Episode 3 transcript

Transcript

Anna-Marie Slot:

Welcome to another episode of 30 for Net Zero 30. I'm Anna-Marie Slot, the global head of sustainability in ESG here at Ashurst. And it is my pleasure today to be joined by Esther Pan Sloane, former diplomat, and Head of the Partnerships, Policy and Communications at The UN Capital Development Fund. Thanks a lot for joining us today, Esther, and maybe you could give us a little background on what you do and what that means.

Esther Pan Sloane:

Thanks Anna-Marie. So I'm the Head of the Partnerships, Policy and Communications at The United Nations Capital Development Fund. That's a UN aid agency that focuses on using finance to help the poorest countries in the world, which in the UN are known as the least developed countries. There are 46 of those. So we use finance to help them develop economically. And the focus has been really looking at poor people and how to bring them into the market through financial inclusion so that they have access to savings and credit. It's on helping private sector companies expand their services to the poor and to see the bottom of the pyramid as a legitimate market segment. And it's about helping local governments learn how to manage their public finances in an accountable way that consults with the local population. So that's building roads and markets that can help individuals access customers.

Esther Pan Sloane:

It's about building bus stations that improve transit connections between poor communities. And it's about having accountable procurement and contracting policies so that citizens know that the public sector is using their money effectively. In the last few years, we've also started making loans and guarantees directly to small and medium enterprises in these least developed countries, to show that it is both possible and profitable to support companies at the base of the pyramid that provide impact on Sustainable Development Goals, as well as a service to their customers in a way that's financially sustainable, so that they can survive as for-profit companies.

Anna-Marie Slot:

So a lot on your plate, it sounds like, and a really interesting intersection, I think, between sustainability in those countries. Obviously, those countries being highly, highly impacted by climate change. What do you think is the biggest shift that you've seen over the last 18 months regarding sustainability and ESG considerations?

Esther Pan Sloane:

I think the biggest shift is just the amazing speed with which the attitude towards these ideas has moved forward. So before coming to this job, I was a U.S. diplomat and I happened to be on the U.S. team that negotiated the SDGs. And when they were adopted in 2015, the idea that business would accept climate targets and actively make commitments to meet net zero targets on a time-bound measurable way was a dream. I mean, people really have been hoping for this for many years, but there wasn't a sense that it would be adopted or even accepted and certainly not embraced by the business community. And now you're seeing GM making an announcement that they're going to only sell electric vehicles by 2030, the head of BlackRock telling all of their companies that they have to focus on climate and social responsibility.

Esther Pan Sloane:

We're seeing more and more investment options in vehicles about both climate commitments, as well as social justice commitments, reflecting some of the demonstrations and unrest in the United States and other countries last summer. So I think the speed with which the business sector and corporations and the financial sector have taken to both climate and social justice commitments has really astounded me, and I'm thrilled to see it.

Anna-Marie Slot:

Yeah, no, really interesting background, obviously, having been on the ground from the governmental side. And it's really interesting obviously because everyone gets into these conversations, who needs to take what step. And infrequently there's... If you're sitting in one camp, you're referring to the other camp. So if I'm sitting on the government side, well, private business needs to step up. If I'm on the private business side, well, government needs to step up. And I think particularly in your role right now, you have a really interesting cross-section between those private and kind of governmental with the focus that you're bringing. What do you think maybe if there was one kind of specific action that you would have people focus on in this near term, in this next two to three years, what do you think could be the real game changer to deliver on these net zero promises that people are coming out with.

Esther Pan Sloane:

I think it's corporations making net zero commitments for their own businesses. We've seen that there are governments that are more or less welcoming and accepting of climate targets. In the United States, it's very encouraging now that the government or the administration is focusing very strongly on climate targets and we'll move actively on them. But we also saw that when there was an administration that was not open to climate at all, business still took action. And from the United Nations' perspective, it's very encouraging to see how fast and how strongly business can move by itself. So we see companies like AB InBev setting very ambitious targets for itself for 2025. And they were so ambitious on things like water usage, electricity savings, reducing waste in every part of their value chain that they set up their own venture capital firm to invest in solutions that could help them as a corporation meet those targets sooner.

Esther Pan Sloane:

So they are both taking action on their own, but they're also seeding a whole generation of companies that do things like recycle every part of your garbage. And those companies will hopefully thrive and go forward. We're seeing tons of interest from investors on these types of issues and supporting those types of companies that have new solutions to these environmental sustainability problems. We're seeing demand from pension funds to have investments that reflect environmental concerns, as well as social concerns. We'll hear from a Nordic pension fund, we have a hundred million dollars to put behind gender, what have you got? And so we're seeing that there's demand for these types of vehicles and investment options, especially. So I would say business... Of course, government has to set the tone and give clear direction about which way they're heading. And we've seen the European Commission be very strong on this and we think their latest guidelines for private sector engagement and fiduciary responsibility for pension funds will be the best in the world and the most progressive about things like commitment to environmental impact and social impact.

