Sophie Robinson-Tillett is a Senior Associate at the University of Oxford, a Contributing Editor at Investment & Pensions Europe, and Founder of Real-Economy-Progress.com. She’s the former Editor of Responsible Investor and also worked for the Guardian. Sophie is an award-winning journalist with deep experience covering green finance, responsible investment, ESG, and sustainability. In this episode, we discuss the drivers of major shifts in responsible investment, policy, actions leaders can take to avoid greenwashing, and much more.
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Click here for the episode web page.
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Brought to you by Re:Co, an ESG Software as a Service company helping clients achieve resilient competitive advantage in the long term.
Produced by Chris Attaway
Artwork by Harriet Richardson
Music by Cody Martin
Sophie Robinson-Tillett is a Senior Associate at the University of Oxford, a Contributing Editor at Investment & Pensions Europe, and Founder of Real-Economy-Progress.com. She’s the former Editor of Responsible Investor and also worked for the Guardian. Sophie is an award-winning journalist with deep experience covering green finance, responsible investment, ESG, and sustainability. In this episode, we discuss the drivers of major shifts in responsible investment, policy, actions leaders can take to avoid greenwashing, and much more.
Related links:
Click here for the episode web page.
For more insights straight to your inbox subscribe to the Future in Sight newsletter, and follow us on LinkedIn and Instagram
Brought to you by Re:Co, an ESG Software as a Service company helping clients achieve resilient competitive advantage in the long term.
Produced by Chris Attaway
Artwork by Harriet Richardson
Music by Cody Martin
[00:00:00] Sophie: There was a real polarisation and it was like, you need to choose whose side you're on. And, and there's no room for nuance and there's no room for thoughtful conversation and learning from each other and, and empathising with each other's perspective. And I think that's happening at lightning speed in sustainability at the moment that real polarisation issue.
[00:00:29] Jenn: Welcome to the future and sound podcast. I'm your host, Jenn Wilson.
This is a podcast where we talk about prioritising people. Planet and profit. In each episode, we speak with world leading experts who help us see the future we want and our role in it.
This is episode 13, Moving the Masses. Quick story…
I was at a conference in London, held by the UK centre for greeting finance and investment. One of the very first panels was moderated by my guest on the show today, I was struck by how she asked the ideal question to senior members of the finance community in London. Government climate scientists, even the line stock exchange, she knew exactly the right question to ask about partway through the panel. She shared that she'd been covering responsible investment for over a decade. I thought to. She has a perspective that very few journalists have. This is not a space that has been covered deeply or broadly by many people for 10 years. So I asked her to join. Now, she's used to being the one, asking all of the questions, no pressure.
She said that she hasn't really shared her perspective on some of the questions I asked today. So for the listeners at home, this is a rare view. Of how Sophie thinks about responsible investment in ESG. Here she is.
Sophie Robinson-Tillett is a senior associate at the university of Oxford, a contributing editor at investment in pension, Europe, and founder of real economy. progress.com. She's a former editor of responsible investor and also worked for the guardian. Sophie is an award-winning journalist with deep experience covering green finance, responsible investment ESG and sustainability.
In this episode, we discuss the drivers of major shifts and responsible investment policy actions. Leaders can take to avoid greenwashing and much more. Sophie, I'm delighted to have you on the future and sound podcast. Welcome.
[00:03:13] Sophie: Thank you very much for having me, Jenn. Um, I've listened to a few of these and they're really great.
So I'm really delighted to, to have been invited on.
[00:03:21] Jenn: Fantastic. Well, look, I met you Sophie at a conference put on by the university of Oxford. And one of the things that I was struck by when I heard you guiding and facilitating a panel of esteemed academics, was that you've been covering responsible investment in ESG for much longer than the majority.
Of journalists, you know, you've been doing this for over a decade and I'm just interested since you were an early mover on this topic, what drew you to responsible investment?
[00:03:54] Sophie: Yeah, an early mover, an accidental, uh, early mover. I hated to add, um, I don't wanna take too much credit for, I was actually at the guardian for, for a period of time, um, writing about regeneration and kind of more economic D type stories.
Um, and I decided that I wanted to go. Learn a bit more about the technicalities of how financial markets work. Whether if I was going to critique them, kind of knew what I was talking about. So I thought, oh, go off and, um, get a job at a trade publication about hedge funds or about public equity investments.
And I'll, I'll do that for a couple of years. And then I'll go back into the mainstream once I've cut my teeth somewhere specialist and no one would hire me except a wonderful, uh, publication called environmental finance who took me. Um, as a rookie. Uh, so I accidentally ended up in, in green finance. I didn't know it even existed before then.
