Exploring Pioneering Knowledge in Sustainable Finance
Sustainability has emerged from an innovative concept into a necessity in the business world over the past decade. As bread and butter of the business world, it now has a profound impact in decisions by all stakeholders – from governments to non-profits, from companies to investors.
Learning about sustainable finance at INSEAD has truly broadened my holistic understanding of this area, and now I feel more excited than ever about this field’s future potential to transform our corporate world’s future relationship with the environment and society.
Furthermore, the highly structured learning of the sustainable finance elective allowed me to reflect on my past experiences in this area, and reach new insights through classroom discussions.
In 2019, I worked as a senior research advisor at the City of London Corporation, the governing body of London’s Square Mile financial district. I collaborated closely with colleagues specialising in green finance to understand how to create the right policy environment and international collaboration structure that would enable the sector’s further growth. We explored opportunities to foster international alignment of green bond standards, encourage financial organisations to further utilise green finance instruments, amongst other themes.
In August 2019, I also travelled to China with colleagues for the first plenary meeting of the Green Investment Principle for the Belt and Road Initiative, which is a powerful UK-China collaboration to introduce sustainability to multiple pillars influencing the operations of financial organisations and their key stakeholders.
If I had once expected the INSEAD sustainable finance elective to be a review of the knowledge I had already gained through my previous job, I was very pleasantly surprised by the breadth of new knowledge learnt.
Within the short timeframe of a few weeks, we examined details of many green finance instruments along with some fascinating recent innovations, such as sustainability improvement loans, which allow companies to raise money for general corporate purposes with a cost of funding tied to their sustainability performance.
We also completed in-depth studies of how sustainability considerations impact business decision-making, such as the way Norway’s sovereign wealth fund exclude from their portfolio certain companies that do not meet ESG criteria, and we used data in excel to examine how such decisions impacted on portfolio risk and returns.
Other fascinating case studies included a close examination of different types of MSCI Low Carbon Indices, the attractiveness of each and suitability for meeting varying investor goals.
My favourite is a case study examining the performance of the Sustainability-Linked Loans for Barry Callebaut, a manufacturer of high-quality chocolate which is also a champion in sustainable practices, especially in the cocoa sourcing process. Such case studies broadened my perspective beyond the realm of green financial instruments in London’s capital markets, to understand how these instruments are linked to activities within the wider economy.
For example, Barry Callebaut’s emphasis on improving farmers’ livelihoods, eliminating child labour and move towards 100% sustainability sourced cocoa all contribute towards a better ESG rating, and hence more favourable rates.
These case studies allowed me to have an ‘aha moment’, allowing me to better understand the wider impact of projects I previously worked on, synthesising new learning in the process.
The ever-evolving nature of the sustainable finance sector means often there is no single answer to key trends and challenges – which invites lively classroom discussion.
And hearing innovative suggestions from my classmates on how certain sustainable finance instruments and adoption methods can be further improved is fascinating – my classmates’ varied background and perspectives means our collective brainstorming sessions are fun and eye-opening.
And of course, the fact we as INSEAD students care so much about Business as a Force for Good really helped to create a supportive and fun environment for such discussions. I am sure that we will all bring many of the lessons learnt from this course into our respective careers no matter which industry we enter, and together accelerate the pace of making sustainability the air of our future business world.