Although not apparent at first glance, there is one industry that is being put under pressure to change as a result of climate change. That is the financial industry, which is noticing an increasing demand from customers wanting to make sustainable investments. The opportunities that the power of money brings are considerable, or so fund manager Sasja Beslik believes. For him, responsibility lies with the young generation of millennials.
Sustainable investments are more than merely “nice to have” and are increasingly becoming a “must have” in the investment strategy of many institutional investors and hedge funds, as a recent study conducted by the accounting firm KPMG has found. According to this study, large investment companies are no longer focusing exclusively on the absolute appreciation of an investment. Other factors such as investment strategies that are both profitable and socially and environmentally beneficial are becoming increasingly important, says Anthony Cowell – partner and head of asset management at KPMG – in his analysis.
Sasja Beslik has observed this trend, too. Beslik is a financial expert and since last year has been working for the private bank J. Safra Sarasin in Switzerland. Beslik, who holds Swedish nationality, heads the Sustainable Finance Development department, which is responsible for developing sustainable financial products. He is also a financial expert who wishes to raise the profile of sustainability and sustainable investment issues in society, an agenda that he pushes via his social media channels. After all, Beslik, who was born in Bosnia, believes that with money and influence comes responsibility, another reason why he is so active on social media, he says.
Beslik, who experienced the outbreak of the Bosnian War as an 18-year-old and later fled to Sweden, is also known for his sociocritical analyses – not something we see much of in the financial industry – in which he scrutinizes the sustainability of international companies like the fashion house H&M. In one of his most recent appraisals, he calculates that Stefan Persson, the chairman of H&M, earns in just four days what a textile worker in Bangladesh earns in their lifetime. Beslik has attracted considerable attention with his analyses because they expose a sore point in the system.
Focusing on millennials as investors
Beslik’s jargon-free approach is designed specifically to appeal to millennials, whom he considers to be the investors of tomorrow. The 47-year-old has specialized in sustainability ever since the members of his target group were still in their cradles. He first came into contact with the issue in 2000, he says, when most financial managers were still grappling with the new economy and the bursting of the dotcom bubble, not to mention when the thought of sustainable investment still seemed to be the preserve of idealists.
Despite his passion, Beslik seems to be anything but an idealist, though he is convinced he can see big changes ahead in the industry. “I’ve been doing this for a while now and I see the financial industry as a sector that can bring about huge changes when it comes to climate change,” said he. After all, there’s always money to invest. Customer demand means that the issue of sustainability as a decision factor for investment companies is becoming increasingly important. This will see more money invested in sustainable companies to support their development. This is why he believes that the financial sector enjoys a unique position when it comes to mitigating climate change.
But Beslik also sees opportunities in an increasingly globalized financial landscape and underscores his view with the following example: If investors start to turn their backs on the coal mining industry, companies will be forced to pay more for financing or even suffer financing problems on the capital market. This affects the balance sheets and share prices, meaning that any business in dirty coal becomes a less attractive proposition over the long term. From this perspective, collective action could enable the financial sector to achieve much more quickly the goals that are difficult to achieve through policy alone. If, say, global funds increasingly commit to making green investments, this would also have a positive impact on the investors’ profits. “You can give customers both: profits and a more sustainable world,” said Beslik.
This is why he is convinced that a lot will happen over the coming years in this area of ESG, the industry jargon for sustainable financial products. “We have no other choice,” said the fund manager.
Holding nation states to account
Another crucial factor, however, will be how nation states invest their money, as demonstrated in a recent analysis conducted by the OECD. The strategy here is to identify financial resources that help mitigate climate change. Nation states have so far played too small a role in green investments, says the OECD. For future investments, sovereign funds should demand more strongly that companies do business sustainably if they want to benefit from investment. The OECD believes that it may be advantageous for sovereign and strategic investment funds to cooperate more closely on this issue in the future.
Germany is leading the way
Looking specifically at Germany, we can see that a lot is happening. At the end of June, the German Federal Government announced its intention to raise €12 billion for the first time ever through green federal bonds. The government is waiting until the end of August to reveal exactly how the money will be used. The next step will be to create a framework for green federal securities. “We want Germany to become a pioneer in sustainable finance,” said Federal Minister of Finance Olaf Scholz and Minister of the Environment, Nature Conservation and Nuclear Safety Svenja Schulze in Handelsblatt.
The finance agency, which is the government’s debt manager, intends to build a “green yield curve” by 2021. This means that a green variant is to be available for all common maturities for government bonds of between 2 and 30 years. This is also important for the pricing of other sustainable financial products because the green federal securities act as a benchmark. This is why financial experts are excited about this trend.