And then I was hooked. I kind of had absolutely no desire to. Go back and write about anything else. I was completely, um, captivated by the topic and ended up moving on from there responsible investor and to where we are now. Yeah. So it was a very accidental move back before it was sexy.
[00:05:03] Jenn: It's really interesting that you say that because there have been so many professionals in the past two years, I guess since 2019, really when ESG started taking off in a big way in public markets, there was a lot of coverage on, you know, a performance we can get into that maybe a little bit later, uh, for ESG. What do you find when you're speaking with other professionals in ESG who have been in this space for about two years, rather than 10, how does it shape your lens a bit to have been in this space for a decade?
[00:05:38] Sophie: Well, I think you have to be quite proactive about not getting too ground down about it. I think it's a, it's quite an exhausting industry. To be in at times because it it's so fast moving and because the, the stakes are really high and the debate is, is very fractured sometimes and, and very passionate and often there's a lot of mudslinging.
So I think having been in it for a long time, you see the same things come round against. It's easier to face saying, I think after, after doing it for a long time, but you also see how far we've come. You know, there's a lot of perspective in that. Uh, when I was a responsible investor, we used to have.
Young journalists come in and, and they get very frustrated with the pace of change or the kind of obsession with profits. And you know, why can't we just understand that we need to, you know, bake human rights in, regardless of profits in all of these things. And I, I would often find myself saying to them, look, guys, you know, if you knew where we were five years ago, when you couldn't even get, you know, these people on the phone, you couldn't get them to respond to emails and you see the speed at which we've, we've moved.
And even if at the moment, the move is more around literacy than change in the way transactions are being done. It's certainly the first step and it's happened at a really unimaginable pace for those people. Who've been doing this for, for a long time. So it gives you a really good sense of perspective, I think.
And, uh, it makes it easier to take deep breaths and say, okay, we are getting somewhere.
[00:07:05] Jenn: I'd love to unpack that answer, but tell me more about the, the key. Pillars or steps that have been taken where you think yes, we are getting somewhere.
[00:07:15] Sophie: Oh, good question. Um, buy-in I mean, buy-in has to be the big thing that has changed the game top 26, we saw certainly on climate, um, G fans commitments that real official mobilisation of the financial markets to net zero.
And I think that's what the last few years has really been building. Two is that kind of sense? Okay. We've, we've all, not all, but many, many large systemically important institutions have come on board with some kind of formal commitment. And that allows us as journalists and, and everybody else to hold them accountable.
And hopefully will allow us to, to kind of hit the next phase, which is actually doing something. There are areas I think, where things have changed a lot, but I don't know whether. For good or for bad. So I think when I started in this market, there was a lot more room for ethics. And I think the reason that we've got this mainstream buy in the reason that we kind of won the mainstream sustainable finance debate is because everything has been reframed as financial risk.
So there's suddenly a sort of a legitimacy in judiciary investors and regulators coming in and, and doing this. I think that in some ways is a big win for sustainable finance. And as I say, it's, it's, what's allowed that buy in. I, I do wonder whether that presents its own problems, particularly when we talk about sustainability more broadly.
Cause I think social issues are harder to frame from a, a financial risk perspective than, than climate change and, and biodiversity. Approving to be. So I think that's a big change that's in some ways escalated progress, but in other ways, it's gonna present us with. Problems down down the very more fundamentally,
[00:08:59] Jenn: I'm really interested in this reframing of sustainability, sustainable finance as a risk issue.
It's interesting you say that because Gilliant Tett an editor of the financial times has been on the future in sound, and she said something similar. And as a non journalist, I'd love to know from your perspective, as somebody who is shaping the narrative to a great extent, How does that happen? What are the most important components that come together?
I realise that this is a difficult question, but what are the most important components that come together that really make something or a topic go mainstream? Is it that Mark Carney gets on stage and says, you know, this is important. And I've been a governor of, you know, two national, uh, central banks.
Like what are the most important components? As you look across this major shift.
[00:09:55] Sophie: Yeah. I think, you know, there's no doubt about it. That Mark Carney, um, waiting into the debate was a, was a bit of a game changer. I think it is the insistence by many big financial influences that this is not about tree hugging and this is not a sort of hobby that people wanna bring to work with.
And I think that chorus of voices gets louder. The, the research behind that, that justifies the fact that this is a conversation about institutional level and system level risk. We've got more and more evidence of that. So I think that's, what's allowed it to tip over. As I say, I, you know, I do think that it makes me quite sad that we have to say this has got nothing to do with anything except financial risk.
