Morningstar Magazine - April/May 2018 - 58

Investors

to have to come up with two thirds of the
money for the Sustainable Development Goals,
and they're going to have to collaborate
with the public sector to do it. Companies have
gotten bigger and have more resources relative
to most governments.
But what a lot of the investors will say is
that they have the money that they'd like to invest
to support the SDGs, but the public sector isn't
coming to them with investment opportunities that
are big enough, that are interesting enough.
What I'm seeing start to happen-I only have
a few examples; we'll see if it's a trend-is
that the big asset owners are saying that they
don't want to come in at the end after the project
has been defined by a government. They want
to be in on the ground floor when the project
is being designed, so that financial considerations
are baked in from the beginning.
From my limited experience in working with the
public sector and some of the multilateral
development banks; these are just such different
worlds. I don't understand their world. They don't
understand my world. People have a different
framing. People have a different language. This is
a bigger gap than that between the financial
analyst types and the ESG and the sustainability
types. Those are starting to come together.
But bringing together the public and the private
sector, even when they agree that the SDGs
are an important thing to support, that's not
getting traction.
Lydenberg: In order for the investment community
itself to be more aware of and manage better
the risks and rewards that are coming at them
from the system level-climate change, the
financial crisis of 2008-collaborative action needs
to happen. In order for investors to have influence,
they need to collaborate. The recently formed
Climate Action 100+ coalition of investors
around the world, with $30 trillion in assets,
is addressing the 100 largest corporate emitters
of greenhouse gases, using the Task Force
on Climate-Related Financial Disclosures5
guidelines. That represents a global coalition

In order for investors to have influence, they
need to collaborate.
Steve Lydenberg

of investors addressing a global problem in
the corporate community, using a set of guidelines
that were globally agreed upon. That kind of
collaborative action means that positive change
can take place.
There's a blurring between the responsibility
of government and that of investors when working
collaboratively on these products. Green
bonds are a very good example of that. You have
what is essentially a financial product, a
fixed-income product, that also has an environmental goal and arguably a system-level
implication. The financial community collaborates

with what are arguably quasi-governmental
organizations, like the World Bank and
others, that are issuing the green bonds, to set
standards for a financial product so that
it can become scalable. And the not-for-profit
world is brought in on the standard-setting,
as well. So, you get this blurring of who
is responsible for creating the kinds of products
that are necessary to bring this up to
a system level.
Some of these products will look just the same
as existing products. There's a wind farm
and it's got a great internal rate of return, so let's

5 The TCFD develops voluntary climate-related financial risk disclosures for companies to use to provide information to investors and other stakeholders.

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Morningstar April/May 2018
Table of Contents for the Digital Edition of Morningstar Magazine - April/May 2018
