Partnerships for Sustainable Finance: Why Multi-Stakeholder Collaboration is Key to Delivering a New Financial System
In his book about social change ‘Theory U’, author Otto Scharmer notes that recognising and attending to the challenges facing our global society ‘is not just a theoretical exercise; it gives us a whole different way to collaborate as change agents for bringing forth a world that is profoundly different from that of the past’.
Nowhere is this more evident than in the efforts to deliver the Sustainable Development Goals (SDGs); and nowhere is the power of this approach clearer than in the efforts to align the financial system with sustainability objectives.
A nascent field just a decade ago, sustainable investing has now become a USD30.7trn market. More than the stellar growth, what is unique about the space is how it enables actors from the entire supply chain of capital to focus on one goal: delivering a financial system able to respond to the sustainability needs of today without compromising the ability of future generations to meet their own needs.
The EU High-Level Expert Group on Sustainable Finance (HLEG) is a case in point. Comprised of senior leaders from civil society, the finance sector, academia, as well as observers from European and International institutions, the group was charged by the EU Commission to provide advice on how to steer the flow of public and private capital towards sustainable investments. Ten years ago, when Europe was in the throes of the global financial crisis, such a multi-stakeholder coalition would have been unimaginable – and would have probably proven unsuccessful. Yet it took just a year for the HLEG to create momentum around the idea of an EU-wide sustainable finance reform. And it was the diversity of the group – along with the frank and inclusive process that underlined the group’s work – that created the political space for the Commission to turn the expert group’s final report into a reform agenda. Two months after the group submitted its final report, the EU put forward EU Sustainable Finance Action Plan. Since then, HLEG-like processes have been set up in key markets, including Canada, Australia and Germany. Developing countries have been active as well, collectively accounting for 100 of the 267 sustainable finance policy and measures in place globally at the end of 2017, with China leading the way.
Another illustration is the World Benchmarking Alliance, a new global institution that will rank the largest companies on their contribution to the SDGs and make these rankings free and publicly available to all. Through an extensive multi-stakeholder consultation phase that took place online and in 10 cities across the world (including Nairobi, Kuala Lumpur, Cape Town, Jakarta Mumbai and Buenos Aires), the WBA has grown into an Alliance of more than 90 institutions from across the supply chain of capital, government and civil society. The first set of benchmarks will address food and agriculture, climate and energy, digital inclusion and gender equality and empowerment issues, and the seafood industry. By 2023, the WBA aims to comprehensively assess the progress of 2,000 companies across seven major areas of transformation required to achieve the SDGs.
An important aspect of the WBA’s work is how the inclusive and transparent approach at the heart of its benchmark developing process also helps to create a space for dialogue between different stakeholders on the role that companies have in delivering the SDGs in their region, building bridges between actors that would otherwise not necessarily talk or meet with each other. As one participant to a WBA consultation in Buenos Aires noted “lack of trust between companies, governments, civil society and people is the largest barrier to developing and achieving the level of sustainability required to meet the SDGs”. By bringing actors together, the WBA helps to address this barrier and to create an inclusive partnership focused on results (the benchmarks) and targeted impact (greater disclosure, improved dialogue, cooperative engagement and better corporate contribution to the SDGs). Of course, what matters for the SDGs is to deliver change on the ground. That is why, at NYU Stern Center for Sustainable Business we have launched “Invest NYC SDG”: a multi-stakeholder initiative that aims to help build a sustainable, inclusive and resilient future economy in NYC by using the SDGs as a framework to drive private sector financing in community-supported initiatives. The program, which launched in April, will tackle issues facing the city such as affordable housing, energy access, urban mobility, and climate resilience while creating opportunities for employment, neighborhood revitalization, and urban development.
The choice of NYC is far from random. The city was the first city to report on its progress towards the implementation of the SDGs and the city’s ‘OneNYC’ 2050 strategy is strongly aligned with the SDGs. New York is also one of the world’s largest financial centers and home to the U.S. Alliance for Sustainable Finance. Building on these synergies between finance and the SDGs, we aim to develop a shared vision with a wide group of stakeholders for how private sector investment can be stimulated in partnership with the public and nongovernmental sectors. Ultimately, we aim to have a set of actionable financing initiatives that will address key challenges and create jobs, with investors committed to leading ongoing efforts. By documenting the process and lessons learned along the way, our hope is that this work can serve as a model for other cities in the United States and globally.
The above are just three examples of how multi-stakeholder partnerships are key to sustainable finance. Others include the Task Force on Climate-related financial risk disclosure (now backed by 785 organisations and 118trn of AUM), the Network of Central Banks for Greening the Financial System (the members of which collectively supervise 2/3 of the global systemically important banks and insurers), the International Network of Financial Centres for Sustainability, and the recently announced Global Investors for Sustainable Development, which will bring together some of the world’s leading CEOs and support the United Nations Secretary General’s efforts in mobilising the financial sector to deliver the SDGs.
Most of these initiatives focus on aspects identified in the ‘Kampala principles’ for private sector engagement, including: strengthening co-ordination, alignment and capacity building; fostering trust through dialogue and consultation; as well as measuring progress and disseminating best practices to increase the alignment of the financial system with sustainability objectives. It will also be critical that these efforts promote a just transition towards a more sustainable economy.
Frank, rigorous multi-stakeholder dialogue and engagement will
be key to building momentum and to success.
Doing so is neither easy nor straightforward. It takes leadership,
vision, integrity, openness, transparency and hard work. But the effort is worth
the prize. After all, as Otto Scharmer notes “what is at stake is nothing less
than the choice of who we are, who we want to be, and what story of the future
we want to participate in”. And that, perhaps, is the strongest appeal of SDG17
on Global Partnerships: to get us to work together to deliver the future we all
Dr. Elie Chachoua
Sustainable Finance Strategist and Senior Research Scholar NYU Stern School of Business’s Center for Sustainable Business
Dr Elie Chachoua is a Sustainable Finance Strategist and Senior Research Scholar at NYU Stern School of Business’s Center for Sustainable Business. He worked for the EU High-Level Expert Group on Sustainable Finance and was part of the core team behind the launch of the World Benchmarking Alliance – an international institution designed to produce free and publicly available benchmarks ranking companies on their contribution to the Sustainable Development Goals. Prior to that, Elie was a managing editor for an award-winning series of The Economist Group. His work has been published by renowned organizations, including the World Economic Forum, The Economist Intelligence Unit, KPMG, the OECD and UNDP.
Tensie Whelan, Director of NYU Stern School of Business’s Center for Sustainable Business
Tensie Whelan is the Director of NYU Stern School of Business’s Center for Sustainable Business, where she is bringing her 25 years of experience working on local, national and international environmental and sustainability issues to engage businesses in proactive and innovative mainstreaming of sustainability. As the President of the Rainforest Alliance, she grew the organization from a $4.5m to a $50m budget, recruiting 5,000 companies in more than 60 countries to work with the Rainforest Alliance. She has been recognized by Ethisphere as one of the 100 Most Influential People in Business Ethics, was the Citi Fellow in Leadership and Ethics at NYU Stern in 2015 and has served on numerous boards such as the Unilever Sustainable Sourcing Advisory Board and the Nespresso Innovation Fund Advisory Board. She was most recently appointed as a member of the Board of Directors for Aston Martin and GlobeScan and is an Advisor to the Future Economy Project for Harvard Business Review. Her work has been published by major publications, including Harvard Business Review, Fortune, and Stern Business Magazine.