I think there's a bigger. Question there around why financial markets are so insistent on being amoral and where that leaves us with other topics around sustainability. We often complete climate change and sustainability as if they're the same thing. But I think, you know, as time goes on, we're gonna have to unpick some of the other components that.
They're gonna feed into a more broad sustainability objective and, and those will, will be stumbling blocks, but, but I definitely think that the big voices and the regulators coming in the regulators were nowhere to be seen five years ago. And now really that's, what's driving the conversation because even if you don't think that climate.
A risk to your business. You still have the regulatory risk that's coming from from that side. So no matter where you are sitting in the ecosystem, you really are now that the regulators waited in gonna face some serious obligations and some risks, if you don't get those rights. So I think that's probably a little big job of that.
[00:11:50] Jenn: Wanna come back to some of the most important pieces of regulation that are, you know, really enabling this shift. But one of the things that you said off the top, uh, of this interview is that you're seeing some trends come around and around. Like, there are some things that come back again and again, and I just, before we move into regulation, What are some of the trends that seem to be a bit repetitive, that once you're in the space for a while, you see them, when you say, ah, okay, that's gonna be here for a couple years and then we move on.
[00:12:25] Sophie: So I think the big one is divestment engagement. So this debate that constantly rears its head. About whether you sell out of a stock or whether you stay in it, um, and try and steward it to a better place. And I think the fight over which one of those is the right approach has kind of been won by the engagement guys.
But, but we see divestment come back into fashion from time to time and, and, you know, we saw, for example, a resurgence around. Post Exxon, there were a number of large pension funds that decided actually you are beyond in our views stewardship. So we're gonna get out. There was like a flurry of, um, it, it was in fashion again, temporarily there.
Now it seems to have gone back out. Obviously there was a lot of, um, divestment around the Russia situation. So we see these little bursts, but the, the kind of theory of change around investment engagement. Where as it's hit every few years, it's, it's a bit of a perennial one, which almost makes me roll my eyes.
Now, when they're, when I see it come up again and people say, oh, look at this really interesting debate that's happened. And I think, okay, well, you know, it's good to revisit these things. And actually it's something that I think is sustainable finance. We have to get better at is changing our minds and being honest about the fact that we've changed our mind.
I think we have a real block against coming out and saying, oh, well, we tried that and it didn't work. Or actually the world looks different now. So we've applied a different approach. There seems to be a real fear of, of doing that. The fear of. I think being accused of having got it wrong the first time.
And therefore ESG is not just same for finance is not seeing a lot of that at the moment, but certainly, uh, in divestment engagement, there is a little bit more of that revival of these ideas and people changing their minds in different ways. So that's, that's the kind of key one that comes to mind.
[00:14:13] Jenn: And of course, by divestment, you are referring to saying, okay, well, we are going to get out of a particular sector, whether it's oil and gas or.
Arms or, you know, these are our sectors that we're not going to, to invest in recently, we saw that the ESG community decided that defence in certain instances made sense to invest in given, uh, recent developments in the Ukraine. And there was a large conversation wasn't there about when we put lines in the sand, are we just sweeping the sand back into the line and drawing it somewhere else? And if so, what does that mean about us being organised when it comes to ESG, others would push back on that view and say, look, this is, this is pioneering. You know, this is a changing field, and we've got to constantly ensure that we have a conversation about the right approach moving forward. So it's a really interesting debate, but I think that what you're sharing about the divestment.
Conversation is really interesting. Another thing that I'm hearing is that it's very difficult to influence when we divest. It's very difficult to, you know, be around the table, influence, you know, push in the right direction, et cetera. And you know, a response to that could be. Well, it depends on who you're around the table with.
Right. Is it a top performer middle of the pack or is it one of the worst performers? And so what influence are you gonna have around the table? I'd love to hear what you think of that.
[00:15:46] Sophie: I think one other response to that is that it's pretty difficult to create change when you're engaging too. I mean, all of the evidence points to the fact that not very much has changed.
As a result of, of stewardship efforts at the moment and stewardship efforts in the investment community are extremely sophisticated. And there was, you know, real efforts through things like climate, actually 100 plus, and some of the smaller engagement initiatives, collaborative engagement initiatives, so really mobilise and put weight behind companies.
But even when you do it at that level with trillions and very clear demands, and actually not asking in the main for people to change the way that they're doing business. You know, a lot of the emphasis is on disclosures and lobbying and things like that. And it's still hard to get wins. So I think there is an argument that either way it's pretty difficult to affect change at these companies.
There's a lot of companies out there and there's a, you know, investors have to own a small amount of, of a lot of them. So having enough weight to really change the game is, is difficult on either side. But I would say, and I'm not an anti-D person too. I think there's a place for divestment, but I would say that.
