Promoting the role of finance in the sustainable economy 28 October 2021

Nick Villiers is the Director of the Centre for Sustainable Finance, Cambridge Institute for Sustainability Leadership. He spoke with Efma’s Boris Plantier about the robust range of programs and tools his center is producing for the finance industry.

What is the Centre for Sustainable Finance?

The Centre for Sustainable Finance at the University of Cambridge Institute for Sustainability Leadership (CISL) works with the finance industry to drive change to enable it to play a leading role in building a more sustainable economy. This is achieved through a unique combination of deep industry collaboration, high-caliber research, and exceptional education programs. We bring together ambitious institutions in a number of collaborations including the Banking Environment Initiative, ClimateWise for the insurance industry, and the Investment Leaders Group. These groups help us identify real world challenges the industry is facing, and ensure that the insights are not only academically rigorous but are useful for practitioners to drive change.

Financial institutions are increasingly communicating on their sustainability strategy. Do you notice any progress on their part in the last two years?

We are seeing ever increasing interest in our executive education from both financial institutions and finance professionals, looking for bespoke courses to build capacity amongst their staff, or via avenues such as our Sustainable Finance online short course. In addition, we welcome the nearly 300 financial institutions that have made net zero commitments, though recognize the hard work of measuring their current footprint and then understanding transition pathways of their clients or investee companies, and finding ways of driving and supporting that transition is only just beginning. Looking beyond net zero, we have also been working with banks and investors to help them understand risks created by the destruction of nature, while the financial materiality of inequalities is an emerging theme in our work with finance.

Is it possible to measure the impact of these plans and actions launched by financial institutions? 

Understanding the impact is key to driving the change we need in the economy, and we work with financial institutions because of the reach and influence they have on society and the economy. Part of our work with investors has been to create the Sustainable Investment Framework which enables investors and asset owners to understand the impact of their portfolios across both social and environmental metrics. Corporate disclosure and data are improving but still have a long way to go to enable the true measurement of impact. It is critical that any approach is simple, transparent, and robust, as we aimed to do with the temperature alignment methodology we published over the summer.

What steps can be taken to make sure they have a real impact on the environment?

It is key that financial institutions help develop the tools and frameworks they need in order to understand the impact of their financing decisions, but they also need to know how to engage with their clients. This was a gap we identified when working with the Banking Environment Initiative. We address this with our education work with banks, but developed ‘Let’s Discuss Climate’ as a guide for bankers to engage with their clients. It takes staff through how to start the conversation around decarbonization, with a simple 5 step process, recognizing that neither clients nor banks will have all the answers today but need to find new ways of collaborating to develop new products and services to support the transition. This need is by no means unique to banking, and in fact has been a focus of some of our recent work with the insurance industry, including a white paper on the role that insurance can play in the transition and what type of product innovation is needed to support that. 

Join your peers in charge of sustainable development at financial institutions in our upcoming Efma community. Contact Katarína at katarina@efma.com

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