Will the financial sector invest in the future?

Does the financial sector have a responsibility in ensuring the well-being and environmental sustainability of our planet, or is it strictly a governmental issue involving policy makers and politicians?

To shed light on this subject the Northern Region in Focus - Sweden invited experts from the Worldwatch Institute, NEFCO, The Nordic Environment Finance Corporation and Swedish politicians to a seminar in Stockholm to discuss both the ongoing problems facing future generations but also ways in which capital could be allocated towards sectors that improve a sustainable ecological future.

Before a general round table discussion began the moderator Per Grankvist invited the World Watch Institute and its European counterpart to address some of their key issues and concerns around trends impacting the sustainability of the environment. The core message portrayed is that growing global populations and in particular the rising consumption needs of a growing middle class is currently outpacing the capacity for natural resources.

Many of their arguments are backed with an impressive array of in-depth analysis of environmental data found within the flagship publication of The Worldwatch Institute STATEOF THE WORLD 2015 CONFRONTING THE HIDDEN THREATS TO SUSTAINABILITY. Mr Tom Prugh the co-director of State of the World in particular emphasized the effectiveness of regional and city level of governance in providing solutions for greenhouse gas reductions.

-Forget the national government level, he added.

Julia Vol the European manager for the Worldwatch Institute in her presentation went so far as to state that we currently do not have much of choice if we are to have a sustainable future adding:

-The current economic system doesn't serve our needs anymore.

The need for renewable energy and overall reductions in global greenhouse gas emissions is clear but who are the people responsible for investing in those projects that help solve many of the current environmental challenges.

Ulf Bojö is one such person, a senior investment manager for NEFCO The Nordic Environment Finance Corporation a coalition of Nordic countries working together to provide funding for green investments. Mr Bojö explained that NEFCO focuses primarily on small and medium sized enterprises and that they have a clear mandate towards funding only those projects that have a positive environmental impact. The size of investment were usually in the range between 100,000-5,000,000 euro.

Before concluding the seminar a general round table discussion begun with an attempt to discuss what was needed to stimulate more investment from financial institutions towards renewable energy projects and how to slow down the dependence of government funded spending.

Jörgen Andersson , member of the finance committee for the Swedish Moderate Party emphasized a market driven approach arguing that:

- If consumption patterns indicate a preference for products and services that possess a clear environmental benefit then this increase in demand should stimulate more investment to those type of businesses.

Matilda Erkrans, member of The Social Democratic Party and Chair of Committee on Environment and Agriculture, expressed that in some cases there needs to be political intervention in order to stimulate investments that are specifically catered towards benefiting the environment and that the private sector would adapt to policies that are beneficial to sustainability even if they may be reluctant to change in the short-term.

Ultimately the panel agreed that there existed major opportunities for investments in renewable energy and other environmentally friendly projects but also the reality that the private sector is primarily driven by short-term profitability and has an incentive to allocate funds and resources only to those areas where they can earn the fastest returns with minimal amount of risk taken.

For there to be a sustained investment from the financial sector the uncertainty of returns in renewable energy need to be reduced, but one thing the panel all seemed to agree on was that ultimately wherever there are large sums of money to be made and the returns justify the risks the investment is sure to follow.

Alexander Hertzberg