I've got a theory that if we changed the word divestment for sell it to someone else, it would be a less popular approach. And essentially that's what it is. Right. But it doesn't look as sexy on a, on a placard. That's really the problem with divestment, which I think is, is a valid thing for investors to be concerned about.
And other people concerned about that, that you can't just. Get rid of it. You have to sell it onto someone else. And you have to think about who would be buying it in this current landscape and whether they are going to do the right thing with it or not. I worry that that can be a real cop out because you know, a lot of the time, if investors are being honest, they're owning these things cuz they're in benchmarks.
If they're not actually able to make. Decision on diversity engagement with a lot of these things, but they will argue for engagement because it's really the only option they've got on the table. But I, but I do see the argument that if you are simply selling your, your sort of bad stocks to another buyer, then.
But the world keeps spinning and, and you may, as you say there, some of that influence,
[00:17:53] Jenn: I wanna come back to the most important pieces of policy legislation that are really driving, uh, sustainable finance in the right direction you cover or have covered in depth, uh, EU policy, uh, Sophie, but imagine. That you know, you're new to this space and you don't know any of the fancy acronyms at a very high level.
What are some of the important pieces of legislation globally that are really pushing this conversation forward?
[00:18:26] Sophie: My oh my there's a lot. Um, so the EU has really been the driver of this. It was the, the one that came up with the idea of, of getting involved in sustainable finance, through financial regulation and.
I guess the kind of flagship pieces of policy for them focus on defining what business activities are aligned with Europe's ambitions on climate. And they do that through the, the taxonomy, the good old taxonomy that makes many people's, uh, heart race for different reasons. And that's essentially a, a sort of.
Dictionary of what business activities are, are as far as the EU is concerned, gonna help it get the net zero in the timeframe that it wants to. Oh, and I should say on, on taxonomy, other taxonomies are now being developed in all kinds of other jurisdictions in Malaysia and in South Africa and Russia and Mexico, Canada.
Um, I think Australia is still pursuing. So what that looks like in five years time, we don't know. I think the big disaster would be. Everybody had a different set of supposedly science backed business activities that aligns with climate. I think we may end up in a situation where we might as well have not bothered, but hopefully there'll be some alignment.
And there's certainly efforts to align on that stuff. The other big objective of regulators is disclosures and that, that takes place across all kinds of there's all sorts of regulation coming in through the S sec and through the EU and in the UK are focused on both how. How investors disclose information around their products and around their investments and their own policies.
And then how companies disclose that information on the sustainability of their business activities. So there's, there's a whole slew of disclosures regulations across many, many jurisdictions that are. Attempting to get this information out into the world in a way that's standardised and can be used by investors and other stakeholders to make sure that people are a contributing to particularly again, to decarbonisation, but also to make sure that they're not miss-selling.
So this greenwashing piece, um, which we've seen really step up in the last 18 months and mostly linked to those, those regulations,
[00:20:38] Jenn: that makes a lot of sense. And one of the topics that you wrote on recently is. perhaps not regulation related, but voluntary standard related with private markets that we're seeing the UN principles for responsible investment teaming up with organisations.
This ties to your work with pensions, you know, institutional limited partners association and trying to figure out what questions should we ask private equity and further, even for younger companies. And venture capital. What questions should we be asking there? Can you help the audience understand a bit that space where it might not be the deep public disclosures that you'll get with a publicly treated company?
Like where is that private space going?
[00:21:28] Sophie: Yeah, it's a really good question. And it's a really important part of the next phase. I think of what regulators are doing and what large investors and asset owners are going to be doing because ultimately, you know, we've spent the last. 10 years fiddling about with public equities and really that's not where change is gonna come in.
The real economy, you know, bond markets that, you know, there's lots of tests of concepts that have taken place in these larger asset classes. And I don't mean larger by size, but you know, these portfolios where transparency is, is more embedded into them already. So they're a good starting place, but, um, It's moving down the ecosystem and, and towards the, the private markets, the venture capital, cuz really that's where the next generation of the big, the big system, the important company's gonna come from.
So there's a lot of attention and there's a really tricky dilemma there that there is some coverage. So they are unlisted companies are covered by some of this disclosure regulation already and we'll continue to be kind of folded into it. Obviously there's a lot of burden there for these smaller companies.
They don't. To have, and it's unfair. I think most people would agree for them to have the same requirements around disclosures as the large players. But the flip side to that from a regulatory perspective and more broadly is that if, if you don't. Socialize these expectations in you actually disadvantage those companies as they get bigger, because they just won't be able to compete.
