FINTECH FOCUS: SUSTAINABLE FINANCE
Craig Wellman, Director of Financial Services for Microsoft UK, explains why he thinks the industry is key to changing individual and corporate behaviour – and buying time for the planet The world has accepted that climate change is happening and most of us acknowledge that tackling it will be the biggest technological and societal upheaval we have had since the Industrial Revolution. But while businesses almost universally agree that urgent action is needed, only 41 per cent are currently on target to meet the UK Government’s aim to be net zero by 2050. That’s according to a Microsoft UK/Goldsmiths, University of London study published ahead of the United Nations’ 26th Conference of the Parties (COP26) climate change summit, held last November. And if you think that’s an alarming figure, the same stat for companies surveyed in the financial services sector is a woeful 16 per cent. “We’re going to have to reverse a lot of the bad that we’ve done, a lot of the working practices that have grown up, and fundamentally change the way we do business, the way commerce happens,” believes Craig Wellman, director of financial services for Microsoft UK. Wellman’s role at Microsoft sees him look after relationships and co-author strategies with some of the biggest names in financial services, including banks, payment providers, asset managers, fund managers and insurers. The tech giant has itself set ambitious targets around getting to net zero, aiming to be carbon negative by 2030 and, by 2050, to remove from the environment all the CO2 it has emitted – directly or by electrical consumption – since its founding in 1975. So, Wellman knows first-hand the challenges large companies face in becoming more sustainable. But, while financial services may have been slower than others to act, he’s convinced the industry is in a strong, and possibly unique, position to effect change – because it’s made up of large,
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data-driven organisations that have influence and control over the way other businesses and entire economies run. Mark Carney, former governor of the Bank of England, now UN special envoy on climate action and finance, would agree with him. Carney has long warned that large money institutions have been too focussed on short-term investments, instead of using their leverage to mitigate the long-term impacts of climate change. Wellman puts it succinctly: “What gets financed, gets done,” he says. “Whether they’re lending, helping companies invest or insuring their assets, there are instruments available to financial institutions – there are ways that can be managed – to encourage sustainability. And that’s going to drive behaviour.” Referencing Carney’s work on sustainable finance, he says there needs to be a multitude of different incentives, applications and strategies to encourage organisations to pull those levers.
Whether they’re lending, helping companies invest or insuring their assets, there are instruments available to financial institutions to encourage sustainability For example, according to an International Energy Agency report last year, to achieve global net zero emissions by 2050 and keep warming to 1.5°C compared to pre-industrial levels, at least $5trillion needs to be invested in climate solutions every year until the turn of the next decade: the investment community has a role to play in that by constructing innovative vehicles, particularly long-term green investment bonds; insurers can also design products to reduce some of the risks inherent in the
necessary infrastructure projects. The problem is, while we’re still in the foothills of this new investment landscape, the incentives for investors aren’t exactly compelling. Green bond holders, for instance, currently see only 50 per cent of the yield they could be getting elsewhere. Wellman cites the example of an insurer that Microsoft has been working with to create more sustainable products that appeal to people in the market who care about such issues. Like any insurer, what’s not paid out in claims is hedged, reinsured or invested. ffnews.com