Esther Pan Sloane:

But there's a ton that business leaders can do by themselves. And so I would say they should take action and not wait for governments because they can move ahead by themselves and make a lot of progress for themselves.

Anna-Marie Slot:

I would agree. So a collective problem, but interestingly, perhaps in some ways, an individual response. I think the latest number I was hearing is 1500 companies have now committed to net zero. It's also an interesting question, obviously. Net zero, no one's really, there isn't any defined term around what that means or what is that in precise words. So an interesting aspect of, I think, those net commitments are, what do you actually mean by getting to net zero? And what does that mean for your organization? And that gives companies, obviously a lot of flexibility in coming to the table on this. If I can ask, you can answer in either your private or your professional capacity, but what is your own thinking around net zero and your own ESG and sustainability commitments? What are you looking at in the next year as a goal?

Esther Pan Sloane:

That's a great question. And I agree with you on the definition of net zero. I really only heard this maybe at the beginning of last year in professional conversations. And I think it's very much like the phrase impact investing, right? What does that mean? And a lot of it is self-defined. So one of the issues that we're having now is we're seeing a lot of investment vehicles come out and call themselves impact investments or aligned to the SDGs, the Sustainable Development Goals. But companies are creating their own report cards and then grading themselves. So I think there is a lot of variability in this space. But at the same time, if you're a corporation, wouldn't you rather define your own targets than wait to have government or somebody else come and tell you what it means and what you need to do.

Esther Pan Sloane:

So we're seeing also a lot of consumer demand and pressure on corporations in the United States to say, what are you doing on environmental sustainability social justice? Millennials and consumers who are young and including some who are not so young are demanding transparency from corporations where they spend their money. They're saying, what are you doing? And if you're not taking action on this, I'm not going to support you with my dollars. So personally, I mean, I think this is an interesting question, right? Coronavirus has made my climate footprint very small because we don't drive. I'm not flying anymore. I walk around my little island. So I would say my family has maybe used a car for a hundred miles in the last year or something like that. So my kids are biking to school. We try to take public transportation or walk or bicycle wherever we can.

Esther Pan Sloane:

We're reducing our use of single use plastics. So we're trying not to buy things that go into the waste stream. We compost. And interestingly, during the beginning of the pandemic, they stopped picking up compost at our local farmer's market in New York City. And the volume of my garbage increased by 80% because of all the food scraps that were going into the waste stream. So just in that small example, I can see just in my family, what an enormous difference it makes to compost. So we're doing that. But I would say also we're really pushing, putting pressure on our investment advisor to say, what are some impact investments? I would like to see more options in my portfolio. I've been asking this question for the last five years and usually you get an answer, like if you want ESG investments, you're going to give up overall return. Esther Pan Sloane: Or the market is too new. There's not enough track record, we can't do anything about it. Or index funds just have to buy the whole market, so you can't make any changes. And that's part of why I left my last investment advisor, because I know there are options out there. UNCDF has created one which trades on the New York Stock Exchange called SDGA. It's an exchange traded fund that we created the screen for that holds companies that have positive economic benefit and LDCs. So I know there are these investment options out there, and I feel like it's incumbent on the financial industry to tell people that there are these options and offer them as real alternatives to the way capitalism and capital markets have traditionally worked. So those are some of the steps that we're taking.

Anna-Marie Slot:

Sounds pretty comprehensive. I have to ask just because you offered it up. Having been on the inside of setting the SDGs, they are becoming more and more prevalent in just everyday conversations that people are having. People actually know what the SDG stands for, which I think is one of the big changes over the last 18 months certainly. When those were being set, when you were in that process, were there any of them that thought, that people thought were going to be more or less kind of galvanizing?

Esther Pan Sloane:

So one thing to realize about the SDGs is they're a negotiated process. They're kind of this interesting UN beast where every country in the world came together and negotiated them. And that was very different from the last development agenda, which was called the Millennium Development Goals. That was done in a very traditional UN way, where the secretary general convened a high-level panel led by Jeffrey Sachs and they got experts together. And the experts came up with the goals. And there were eight of them and they were mostly focused on health and education, but they were for poor countries and it was, okay, poor countries, here's your development agenda for the 15 years from 2000 to 2015, here's the millennium development goals. And what happened was poor countries said, nobody asked us and maybe maternal mortality is a big issue for somebody else, but my biggest issue is youth unemployment.

Esther Pan Sloane:

So it took a long time to get political buy-in for the goals from the very governments that needed to implement them. So on one hand you had kind of the Gates Foundation and other international funders supporting the goals and thinking they were great because they had measurable targets and indicators, but then the people and the governments that needed to implement them didn't have the resources or initially the political backing to carry them out. So there was quite a long delay before people really in a unified way got behind the MDGs and then the time ran out. So while there was really tremendous progress made on poverty and some of the health goals, it was not a universal agenda. So when time came to renew the development agenda for the United nations in 2015, poor countries said, hey, we have to be part of this process.