They won't be able to get capital. You know, investors will have expectations that they simply aren't able to meet. So there's a difficult balancing act going on at the moment. And then some of the thinking that's being done by rule makers and large investors about how to get it right with smaller companies to make sure that they're disclosing enough, but not so that you're really gonna disadvantage.
In the markets terms of resources, ratios, it's gonna be interesting. And, and I certainly think there's a, a really big focus and, and it will continue to grow over the next few years as to how they fit into this puzzle, because that's really where the change is, is gonna happen.
[00:23:34] Jenn: I was looking at a report recently that described an element of what you've just provided a really thoughtful overview on, which is when you look at carbon emissions, greenhouse gas emissions at disclosures for private companies versus publicly traded companies.
There's a golf between them less than 1%. Of private companies are currently measuring their greenhouse gas emissions. Now this is something that Re:Co helps private companies with and we've been really happy to see. The convergence project with ELPA. And I think BCG is supporting it where they've come up with six indicators that the majority of institutional investors are looking for private equity firms to be disclosing.
And we see that as really hopeful. Uh, we also see that if you don't have perfect metrics to begin with, you can still. so coming back to your point about action, I'd love to get your point of view, Sophie, on four companies out there who are just starting, you know, they might even be big companies with several billion of revenue, but they've never been, they're not publicly treated.
They're new to this journey. They see all these net zero announcements. Do you have any advice for them in terms of how to. Look to the future and think about how to pursue net zero. Even if it's not that, you know, they have shareholders that are breathing down their necks, but they know they want, they wanna do something, but they're not quite sure where to start.
[00:25:07] Sophie: The calculation of your emissions is obviously kind of a essential part. And I think we've come so far over the last. Five 10 years in terms of quantifying and having standardised metrics. So P cap, which I'm gonna get this wrong now is another one of the millions of acronyms with the partnership with carbon accounted financials.
I think it is there an organisation that is developing methodologies for different groups of the financial systems to calculate within their own. What they need to in a meaningful way around carbon emissions. So there's really good resources like that. There's, there's work being done by all of these large institutions.
And I think that's one thing that really the collaboration that's going on makes it much easier for new interests to find the organisations that they, somebody will be doing it already. And, and there's a, there's a lot of opportunity to, to go there with it. And, and the obvious other thing. Identifying the area where you can make the real difference.
Cause I think the idea that every company should be focusing on, I don't know, it's it's scope three emissions or it's, you know, whatever part of the, the chain or it's activities, it's gonna be different for different organisations. And I think importantly being honest about. Not only can you make the difference, but where do you need to make the difference as an organisation and having that conversation internally and also, I mean, bringing together the right people within companies, that's something that I hear a lot, you know, that there's, there's been a lot of education within companies about actually these are not the normal set of people you might have around the table.
You, you know, these new partnerships are gonna have to form internally as well as the collaborations that are going on outside in order to have the expertise to. To really identify those material errors and the areas where there's the kind of low hanging fruit as they like to say in our, in our world.
But, um, collaboration internally, externally, I think.
[00:27:00] Jenn: that makes a lot of sense. I wanna turn our lens to the future. Now, Sophie, we've talked a bit about what you've seen over the past 10 years, the important policy developments, and I'd love to know just to start with a big, broad question. I'd love to know if you think to the next, let's say like the next three to five years, what are some of the key trends in ESG and responsible investment that you think we're likely to.
[00:27:28] Sophie: Wow. I think they're gonna come fast. I think this politicisation of, of sustainable finance is really gonna be absolutely essential. What happens over the next 18 months in terms of this tag of war? Yeah. I've spent a lot of time thinking about this, you know, this, um, ESG pushback as everybody's calling it, particularly in the us, you know, this only really.
The us got involved in a sort of serious way in the sustainability conversation around 2019, I would say around the timeframe that you were talking about it going off, because that catapulted it into the mainstream, but it also came with its own set problems, which is that we now have this very, very politicised conversation around sustainability.
And I think that's gonna play out. And as a journalist, I've been doing a lot of sort of fear stroking around the role of the media in getting that right. I think there's a. Parallels with other big moments we've seen over the last 10 years in political and economic milestones, you know, I'm a Brit and I'm thinking of Brexit, but I'm also, you know, with lots of things around the, the pandemic and where there was a real polarisation.
And it was like, you need to choose whose side you're on. And, and there's no room for nuance and there's no room for thoughtful conversation and, and learning from each other and, and empathising with each other's perspective. And I, I think that's happening at lightning speed and sustainability at the moment that polarisation, which is quite worrying. I mean, we should be pleased that it's happening because it's happening because it matters. And people didn't care about this eight years ago, you know, you wouldn't find state officials writing to investors, telling them not to divest cause nobody cared and it wasn't affecting the cost of capital.
