Financial Values in a Climate Crisis

In light of COP26 conversations, and as 2021 draws to a close, we reflect on INSEAD’s conversation with Mark Carney on building a capital-intensive, sustainable future. During the session, three students from INSEAD student clubs posed their questions to the UN Special Envoy for Climate Action and Finance. The session is available for viewing here.

“Despite varied and ample warnings, we didn’t invest adequately in preparedness or healthcare capacity for a pandemic. And despite overwhelming scientific evidence, society has been under-investing in addressing climate change.”

Speaking about the importance and value of resilience, sustainability, and a green stimulus, Mark Carney joined Dean Ilian Mihov and Executive Director, Katell Le Goulven for a business and society conversation, co-organised by INSEAD Lifelong Learning and the Hoffmann Global Institute for Business and Society. Students from the INDEVOR Club, Environment and Business Club, and the INSEAD Student Impact Fund were also part of the session and had the opportunity to share their thoughts and questions with the UN Special Envoy for Climate Action and Finance.

Mandy Bowers, representing INDEVOR, INSEAD’s social impact club, asked Carney to share his perspectives on how we can best shift stakeholder capitalism into the mainstream. Giving three main areas of focus, he claimed that gaining buy-in for stakeholder capitalism first requires building resilience in the current system to better deal with worst-case scenarios. Second is the solidarity to benefit those individuals who are experiencing disruption during the current transformation. Last but not the least, is to develop responsibility through aligning incentives around long-term value creation. He mentioned the key is to “resolve this tension and do so in a way that isn’t just a response to an immediate crisis.”

Reflecting on this, Bowers expressed, “As future global business leaders, we will be responsible for strategic planning and futureproofing against unforeseen challenges and crises. We will share responsibility for deploying technology to empower and enable individuals through sustainable and technological transformations, and work to develop cultural norms and institutionalize values.”

Assaf Nave of the Environment and Business Club posed his question next. Asking who should be the prime mover behind the fight against climate change, and where the bulk of investing should be, Carney responded that there is no single key player in this situation. Every segment has a role to play, and each player will have to be responsible for their part and in re-prioritising their preferences. Lucrative incentives and/or penalties will also have to be readjusted in the private sector.

He explained that this strategy requires short-term and long-term efforts, with the first 5-15 years focusing on education, prevention and damage control, and with 20-50 years focusing on the new rules set by legislators and people’s representatives in order to create a real change in how we conduct business in modern times. Sharing his sentiments from the session, Nave said, “Mankind will have to start paying for the damage that it has done. If we have broken something, we must and we can fix it.”

Speaking next was Anusha Kukreja from the INSEAD Student Impact Fund, with her question, “If every society across history and geography has been built on exploitation of either a group of people or natural resources, what would a new model look like? How could we practically get there and make the change stick?”

In response, Carney provided an overview of the rationale behind impact investing – ESG-centered companies target big problems to ‘do well by doing good’, outperforming and attracting better-quality talent. He suggested that impact investors separate out the companies that live and implement these values by first taking full advantage of the new financial and reporting metrics being developed to assess impact on climate, equity, and other goals. Second, they engage with management, impacted communities, and other stakeholders.

Over time, as the market continues to chase these outperforming companies, ESG will become mainstream, and society as a whole will move forward. That’s when we start looking for the next big shift. Stating her one takeaway, Kukreja said, “What stuck with me is Mark’s belief that there is low-hanging fruit - green initiatives that create short-term benefits with jobs and GDP growth – there doesn’t need to be a political tradeoff.”

As the session came to a close, Carney emphasised the importance of taking responsibility to improve the status quo. “Whether it’s the Bank of England or some startup you create, ultimately we’re custodians of an organsiation and we want to improve them and pass them on.” Also re-affirming his point of putting values at the core of every initiative, he explained, “You are all leaders, and you affect people you don’t even realise, and they will emulate you for good or ill. And I’m confident that it will be for good.”

With another year drawing to an end, and the world continuing to find its footing with the COVID-19 pandemic, businesses, societies and governments are witnessing the problems of ignoring the social and environmental challenges. Only by addressing this emergency, getting every party involved and investing in sustainable solutions can we truly be better equipped to protect and preserve the world for ourselves and future generations. As the Hoffmann Institute gears up for its acceleration phase, we look forward to contributing and driving efforts that support this mission.