Why Sustainability Is Good Business: Key Takeaways from IEFA Toronto 2024
Why Sustainability Is Good Business: Key Takeaways from IEFA Toronto 2024
Vice Chair, BMO Financial Group
The Hon. Brian Tobin was named as an Officer of the Order of Canada in 2013 for his contribution to Canadian public policy as a federal and provincial politician, a…
The Hon. Brian Tobin was named as an Officer of the Order of Canada in 2013 for his contribution to Canadian public policy as a federal and provincial politician, a…
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There is no shortage of challenges for governments and investors to deal with, including geopolitical risks, global warming and widening inequality between nations. A key question is how the two groups can collaborate to meaningfully address these issues.
This was the focus of “Scaling for a Sustainable Future,” the inaugural plenary session at the 18th annual Toronto Global Forum organized by the International Economic Forum of the Americas (IEFA).
Representing the investment community on the panel were:
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Jean Schmitt, President and Managing Partner, Jolt Capital
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Robert E. Furdak, Chief Investment Officer for Responsible Investment, Chair of the Responsible Investment Committee Man Group
To explore the issue from the public sector was:
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Sithembiso Khoza, Head of Balance Sheet Management Development Bank of Southern Africa (DBSA)
As the moderator of the conversation, I noted that there is growing consensus around the need to find sustainable solutions because it’s just good business. The focus now is trying to remove impediments that might slow investments in those solutions.
Sustainability is good business
Man Group’s Robert Furdak believes most businesses see the risk that climate can have on their operations and remain committed to building resiliency against those impacts. “Companies realize that this is a threat to their businesses, a threat to their profitability,” he told the packed conference hall in Toronto. Man Group, for its part, sees climate change as such a critical threat to society and the economy that it has climate scientists on staff.
Jolt Capital’s Jean Schmitt shared that some executives don’t always appreciate how sustainability can benefit their business right away, which is why investors like Jolt Capital urge their companies to track their emissions. These businesses often discover that embracing transparency and reporting their emissions is good for business, he said.
In some ways, the bigger challenge today isn’t convincing executives of the merit of embracing sustainable practices; it’s measuring them. Sustainability data can be subjective, said Furdak. To overcome this challenge, Man Group has partnered with Columbia University to develop a model to determine an effective way to allocate capital to have the biggest impact on decarbonization.
“It’s a complex relationship between society, the environment, policy, demographics, and trying to figure out the difference between where capital is currently allocated and where capital needs to be allocated to achieve net zero,” he said. By that measure, Furdak added, more capital must be distributed to Africa, and there needs to be a greater investment in better land use and greener transportation.
Building partnerships and attracting expertise
Against the backdrop of extreme weather events in the U.S., including destructive tornadoes, hurricanes and flooding, not to mention the record-high temperatures recorded around the world this year, I asked what it will take to deal with this existential threat.
“The survival instinct has to kick in, and so some of the behaviors that brought us here will have to change,” Sithembiso Khoza of the DBSA told the panel. The development finance institution is drawing more attention to the African continent by showing how investments in the region can have a larger impact on the climate. As Khoza explained, some of the greatest challenges the organization is trying to address are around water scarcity and access to power and connectivity.
“Most African countries have never seen a telephone cable, and they jumped that whole technology cycle by going straight to cell phones,” he said. “You might have countries in Africa where the first experience of electricity is wind, solar, clean energy, so it’s a great opportunity for Africa.”
To help achieve some of those goals, DBSA is looking to attract companies that can bring expertise in key areas like solar power to the country. “We’ve spent a lot of time developing partnerships,” Khoza said, noting that DBSA works with investors across Europe and Asia and private investors in the U.S., such as PIMCO.
Competing for investments
Still, DBSA faces an uphill battle as it competes with developed nations for investment and resources.
When investing in sustainable technology, Schmitt offered some advice: stay away from the trade that’s fashionable at the moment. In his view, there is too much emphasis placed on trying to identify the next unicorn investment, and he added that many of these investments fizzle out.
“Go after growing, real companies, real technologies. It’s that simple,” he said. “It takes time, so don’t look too short term.”