So the fact that it's happening I think is I try and be optimistic and say, it's a good sign, but should be pleased that this for is happening. Cause it shows. , this is really having an effect on the cost of capital and, and it's worrying people, but it also has the potential to really undermine. Credible progress and, and to frighten regulators off, because if it looks like public sentiment is against sustainable finance, then they will take that into account history would suggest.
And, and I think the media and all figures involved in this on all sides to have a real responsibility over the next three years to make a concerted effort to. Calm that down and to make sure that the debate is as healthy as it can be, because we are going to have to make a lot of mistakes. There's gonna be a lot of trial and error, and it can't be left in, in the hands of sort of two sets of political ideas.
That's not, you know, we can't, we can't live without sustainable finance. I would argue. So we need to not. Get to the point where it's sort of like a sort of west side story set up where there's two gangs of the, of people sort of, uh, going after each other. So I think that's gonna be a really big thing, seeing how that plays out over the next 18
months
[00:30:23] Jenn: And Sophie, for those, the centres who maybe haven't seen the headlines coming outta the United States is an example I'd love to hear from you.
Some of the, you know, main stories coming outta the us where you've thought to yourself. Ah, okay, this is a major trend. We're seeing this politicisation is a big deal and it's going to have to be contended with what have been some of the headlines that have really struck you where you said this is potentially shifting our conversation.
[00:30:55] Sophie: There've been a number of state senators. So I think I hope I'm gonna get this right. The state Senator of Arkansas a few weeks ago wrote to Larry Fink, the head of flat. To express his outrage at BlackRock's collaborative engagement efforts on climate change, particularly through climate 100 plus, which is this big multi, multi, multi trillion dollar investor initiative where they try and target the most important carbon S and convince them to, to do things differently, their accusations.
And it's not the first time of acting in concert, which of course Blackrock and all other investors involved in this strongly deny. But there. A real attempt by some people to take the collaborative engagement efforts and to argue that they constitute acting in concept and therefore are a sort of breach of market rules.
So that's something that's been happening popping up across different states and that different parts of, of the investment community have, have had to answer for, and it being threatened with litigation and all kinds of other things to try and squash that. And then there's the big figures. There's the Elon Musks and the tar fences, and you know, who.
all kinds of different views, but they are large big names saying this isn't working ESG, sustainable finance. Isn't working. You know those debates. I think of a lot of oxygen and, and have really thrown some doubt into the market on whether this is the right thing for, for people to be doing and in the UK as well.
I mean, I think it was the pensions regulator a few weeks ago that put out a note to the UK's pension funds, advising them against what they described as work capitalism. So this kind of language around ‘wokeness’ and snowflakes is creeping into sustainable finance in a way. It just hadn't crossed my mind naively that it would, it would just sort of find its way into our little world.
Um, but it has, and it's, it's not just in the us, but certainly it's being driven by these, these big moves. It's also big moves in the. In some states to stop asset owners from divesting. So asset owners and banks that might have rules around like not investing in fossil fuels or having some kind of screens out on climate grounds are being ruled out of state investments and state contracts, which that seem to be undermining the fossil fuel industry, which.
In some states obviously essential part of their economy. So there's, there's a few ways that this is happening that are very concrete, as well as the sort of fluffier language around the
edge.
[00:33:26] Jenn: It's a great overview. Thank you, Sophie. One of the things that we heard from a, another guest on the future end sound Amory Lovins.
The founder and chair of Rocky mountain Institute, he is famous for working with people in the us of all different political backgrounds. And he talked about this idea of being motivation, agnostic. It doesn't matter whether you want, you know, energy security, or if you want to reduce carbon emissions in avert climate change, we're working on the same thing or reduce your costs, uh, when it comes to energy, we're working on the same thing.
So let's, uh, roll up our sleeves and work together. And I thought, I'm thinking back to that as you provide that overview and it seems to be probably the way to cut across. The or stand in between the two gangs, if it's a west side story.
[00:34:23] Sophie: Yeah. I think the whole energy conversation in the short term will be really a difficult one, obviously.
But from a climate perspective, I'm talking about specifically. But I think that what you just said is, is right. That ultimately there will end up being even more people with the same. They might have different ideologies, but the end result needs to be more renewable energy and, and rethink of the energy systems, um, for whatever reason.
And if we can just. Get over all the rest of it and put our shoulders to the world. That's the only way we stand a chance for. So yeah, fingers crossed.
