Can you give us a brief overview of your work regarding sustainability?
I am responsible for corporate sustainability for HSBC in Germany, which is integrated into the sustainability management of the HSBC Group on a global scale. I have been a part of the Department for Strategy & Planning here in Germany since 2017 and have worked in the area of sustainability management for more than ten years already.
What can companies do to be more sustainable in their day-to-day activities?
At the moment, corporations are increasingly challenged to integrate sustainable activities into their company and make them a part of their core business. For the past ten years, I have been experiencing sustainability as a key topic that was however never integrated into the overall corporate strategy. Awareness in the financial sector – as I speak for a bank – has shifted drastically at least since the Paris Climate Agreement. Financial institutions have begun to realize that, as a result of climate change, new opportunities and risks emerge for companies, from a regulatory viewpoint, from the viewpoint of risk management but also from the needs of clients. This has made them realize that it is good to have a strategy to address questions of sustainability.
How would you respond to someone who suggests that it is not possible to be sustainable and profitable at the same time?
I understand the argument, as there is always the question of how genuine this whole thing is. Looking from the outside, it is hard to gauge whether the question of sustainability has genuinely reached the executive floor. Often, sustainability has been a bit of an exotic issue, that was a topic for the CEO, but it was also always an associated issue, meaning it wasn’t integral to the company. By making it an issue for the whole board and by it coming also from the point of risk management, the opportunity now is that it is seen as a genuine concern, and not just a marketing strategy. The opportunity is that we see that at the end of the day it can also cost money if it is not considered – and that if it is not considered, that we can be outrun by our competitors, which is another important aspect.
Looking at the bigger picture, how do you think the private sector can contribute to tackling climate change?
This is the most important point. The private sector has leverage, the financial means that have to be provided to achieve climate neutrality in the first place. In this context, the private sector is of high significance. We know that the investments that need to be done now will pay into climate neutrality. The means that they have to be provided now, on the side of investments, and these assets have to invested sustainably or conforming to ESG (Environment Social Governance). What is a lot more important, however, from my point of view, is that financial institutions have to move on the side of credits and financing to introduce guidelines and policies dealing with sectors that are disproportionately affected by the transition to a low-carbon economy, or sectors that no longer have a future – key word ‘stranded assets’ – and where sectors have to turn around their entire business model. There is also a big opportunity here, where banks can use their power responsibly, as they can actively channel the funds and financial streams.
Do you think that our economic system, or more specifically the financial system, needs to be changed to take climate change into account, or are the current structures suited to adapt to it?
I believe the financial economy has delicately held back for a long time. When it comes to emissions, for example, it long seemed to banks that the emissions stemming from their own operations were so marginal, that there was no point in looking at these processes from the viewpoint of sustainability. They therefore didn’t feel responsible to report on climate-related matters. This attitude used to be state of the art, but the real area that banks should consider in climate accounting is what is financed through its investments and lending: what would happen if indirect uses concentrate in the credit books through scope two and three considerations[i]? Here, I think we will see – through regulations and risk management – how banks will be taken to task by disclosure, to address and deal with these issues and to deliver content on soft facts. I don’t only mean qualitatively but also to make these issues quantifiable.
Do these efforts need to be supported by governments?
Absolutely. Without statutory provisions or provisions from regulators, the financial industry would not move. There is always the question of whether I have to create a product, or if there is demand. You can say at the same time that there is no consensus yet in the market as to what is a sustainable product and what is not a sustainable product. I think this is precisely where governments can provide clarity and establish guidelines and policies that will actually translate into statutory provisions. That is a vital step. There is always the balance between market regulations on one side and letting the market work by itself on the other side. I think it is difficult, for example in the area of green bonds, to avoid hindering the market with excessive regulation, as it is developing so well right now. Nonetheless, there is also a need for guidelines specified through laws to insert the necessary clarity and transparency.
What was your motivation to work in this field? How have you also benefitted from a growing interest in sustainability? For me, this is a really big topic of the future. Personally, I was trained as a banker after high school and then went on to study business administration. In my studies, I was always lacking something, something ethical in the way I had learned business and economical linkages. It was always concentrated on growth and I was thinking that it could not end well, if companies need to always keep growing, to maintain their right to exist; this compulsion to dynamize, if you can call it that, also leads to the breaking point of nature. At the same time, we realized during the financial crisis that capital markets react much faster than real markets, so the whole system cannot be healthy. Through the topic of sustainability, I then came to a theory that I found convincing and that I also find important for my children. Economics has to always be there for people, in some way, and with sustainability we go in the right direction. It is something that lets me believe that markets, liberal markets, can function but we have to approach the topic in a different way from the perspective of business administration and economics and that is still new. Here, it is exciting to me to be in conversation with so many different departments in the company to advance this issue internally, but of course also externally.
[i] Categories of Greenhouse Gas Emissions according to the Greenhouse Gas Protocol: https://www.carbontrust.com/resources/faqs/services/scope-3-indirect-carbon-emissions/
Larissa Saar is a member of the German Junge Liberale (JuLis), a Libel editor and member of IFLRY’s Climate Change Programme. She is currently doing a Master’s in International Peace Studies at Trinity College Dublin. You can contact her via email: larissa.saar@julis.de