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New Institute responds to urgent need for sustainable finance

by Mark Sabourin
EcoLog, 11/22/2019 12:24:00 PM

The Smith School of Business at Queen’s University has established the Institute for Sustainable Finance. As one of its first acts, the new Institute has launched the Canadian Sustainable Finance Network.

The Institute will develop education initiatives to foster a deeper base of knowledge and expertise in sustainable finance in Canada. This will include programs for business professionals, the first being a course on sustainable investing that will run in Toronto from April 15 to 17, 2020.

The Canadian Sustainable Finance Network is an independent alliance of academics, researchers and educators who will address the most pressing questions around sustainable finance.

Financial networks are incorporating sustainability into their decision-making, admits Sean Cleary, the Institute’s executive director and the BMO professor of finance and founding director of the Master of Finance program at the Smith School of Business, in a phone interview with EcoLog News. They’re just not doing it quickly enough.

“Finance is about allocating capital and managing risks and processes,” says Cleary. Sustainable finance isn’t much different. “It’s taking traditional finance and incorporating sustainability issues into it,” he says. In time, he suspects, all finance will be sustainable finance. “Unfortunately, we can’t wait around for that tipping point.”

The finance community needs information and research, he says. Investors have questions that need to be answered. Climate risk disclosure is an example. France is the only major economy that mandates companies to require publicly-traded companies to disclose their climate risk.

Since 2015, when France made disclosure mandatory, several major international investors have followed suit, but the practice is far from widespread. Without climate risk disclosure, it’s very difficult to make the right decisions, Cleary says.

There may even be a risk to financial markets themselves. Between 1995 and 2000, the Internet bubble burst and the technology-heavy Nasdaq index in New York lost more than 75% of its value. The Internet bubble was the result of a massive over-investment in telecommunications stocks — the result of a poor understanding of an important transformation in the marketplace.

The shift to a low-carbon economy may present a risk that is similar in kind, but far greater in scope, if investors are not equipped with the information they need to make wise decisions. Sustainable finance may turn out to be as good for an investment portfolio as it is for the planet.

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