[00:34:57] Jenn: So politics coming into ESG is one of the themes. Are there any other major themes as you look to the next three to five years that you would love to bring up with the future and sound audience?
[00:35:08] Sophie: Well, yeah, I think supply chains and social issues are going to. I think we're seeing that where EU regulation has focused on climate. It's now quite quickly expanding out into social issues. How well it will do that is anyone's guests. I think it's got a big task on its hands to try and quantify things like social activities as a taxonomy in the way that it's doing with, with low carbon activities.
But it is trying to do that. I think the pandemic really brought some of those issues. The agenda around working conditions and, and supply chains and the treatment of people all the way through the value chain. So I think those things will become part of the conversation hopefully more. And that will, as I say, extend that towards the conversation that supply chains.
And I think alongside that, the conversation around. Value chains on carbon as well. This scope three conversation, which is a very geeky and boring one, but it's a real game changer. If you're talking about who's taking responsibility for this issue of, of climate change, I mean, think was described as a battleground a few weeks ago in there, one article, but it's, it's that, that area where we're gonna have to do the.
Thinking around trying to work out who is responsible for what emissions indirectly and, and how we calculate emissions in value chains. So, yeah, just extending those topics out through supply chains and value chain, I think will be a really big topic over hopefully I guess, five years.
[00:36:46] Jenn: A more holistic, uh, point of view, moving beyond scope one and two.
And for those listeners that aren't familiar with scope one, two, and three scope. One has to do with the energy used and the carbon emissions generated by your owned assets. So if you have a plant or an office, it's the energy, the fuel that you use, the natural gas. Heat your building, for example, or your vehicles, gasoline petrol, uh, depending on where you're, you're listening from today that is used to fuel your vehicles.
Scope two is the electricity that you're using in your owned assets and then scope three is all the rest. So it can be the things that go into your product or service. For example, if you're building a bridge, uh, the materials, the steel, or the concrete that you're using, um, to build that bridge or the things that happen after you sell the asset or the product or the service to your client, I should say.
And so that could be things like if you're selling oil and gas, how is your customer using it after, after they buy it from you and they stop at your petrol station? So that's the overview. And so often when we talk to corporate leaders, you know, the vast majority of their greenhouse gas emissions over 90% is coming from scope three.
So I think that's a really important trend that you've pointed out. the drafting of the S E C rules related to this show that we're, we're probably going to see some guidance related to focusing on financially material scope, three buckets. So completely agree with that. Sophie. Now we're coming to the, to the last couple questions in this interview, which is a shame, cuz there are so many questions I'd love to, to ask you Sophie.
One of the final questions relates to greenwashing. So you brought this up earlier. It's part of the backlash, uh, against ESG. And I know that you've been asked this question or, or related questions to, to greenwashing so many times, and you're a bit sick of it, but I'm gonna ask it anyway and maybe from a slightly different vantage point.
So imagine that you are the CEO of a large services company. and you see an opportunity SG, maybe you're an account. and you wanna go for it. Right. And you wanna show that you're leading. How would you given your experience, think about greenwashing. Like how do you define it and how as a leader, do you avert it?
Make sure that you're not engaging in any kind of greenwashing.
[00:39:28] Sophie: Yeah, that's a tricky one. Cause so much greenwashing people always talk about greenwashing as if there's some sort of panto on villain behind closed doors who really wants to mislead the world. And in some cases, That is what happens. But in a lot of cases, it's that they haven't kicked the tires and they don't have the expertise to actually understand that they might not be fulfilling what they say, or there might be a lack of knowledge there.
So I would say, I mean, the first thing is make sure that you have some expertise in your, your own company. I mean, we hear now everybody is. ESG expert. Everybody is, you know, everyone's linked in bios. Something like they're one of the leading voices in, in climate risk or whatever. Um, they're not, most people are still pretty new to this, but finding the right people to, uh, to have the scientific expertise, as well as the understanding of the, the context I think is really important for organisations.
And I think that's why we're seeing this real battle. For staff at the moment, you know, there's this quite well known hunt for, for credible sustainability people. And I think that's because companies are waking up to the fact that they need to have people in house that have the scientific understanding, but also the knowledge and the kind of context to say, hang on a minute.
That's not gonna go down. Well, you know, we, we don't do that anymore or this has already happened. So I think that expertise is super important. And I think walking before you can run, I think that there's a desire sometimes to pump, press releases out into the world with these huge commitments. And to make these massive statements.
We've seen some asset managers, for example, with funds that are labeled the best world saving companies fund. And they're sort of quietly renaming those funds with sort of good intentions companies, because I think there's a realisation that this real hyperbolic language that's been adopted by companies and by service.
