Guest Blog Post written by Julie Tran during TBLI CONFERENCE™ NORDIC 2015. Views and opinions are that of the writer and are not the official views of TBLI CONFERENCE™.
When looking at the state of our world concerning climate change, poverty, war and financial crisis, most people would agree with me that it’s time to change. Change in our mentalities, consumer habits, the way we work, connect and collaborate with each other. But is it enough? Or do we need to take bolder steps, especially those who manage the flow of monetary system?
During the past 5-10 years impact investment has grown fast where institutional investors like pension funds are playing a big role driving the movement forward. But there is no growth without challenges. From my attendance of the TBLI CONFERENCE™ NORDIC 2015 in Copenhagen, I had a chance to talk with Philippe Desfossés, CEO of the French public pension fund ERAFP, about the development of impact investment and the implications that it contains.
We started the conversation by talking about the challenges that institutional investors are facing at the moment.
Philippe told me that the first challenge is to survive the low return environment that many pension funds are facing. But despite the low return, he believed that the biggest challenge is to find the right balance between financing the transition of our economy to a more sustainable one, and investing in people who can speed up the transition. It’s also about daring to think out of the box and finding new ventures that have the potential to be disruptors. As incremental steps won’t be enough if we truly want to reach for a more sustainable future.
While I was listening to Philippe, I couldn’t help but think back to the “good old days” where I studied innovation from Copenhagen Business School, learning about disruptive versus incremental innovation. Some would argue that incremental innovations are the most effective, as not all disruptive innovations ended up revolutionising the targeted industry. I wondered; could Tesla’s new home-based battery disrupt the electricity market, decentralise the power and bring out the changes that we need? And preferably not only in wealthy developed countries but also in small remote villages in Africa, Latin America or Asia? If we look at this from a very long timespan, perhaps the most interesting questions are; how will Tesla’s innovation bring out a shift in other renewable energy industries? How would that influence the choices of impact investors who are making the decisions right now concerning which renewable industries to invest in?
Last but not least, despite the fact that the cost of renewable energies is going down as Philippe told me, will renewable energies grow fast and strong enough so that we can end our use of fossil fuel before it’s too late?
“There is a lack of understanding” he said, and elaborating further that we need to move from “extract-produce-throw away” attitude to “reduce-reuse-recycle” mentality.
I couldn’t agree more. It reminds me of a story I’ve read in a magazine about a lady who changed her wardrobe every season! I remembered: “ 4 times a year, and I still have dresses that I bought 10 years ago?” But she recycled her old clothes or gave it to charity, so she said. Her story made me realised that recycle without “reuse” and “reduce” could never bring out the necessary impact that we truly wish for.
“We should trust the market- the market should provide the right information, which is not the case”.
Philippe explained to me that the way we price our goods doesn’t reflect the true costs of producing it. He gave me an example; the price of the cherries in the winter. How wonderful it is for us to be able to buy cherries anytime we want from the supermarkets, but the price doesn’t include the carbon emission produced by the transportation of the cherries from farmers to supermarkets. I must admit, his example made me feel a bit guilty for my love for mango! I live in a country where it’s impossible to grow mango in any season, and with the price of 2 Euros for a mango that I normally pay for, I’m sure that the price doesn’t include environmental cost.
The challenges are huge - so I asked for his opinion about what we could do about it. He talked about a need for new legal frameworks. Carbon needs to be priced as well as subsidies for unsustainable industries must be reduced. Further, we should think that the challenges can also unleash a wealth of opportunities. As the future is unknown, he wouldn’t be able to predict the time frame of the transition, but believed that it can go faster than we expect it. I guess it depends on our learning curve and our willingness to change and adapt.
I thanked him for the conversation while thinking that we may face the greatest challenge ever when it comes to climate change, but this is also an opportunity for us to transform ourselves to beautiful butterflies. If we do make it and don’t fake it. And I truly hope that we will make it!