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Will the transition to a sustainable economy be able to use the existing resources of private capital? Louisa Clarence-Smith met an environmentalist striving towards sustainability from inside today’s financial system.
“Sustainable investing needs to be the megatrend of our times,” says Cary Krosinsky: author, professor and director of The Network for Sustainable Financial Markets (NSFM).
The transformation of today’s dominant financial markets to one based on sustainable principles could be seen within five years’ time, Krosinsky predicts.
“The economy needs to take into consideration environmental, social and corporate governance risks and applications; or else there will be financial catastrophe,” he told The Extraenvironmentalist.
Two days after our interview, yet another ongoing financial catastrophe was in the press as JP Morgan made a $920 million payout for its ‘London Whale’ scandal.
Krosinsky commented: “The JPM scandal is a combination of ethical and risk management in nature. It takes a culture wanting to avoid such problems as well as proper risk assessments to avoid not only this problem but foreseeable risks in the future.”
Launched in 2008, the NSFM was created with an understanding of the vital need for new ways of thinking about finance; and the belief that a non-partisan consultancy is required to help finance professionals collaborate on proposals for sustainability on a global basis.
Krosinsky wants to see participants in the Network embedded within mainstream financial services organisations as a “professional association,” monitoring operations. When crisis hits, there would be credible professionals on hand to offer a detailed review of more sustainable practices.
Put simply, the purpose of The Network for Sustainable Financial Markets is a pragmatic response to an examination of the state of finance. “What’s broken? How can we fix it?”
Network participants must support its seven principles; including greater risk management practices and rewards for long-term, sustainable value creation. Yet, with no commitment to act on those principles, the organisation faces a tension between simply discussing sustainability and being an impetus for tangible change.
Krosinsky admits that there are a spectrum of activities which can constitute sustainability: from green-washing to gate-keeping to implementing change in some way. However, he is confident that The Network’s plans to directly engage with financial institutions could bring about real reforms.
One NSFM initiative on environmental sustainability is the Climate Bonds Initiative which promotes the transition to a low-carbon economy, generated through private investment in green bonds.
Krosinsky mentions that other factors such as education are important to increase the sustainability of our planet. However, he believes that public awareness of climate change is strong enough to suggest that companies who practise good sustainable investment will be rewarded going forward.
His assertion follows the release of a Yale study last week, which found that half of Ohio citizens believe that humans are responsible for global warming.
Given that Ohio is considered to be a moderate state, Krosinsky is optimistic that the study indicates a significant shift to greater public consciousness about climate change. Businesses will need to revolutionise their working practices and publicise their ethical code; or face losses as customers take their trade elsewhere.
Krosinsky is convinced that we are on the road to some sort of major change. He cites resource constraints, mass migrations from water shortages and pending climate change as indicators of a likely turning point in human history.
“Will we continue down that path? I don’t believe the human race is inherently destructive,” he said.
“Financial markets as we know them, driven solely by monetary profit, don’t seem to work without adequate checks and balances”. Krosinsky believes that sustainability applications at scale could help.
Whilst agreeing that capitalism today seems to be failing, Krosinsky suggests a reform of the current system; not a revolution.
“Capitalism may well only be able to survive through sustainability,” he said.
Cary Krosinsky is director of the Network for Sustainable Financial Markets. He is co-editor of Evolutions in Sustainable Investing, and a founder and director of the Carbon Tracker Initiative. You can follow the work of the Network for Sustainable Financial Markets on their website.
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