You know, everyone in the ecosystem really needs to just calm down a bit. We need to be a bit more honest. And I think the role of the regulators in that has, has really sharpened that focus. We've seen enforcement actions really for the first time ever on greenwashing over the last 18 months, we've seen the S E C move.
We've seen B and the German police move, and we've seen some consumer watchdog groups in other countries in Europe actually take large institutions. Court for misselling because they're saying, look, you know, you might know that you're just doing this for marketing reasons, but actually your everyday person on the street believes you when you say that this really contributes to.
So I think just everybody's calming down. I think any institution that would be thinking about going down ESG route or doing this just needs to make sure that they don't get over excited that they do the research and the background. They have the expertise first and that they're very, very conscious about. Istic about the way that they're putting out to the world.
[00:42:18] Jenn: Where do you go recruit at Sophie? You're the CEO of this services company, you know, are you going to geography, schools, environmental? Are you looking for people with environmental science backgrounds? One of the questions that I constantly get is it's so hard to find this combination of skills because it's a relatively new field.
Like where do you go? Yeah.
[00:42:43] Sophie: There's a definite lack of, of people with this knowledge and, and I don't. Know what the answer is. I mean, I'm obviously, uh, biased because I am affiliated with Oxford Smith school. So I would say go there and, uh, get all your, the brains from there. But, um, you know, I do think that there's a lot more scope for academic engagement on this.
And I wonder also whether people are moving much more towards almost portfolio E careers in, in sustainable finance, where they can advise more than one organisation, or there's a lot of partnerships that are going on with academics and with scientist. I think apart from, and I might be totally wrong here, but off the top of my head, apart from COVID, I can't think of a time where finance and science have collided in the way that they do with climate change.
And I think that's something that we're all getting to groups with is how do you bring people with regulatory and compliance, understandings, finance, and then. Science and you, you are right. It's incredibly hard to do that. And I think there's a lot of work being done to try and work out the best way to do that.
But again, it's very hippy dippy of me, but the collaboration component of sustainable finance is gonna have to be one that, that seeps through our think into the recruitment as well, because there isn't gonna be that many people in the world, the knowledge to do to do it
all.
[00:44:03] Jenn: Everybody going straight to the Smith school at Oxford.
They'll have Sophie to blame for having no more researchers because everybody's joining the ranks of corporates. That's okay. I'm sure many people they're oversubscribed, uh, for people who wanna do research with the Smith school. Sophie, my last question for you. And my favourite question, because I learned so much from people like you, who join me on this podcast.
If you had to name one book, That has really shaped your perspective and your work that you would recommend,
what would it be? What would it be?
[00:44:42] Sophie: Um, I'm actually, I'm re-listening I read it the first time, but I'm listening to it again now. Um, Mariana MASU, car's that on the value of everything, which is, uh, a great book.
I'm sure many of your listeners have probably read it. Cause it's. It's been around for a while, but it's, uh, it's a book about the nature of value in a global economy. And who does the taking and who does the making and why we don't reward those things in a healthier way. And I think it's a really important for me.
It's a really important book because it, you know, we talk about sustainable finance and a lot of the time we're talking about a bit of jiggery pokery and tinkering around the edges. And I think it's really important that everybody who's involved in the conversation around ESG and sustainable finances, thinking also about those fundamental questions, because what we don't want is to get to a position in 10 years time, what we've got all of the disclosure you could possibly wish for.
And we've got all of the enforcement actions you could have on greenwashing and everybody's giddy, but actually the system, it still really doesn't do what it ought to be doing on a more literal sustainability ground that it, that it needs to. We need to rethink and be conscious of the way that financial markets are contributing to, to the world.
And obviously that world has to be low carbon. It has to respect you right. And all the rest of it. But, uh, she, she's a fantastic academic and, and economist who really dives deep into that idea of not socialising losses and privatising gains, but actually thinking carefully about how you make sure that value is actually being created rather than just.
[00:46:29] Jenn: Thinking more, widely, more broadly about value creation. I think that's a fantastic recommendation, Sophie. Thank you for joining us on the future and sound podcast.
[00:46:40] Sophie: Thank you very much for having me.
[00:46:57] Jenn: Thank you Sophie. For joining us, you can learn more about her work by checking out the links in the episode description or by visiting re.co.com/the future and sound. The future and sound podcast is written and hosted by Jenn Wilson and produced by Chris Attaway. This podcast is brought to you by Re:Co, a software as a service company, helping clients achieve resilient, competitive advantage in the long term, if you enjoyed this podcast, don't forget to tell a friend about it.
And if you have a moment, read us in your podcast. Until next time. Thanks for listening.