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Executive Perspectives

EXECUTIVE PERSPECTIVE: Global banks see new investment opportunity in sustainability

“Along with doing the right thing for the planet, there is a lot of profit to be made here” says Mark Burrows, Managing Director and Vice Chairman, Global Investment Banking, Credit Suisse.  

United Nations Environment Assembly, Nairobi, Kenya | 26 June 2014

The world’s largest bank (Industrial & Commercial Bank of China), along with 20 plus other global banking and financial institutions are meeting here in Nairobi to help build the framework for an estimated $2.5 trillion annual investment to achieve “sustainable development goals” or SDGs.  In a nutshell, SDG’s consist of roughly 15 new areas of focus for global development expected to be adopted in the next 18 months by the United Nations General Assembly (see below for draft list).  These goals will commit nations globally to achieving and funding new standards on how human and natural capital are managed.  We sat down with Steven Stone, Chief, Economics and Trade Branch of UNEP to gain a better understanding of the investment opportunity aligned with these very ambitious goals for the planet.

Sustainability: Which of the proposed SDGs do you think will result in the most interesting near term investment opportunity?

Steven:  I’d look first for investment opportunities in water management, renewable energy, poverty eradication, employment, and sustainable production innovations.  Water is about increasing scarcity and how to manage that operationally.  Energy is about the emerging opportunity to invest in the development of renewable energy infrastructure.   Sustainable production is about innovations in supply chain management and efficiency which will reduce costs and adverse environmental and social impacts.  Employment and poverty are about improving education and community development.

Sustainability: Where will the money come from?

Steven: There are tens of trillions of capital available for this effort across public, private and quasi-private sources.  The problem is not the availability of money, it’s providing the incentives to consider new opportunities and providing the channels for the investment.

Sustainability: What kind of incentives will emerge?

Steven: Actually, there are already pools of capital chasing oversubscribed investment opportunity.  Recent green bond issues (investments certified as meeting minimum environmental or social standards)  in the tens of billions of dollars by entities such as the African Development Bank and a 300 million dollar issuance by Unilever were overwhelmed by investor interest.  Infrastructure investment will provide another vast area of emerging opportunity.  I expect to see pools of public capital alongside private investment which will help private sector players manage their risk in this space.  I expect to see advances in public procurement which will increasingly reward bidders who meet or exceed sustainable performance standards.  I expect to see increasing public awareness and approval for products which are not produced at the expense of the environment or the human dignity of the people involved in production.

Sustainability: How will the private sector the risk around the ESG performance of its investments in the developing world?

Steven: Very carefully.  There will be vast investment and business opportunities in the developing world, but these opportunities will need to be matched by very granular supply chain management to ensure production does not violate legal and social standards of behavior.  If this is done well, it will result in a more sustainable business model for the private sector, and a more vibrant and healthy world economy and society.  In the end, this is a big part of the purpose in the planning for sustainable development goals.

List of Proposed Sustainable Development Goals to be attained by 2030

1. End poverty in all its forms everywhere

2. End hunger, achieve food security and adequate nutrition for all, and promote sustainable agriculture

3. Attain healthy life for all at all ages

4. Provide equitable and inclusive quality education and life-long learning opportunities for all

5. Attain gender equality, empower women and girls everywhere

6. Secure water and sanitation for all for a sustainable world

7. Ensure access to affordable, sustainable, and reliable modern energy services for all

8. Promote strong, inclusive and sustainable economic growth and decent work for all

9. Promote sustainable industrialization

10. Reduce inequality within and among countries

11. Build inclusive, safe and sustainable cities and human settlements

12. Promote sustainable consumption and production patterns

13. Promote actions at all levels to address climate change

14. Attain conservation and sustainable use of marine resources, oceans and seas

15. Protect and restore terrestrial ecosystems and halt all biodiversity loss

16. Achieve peaceful and inclusive societies, rule of law, effective and capable institutions

17. Strengthen and enhance the means of implementation and global partnership for sustainable development

Note: This interview conducted by Sustainability Managing Editor Tim Nixon.

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