“Instead of having finance experts influence how sustainability companies operate, I thought it was more important that people knowledgeable on sustainability are in the decision-making roles within financial institutions, so they know exactly what is sustainable financing structure, how you can quantify impact, what’s green vs. fake green.” This is what Becca, a sustainable development and East Asian studies graduate from Columbia University, said when asked about why she chose to pursue a career in sustainable finance.
Becca is now a sustainable finance associate at a top-ranked global investment bank. But the path wasn’t straight or simple. She navigated through various internships and research roles during college to figure out what she really wanted to do with her degree. Her experiences included conducting and organizing research interviews on sustainability, innovation, and economic development in China, working with the International Research Institute for Climate and Society’s Financial Instrument team on a flood index insurance project, and interning at two other top investment banks as a summer analyst. Through these internships and studies, Becca recognized the crucial link between the private and public sectors and the pivotal role of the private sector in providing the capital to make the work of the public sector more executable, feasible, and scalable.
Becca is deeply concerned about environmental issues. She sees the private sector playing a key role in addressing sustainability challenges. One of the things it can do is provide ready access to capital, which can fund projects and technologies for the green transition. This made her want to work in financial institutions as they get to decide where to put money and which assets to finance. And working for sustainable finance means providing money to the right projects that are doing the right things around sustainability-related issues.
But deciding what is right is what makes Becca’s job so challenging and important. Like traditional financing, projects have to meet stringent requirements. But unlike traditional financing, they also have to meet sustainability requirements. Sustainability requirements assess whether a project/company qualifies for making a significant sustainability impact. However, projects are scrutinized not only for their objectives but also for the feasibility of achieving those objectives. Even if the right projects, projects with sufficient sustainability goals, are identified, whether or not they will do the right things to achieve those goals remains uncertain.
Becca’s sustainable finance team plays a crucial role in this process of identifying the right projects that are doing the right things by structuring suitable bond products. These bond products can include green bonds (GB), where funds are exclusively used for green projects, or sustainability-linked bonds (SLB), which depend on whether the issuer achieves predefined sustainability/ESG goals. Such goals might include reducing carbon emissions or improving waste management within a defined time period.
Put another way, GBs are process-oriented, focusing on how exactly money will be used for a project and how green the project is; but SLBs are result-oriented, focusing less on how exactly the money will be spent and more on if the promised targets are achieved on time.
Despite the good intentions behind these instruments, Becca has some concerns. Specifically, Becca points out, “Sustainability target measurement, let’s be honest, is hard to measure so SLBs appear to be less strict about how money is spent. There was a tendency for companies to borrow money through SLBs instead of GBs.” However, this has begun to change. As investors became aware of the risks behind SLBs, they started to show a stronger preference for GBs.
Ultimately, investors want to make sure that their money goes into tangible things, such as a wind farm or a waste management project, which is what GBs promise. SLBs, on the other hand, have less transparency in terms of how the money is used– it may be for general corporate purposes instead of specific sustainability projects.
As a result, there is a significant challenge for market players to prove that their performance target is ambitious or to show that they are actually going above and beyond to meet that anticipated performance target. That scrutiny, Becca notes, has resulted in a decline in SLB issuance.
When asked if any regulation could make SLBs more effective, Becca shakes her head resignedly. In fact, there isn’t any regulation on GBs either. The guidance that issuers commit to is all voluntary, and the only thing that binds them to it is investor pressure. After all, they want to gain credibility in their SLB and GB structures to have a good reputation for future investments. This is why Becca’s team is especially important as they are held accountable for assessing companies’ credibility in achieving sustainability goals.
While that may be the official answer, Becca did add that personally, she has confidence in the future of sustainable finance. She sees promise in the SEC’s increasing attempts to get involved and people’s expanding interest in sustainability.
In early 2022, Becca founded the Global Futurist Initiative grassroots movement with the goal of achieving youth equity and elevating youth contributions to society and natural ecosystems. “I know I am not experienced enough to be impactful in finance yet, but I try to make an impact in sustainability wherever possible,” Becca states joyfully. Through this movement, Becca started a campaign for “SDG18 Youth Equity” that created the SDG18 symbol, targets, and indicators to be added to the United Nations’ Sustainable Development Goals.
To Becca, combating climate change means giving youth and succeeding generations a green future. While using financial resources is one way to make such future possible, Becca also sees it as necessary to provide youths with the tools and knowledge needed to be effective leaders in advancing these transitions. Through the Global Futurist Initiative, Becca hopes to equip youth to systematically generate new possibilities for transforming our global timeline. To achieve this objective, the organization supplies resources and organizes wide-ranging events across the globe that empower youths with the knowledge and opportunities to enact change. For example, the leadership board and activists of the Global Futurist Initiative were invited to the ECOSOC Youth Forum held by the United Nations. Right now, it is planning for a symposium in collaboration with the United Nations Association of the USA and Accountable Impact that aims to share background knowledge and learnings and to strengthen capacity in institutionalizing and expanding support for committing the U.S. to the SDGs.
“If there is not an opportunity yet, then we will step in to create that opportunity” is Becca’s way of thinking both for sustainable finance and sustainable activism. As discussed above, there are some obstacles faced in sustainable finance, but Becca is ready to tackle them with other inspiring youths.
*Note: Becca is used as a pseudonym for the interviewee as the interviewee prefers to remain anonymous