Managing Director and Vice Chairman of Global Investment Banking at Credit Suisse, Mark Burrows, speaks at the high-level closing plenary session from the second day of the Global Landscapes Forum 2015, in Paris, France alongside COP21.
The closing ceremony takes a closer look at some of the initiatives that emerged through the Forum and offers a space for tracking progress as well as outlining next steps.
Mark Burrows speaks about valuing natural capital and the development of conservation finance, impact investing and green bonds. Green finance in emerging economies, he says, is changing the rules of the game.
Sunday, 6 December 2015
Global Landscapes Forum, Paris, France
I just wanted to really throw away some of my notes about the complexities of finance, and I just wanted to flick through them and bring you a sense of optimism and hope. Because, whilst certain people might represent the youth here, I am certainly the oldest investment banker you will see on the podium.
And one of the great things about being here, it’s very rare for an investment banker to be clapped so thank you for that. But I have a central point that is really important to every single person in this room with this sense of optimism. Today’s financial system will not deliver – and this is terribly important – adequate finance for sustainable development. And all this is despite historically low interest rates and a growing surplus of capital.
This is just so fundamental. As Kristiana said, where capital goes over the next 15 years is going to decide where we are able to address climate change and what kind of a century we’re going to have. It’s that fundamental. I was going to talk to you about the past in finance and the excesses that led to 2007 and 2008, and the crisis then. But basically that was all captured by someone called Mahatma Gandhi. He made a wonderful comment that I think sums up that whole period. Speed is irrelevant if you’re going in the wrong direction – and that is what was happening. We were going in the wrong direction.
So the second point is that this earth is for our ancestors but is also for our children. As the Indians said in North America, and the indigenous people in Australia said, we are here for those that follow us.
Now, the thing that is happening at the moment, right now, is that there is a whole wave of new financial instruments coming to play. The importance of me being here is not because I know Achim Steiner. It’s because, without me and the people that I represent, however unpalatable it may be to those of you who have to deal with the minute issues of landscape in the forests and lack of access to money, the people that I represent are the people that will ultimately make the difference.
And it’s really important to understand that the most critically acclaimed reports in terms of the leverage that’s needed puts the global finance sector as needing to provide 20 times all that is provided by governments, NGOs, and other philanthropic people. So the multiplier effect is enormous.
And this is not a problem because what’s happening is that we are starting to value natural capital. It’s very emerging, but we are starting to value natural capital. That is what has led to a thing called conservation finance. That is what has led to this whole new generation of jargon which is impact investing. And impact investing shouldn’t just be seen as an investment bank doing an amalgamation of green bonds. It should be investment banks doing impact investing for the least off in society, to assist them in terms of what they are doing. So we need to get that as a trickle-down effect.
But we’ve got conservation finance, we’ve got green bonds. I say to people that ask me, well what is a green bond? Sean Kidney, who happens to also come from the southern part of the world, who is the father of the green bonds movement, is quite irritated by this. Because I say a green bond is nothing more than an accelerated infrastructure investment debt instrument for large companies. And that’s what it is.
So I think what we need to do in the next five years is, as well as creating a robust and highly attenuated green bond market, what we should be doing is greening the debt market. That is what we should be doing.
Now, in terms of the future, our knowledge of the natural environment has now evolved to a point where the facts have changed. A consequence is that the natural environment is increasingly becoming a significant investment parameter. And this is real. Not just because of the underlying risks and opportunities, as expounded by Achim and others, but because of a new wave of associated financial policies, regulations, and standards.
And whilst there are fragmented conservations taking place at the margins of finance and sustainable development in the economic north, that’s here, a quiet revolution is taking place in the emerging economies that has the potential to radically change the financial playing field and the financial rules of the game.
And I think the thing that I’ve heard very little of over the COP since I’ve been here, which I think is – and I have been involved in the G20 from an Australian representative in the past. But I think the most significant thing that has come out, which aligns itself with what is being done in the COP, if I may so Achim, and what we’re talking about here, is the announcement by China that green finance will be on the G20 finance track for the first time.
This is the first new work stream that has come into the G20 for four years. And the Chinese will lead this in concurrence with the People’s Bank of China and the Bank of England. That is enormously significant and it’s big news. And when you look at Brazil and South Africa, the introduction of progressive financial regulation governing stock exchange and pension funds, the leadership you’re seeing in Bangladesh, Nigeria and Indonesia.
The old world is hesitant about change, and when I look through the list of attendees at the COP, I was embarrassed that I was amongst – if not the oldest, but I was certainly amongst the very few. And we need to engage with these people. We need to engage with the old west.
But my view is that the old west will be trumped by the emerging countries in terms of how they deal with sustainable development. Because, remember, for a lot of countries like Kenya, sustainable development and finance is the very essence of their livelihoods and their economies. Nothing is more important.
I just wanted to leave you with one sort of statement that I hope, if I’m invited back next year, it will be reality. My holy grail in terms of landscape finance and sustainable development is to have a billion dollar bond that either deals with restoration and protection of the Barrier Reef, restoration and protection of the peatlands in Indonesia – but something that is a debt instrument that is guaranteed by the centrality of the ecosystem itself.
To me, there is nothing different between a unique ecosystem and the very nature of sovereign debt. And if you think about it, I’m sure you’d agree with my premise. So I would hope that, in the next year, as this idea permeates among these western institutions, which is where the money is, that we can come here in a year’s time and say, this is a change.
But, at the same time, when we come here again next year, we’ll talk about the development of conservation finance, we’ll talk about the development of greening the bond market, we’ll talk about leveraging the debt market into providing the sorts of money that are needed by everybody who is represented in this world.
I thought about there have been a lot of quotes floating around the COP and it’s pretty hard to be competitive. But when I think about what’s been said, I luckily picked on one famous French writer, Victor Hugo. And think about this quote, it sums up everything I think this is all about: nothing is more powerful than an idea whose time has come.
Thank you very much.