Esther Pan Sloane:

You're not going to have some experts tell us what our priorities are, we're going to tell you what our priorities are. So for the first time it was a negotiated process. It took three years. Every country put in their priorities, which is why the Sustainable Development Goals, there are 17 of them and they're much broader. They cover essentially every aspect of human life. Because for African countries, they wanted industrialization to be there. Nordic countries wanted gender equality, small island developing States, wanting to protect oceans. So that's why you see that they're quite broad and wide-reaching. So, we're thrilled, I'm thrilled. I'm sure everybody who was part of the process is thrilled that they've taken the... They've captured the public imagination in the way that they have, and that people are making decisions based on the Sustainable Development Goals. I think based on the record of the Millennium Development Goals, I would have thought that the health ones, the health and education goals, which are very pragmatic, would have been... that people would have gone after those first, right?

Esther Pan Sloane:

Because it's easy to count how many kids you get in school. It's harder to say, what is the quality of education they're getting in schools, but it's easy to... It's very concrete for government to focus on how many girls under the age of 10 are in primary school. And they can do that, and then they can count it. Some of the other goals like 17, which is partnership for the goals is really more about what we've been talking about here, bringing the public and private sector together, to work together, to make progress in a way that was not happening before. And the SDGs are the first development agenda that treats the private sector as well as civil society and other actors as partners in achieving the development agenda. In the past, it was actions for governments and it was really focused on what governments could do with support from other governments. Now, there is a really broad understanding that every actor in society has to share and take part and keep each other accountable, and that's the only way we'll ever meet these ambitious goals.

Anna-Marie Slot:

No. Definitely very interesting. And I'm hearing a theme in what you're saying around people's buy-in, either that be the company or that be in the process of developing an SDG, or if that's in the process of setting up your own financings and your own investments for your own personal portfolios. A really interesting key theme there in terms of that becoming part of how people are looking at this issue. Last question for you. If you could get just one person or one company, one organization listening in to take one action, what might it be and who might it be?

Esther Pan Sloane:

So I would ask every person to think about their own ability to act. One thing that struck me is that many people feel very helpless. They think climate change is this big issue, and there's not much they can do about it. But if you think of yourself as an actor, each individual who has a job and is lucky enough to be working during these tough times, you have assets. So each person gives to charity. They have assets that they invest. They maybe go to the pension fund, they're saving for education. So you have a range of assets that you use. And we ask family offices and very wealthy people to think of themselves, having a spectrum of finance. That there's a certain group of a certain part of your money that needs to make a return. For example, to ensure that you have a stable retirement, there's a certain part that needs to make a return so that your kids can... you can pay for their education.

Esther Pan Sloane:

But then if you look on the other side of the spectrum, there's money that you give away for free. Those are your charitable donations and your philanthropic work. So if you think of the spectrum of finance, there's different colors of the money, the money can do different things. And so one of the things we've asked people to think about is in your spectrum of finance, how is all your money supporting itself? So does your philanthropic giving support your investments? Do your investments support the same causes of your philanthropic giving? And if they don't, maybe you should think about bringing them more into alignment. So an example is many people give to say causes that fight climate change, maybe to protect animals or to restore wetlands or something, but if they're invested in broad-based indexes, they're supporting fossil fuel companies. So your charitable giving is in direct conflict with your investment funding, and you can change that.

Esther Pan Sloane:

You own those assets. You can decide where they go. You can say, I refuse to support fossil fuel companies or gun manufacturers or companies that profit from riot gear or companies that profit from hate speech. You can make those decisions and take your investment funds out of those companies. And that's a way of making change that's a lot more effective than standing in the street with a sign, right? Because a corporation can ignore a protester, but if lots of people start pulling their money out of the stocks of publicly traded companies, they'll start to pay attention. And even private companies pay attention to how consumers feel and what the social trends are happening. So I would say, please consider yourself and your power as an individual to direct your assets towards companies and activities that are consistent with your values. And if you find that your assets are supporting activities or behaviors that you don't like, move them.

Anna-Marie Slot:

Thanks, Esther, for all those thoughts and thanks for coming on today, we really appreciate your time. I think key takeaways there that I'm hearing are corporates to get going in this process to start sooner than later, to come up with their plans and drive the conversation about what those plans should be and how those plans work in the wider framework of the SDG and the international goals the governments are setting. So I think that's a really interesting one for companies to really come to the fore on that. And then supported by the fact that every one else, investors of all sizes and shapes are going to start looking at companies to deliver on these. So really interesting points and thanks again for your time.

Esther Pan Sloane:

Thanks Anna-Marie.

Anna-Marie Slot:

Thank you for listening to this podcast. We hope you found it worthwhile. To learn more about the issues we've just covered, please visit ashurst.com/podcasts. This 30 for Net Zero 30 episode is just one small part of our continuing podcast series, ESG Matters @ Ashurst. Make sure you don't miss any of our future episodes by subscribing via Apple Podcasts, Spotify, or wherever you listen to your podcasts. While you're there, you can also listen to our other episodes and leave a rating or review. In the meantime, thanks again for listening and goodbye for now.