Brandeis International Business School’s inaugural two-day event convenes leaders from academia, finance industry
The world’s 7.8 billion people create roughly $100 trillion dollars in economic output every year. But the current environmental costs of all that productivity are unsustainable, according to the latest climate change projections.
“The challenge of sustainable development is the following: how do you take a $100 trillion global economy, grow it by three percent a year … and do so in a way that we go from 50 billion tons of CO2 down to zero,” said Aniket Shah, managing director and global head of ESG research at Jefferies, a global investment banking firm. “That is nothing short of a complete transformation in every single thing that we do.”
At Brandeis International Business School’s inaugural Trends in Asset Management Conference, finance leaders and academic researchers explored top trends in the industry, including investing for climate change, sustainability and innovation.
The two-day event was held virtually May 4-5 and co-sponsored by the Rosenberg Institute of Global Finance and the business school’s Asset Management Council.
During a panel discussion, Shah said it is possible to fundamentally transform the global economy and avoid the worst impacts of climate change. But it won’t be easy.
“It requires a rewiring of our social institutions, of our financial system, of our economic system, of our policy system, of how corporations behave,” he said.
Practitioner Panel: Sustainable Investing
Shah spoke on a sustainable investing panel moderated by Rob Brown ’88, MA’89, senior partner at Atlas Impact Partners.
Shah and Brown were joined by Tim Dunn, founder and chief investment officer at Terra Alpha Investments, and two Amalgamated Bank executives, CEO Priscilla Sims Brown and senior vice president and chief sustainability officer Ivan Frishberg.
The panelists highlighted how sustainability is a key element to their business models.
“A third of our work goes to sustainable financing, whether that be geothermal, whether that be PACE loans or other solar loans,” said Sims Brown, noting that environmental sustainability is a core component of Amalgamated Bank’s investment portfolio.
Dunn said capital markets have yet to adequately account for sustainability, but that could soon be changing in both Europe and the United States.
“We need to figure out how to account for the value of people and the environment,” said Dunn. “Because that’s what drives decision making in the c-suite and investment firms. We’ve gone far too long without accounting for that.”
Academic Panel: Climate Change and Investment Decisions
Finance professors Dan Bergstresser of the International Business School, Marcus Painter of Saint Louis University and Michael Schwert of the Wharton School joined Federal Reserve Board economist Marcelo Ochoa-Coloma for a discussion on the relationship between climate risk and financial markets.
At the local level, municipal bond markets are already placing a premium on loans to communities that are vulnerable to climate change.
From 2004 to 2017, Painter analyzed municipal bond rates and found that higher climate risk is associated with higher interest rates on long-term bonds. The average additional cost to those communities was $2.6 million per year.
“The market already recognizes climate risk,” said Painter.
Mixed Panel: Venture Capital and Innovation
Debarshi Nandy, the Barbara and Richard M. Rosenberg Professor of Global Finance at the International Business School, moderated a panel featuring a mix of finance professors and industry executives.
The discussion focused on the role of venture capital funds in spurring sustainable innovation. Panelists included Josh Lerner of Harvard Business School, Laura Lindsey of Arizona State University, Tansel Ismail of Energy Impact Partners and Jane Kearns of Evok Innovations.
Kearns said she sees a need for government incentives to close a gap between big investors and new green technologies. The most significant investments typically come from large institutional investors, such as pension funds, which are inherently risk averse and more likely to avoid newer, unproven technologies.
“I think there’s a role for government to offset risk, to enable private capital to flow into the sector,” said Kearns. “Because, frankly, we can’t do this all with government dollars or philanthropic dollars. We need the entire capital stock. Everybody needs to be playing in order to be able to deploy these technologies.”
Lerner underscored the outsized impact venture capital has in spurring innovation.
“Less than half of one percent of companies receive venture capital, but the impact is huge,” said Lerner, noting that half of all companies launching IPOs are backed by venture capital.
This article orginally appeared on the Brandeis International Business School website. To watch videos of the full conference program, please visit the Trends in Asset Management Conference web page.