the Eco-Cities program, just to name a few initiatives in the years following Dongtan.

Ten years after the rumors, the scandal and the bad press, Arup is one of the global leading companies providing services for sustainable infrastructure, green building, distributed energy, masterplanning, intelligent transport solutions and sustainability consulting, amongst other related specialties, and is currently working on water reuse, smart and climate resilient cities along with governments and development institutions. In the meantime, even though China’s cities are not within the top ten greenest cities ranking, since Dongtan, hundreds of eco-cities have sprouted across the country. It cannot still be called a success, as most of them have not been finished or are half-empty, but definitely they keep learning on how to build the new city model to meet the burning urban population challenges they have ahead.

So, would you call Dongtan a greenwashing failure or capability development success?

 

Picture: Sino-Singapore Tianjin Eco-city – Currently housing 6,000 people in 3 Sq Km, and expected to accommodate 350,000 people over 30 sq Km by 2020.