Sustainable Finance - Sitting down with Geilan Malet-Bates
In this day and age, it is hard to ignore the climate crisis around us. Everybody is talking about food waste, plastic in the oceans, the negative effects of fast fashion.. But we shouldn’t forget about another industry, a massive one, one that can have a very impactful role in this fight to save our planet.. Let’s talk a bit about sustainable finance, shall we?
We had the privilege to sit down with Geilan Malet-Bates, who is the co-founder of Plenitude - a pro-environment digital wealth and pensions manager
1) Hi Geilan! Can you give us a quick overview of what Plenitude does?
Hi Joyce! Thank you so much for having me to talk with you! Sustainable finance is indeed an incredibly important topic, because as we’re both acutely aware of course from our shared banking days, the finance sector wields the most power and is therefore the best placed sector to be at the forefront of tackling our global climate crisis.
Very simply, Plenitude is a values-led digital asset manager, that allows individuals – i.e. retail investors - concerned by our climate crisis, to integrate their values into their long-term savings and pensions in a low-cost, intuitive way. There is a strong focus of course on risk management which, in layman’s terms, is about mitigating potential losses, given of course that the value of an individual’s investments, being at the mercy of the markets, can go down as well as up. As a B2B2C proposition, we look to partner with banks/building societies and wealth managers who are concerned about climate change and want to align their values with their investments. People are therefore empowered to save for their future, earning a sustainable financial return.
We also serve a broader educational vision: helping people understand what their savings and pensions are invested in so that they can make informed choices about how to save for their future and generate both long-term environmental and financial gain. We additionally have an institutional ESG advisory arm.
2) How did the idea come up to launch the company?
We face a climate crisis. We’ve had the hottest summers recently of the last 100 years, globally. People are more conscious and driven now, more than ever to effect change. At the same time there is a supply shortage of values-driven financial products for individuals which, traditionally exist solely for (U)HNW (Ultra High Net Worth) and institutional investors. People want their investments to make a difference, but they don’t know how.
Plenitude began its journey in 2016. My two co-founders, Dan (ex-banking and hedge fund derivatives trader, FinTech investor & founder, Author) and Tim (marketing & communications specialist, 2008 Antarctic expeditionist and a founder and trustee of the Shackleton foundation) were MBA students together in Cambridge where they spoke about their mutual interest in responsible investing and so initially founded a responsible investing robo-adviser.
As for me, from a young age my parents impressed upon my brother and I the importance of reuse, recycle and sustainability. I’m half Egyptian, a country where a significant portion of the population lives below the poverty line which, makes you think about how you live your life especially in a place like London where there can be a tendency to take much for-granted.
I also spent ten years in banking, during which time you and I were blessed to have met, mostly on the trading floor in sales. I enjoyed my time there and I left with a lot of knowledge and experience, but I wanted to make a difference and I quickly realised that the corporate world wasn’t going to allow me to do that in the way I wanted to.
Dan was a friend of a friend of mine and so I was welcomed onboard my fantastic and supportive team, as a 3rd co-founder just over a year ago, taking the company through our rebranding at the start of this year. I’m also an advisor to the IoD’s Sustainable Business Group and I also speak on panels about the importance of diversity.
It’s been an incredibly busy and exhilarating past year and we’re working on several exciting things to take us into 2020, so watch this space!
3) You focus on ESG (Environmental, Social and Governance) factors to evaluate a company’s performance. Can you explain a bit more about that?
ESG is one form of SRI (Socially Responsible Investing), others include Impact Investing, Negative Screening/Exclusionary. I wrote an article earlier this year about how to invest ethically which includes the terminologies and their definitions, and which your readers can view here https://thefintechtimes.com/invest-ethically/
With regards to ESG specifically, the financial impacts and opportunities of Environmental, Social and Governance factors are integrated into companies’ financial analyses in order to determine a holistic investment recommendation by asset managers.
Breaking them down: Environmental factors regard a company’s policies and resource allocation to the treatment of waste, pollution, energy use and nature conservation; Social factors pertain to how responsibly a company behaves and positively impacts the communities within which it operates, and Governance factors regard a company’s ethical code of conduct: how strongly it promotes equality, handles executive remuneration, promotions and board member choices to mitigate conflicts of interest. Also upholding shareholder voting rights and adhering to transparent accounting and tax reporting, such that the environmental and social aspects are also naturally well executed.
4) Have you found that investors are interested in “green finance” as it is sometimes called? What is the biggest hurdle you had to overcome from companies or investors when talking about these issues?
There is no doubt a huge and growing level of interest in sustainable investing within both the investment community, by which I mean asset owners, investment managers, banking professionals and other financial institution professionals, as well as civil society at large. I personally find myself engaging with others on the topic frequently, both inside and outside of the professional sphere – people want to know and more importantly, do more to make a meaningful impact.
I attend a lot of the sustainability conferences both here in London and abroad. There are a lot of positive takeaways, but there are equally significant challenges. The main ones generally echoed across the sustainable finance ecosystem come down to a handful:
- Greenwashing – i.e. marketing a product or service as being ‘green’ / ethical / environmentally or socially friendly, when in fact, it’s not. This comes from a ‘box-ticking’ mentality but with greater definitions of terminologies and standards of what constitutes environmentally material, this should hopefully diminish with time. We need all hands-on deck and for companies and all of society’s stakeholders alike, to really act on changing the business status quo.
- A lack of data transparency which exists mainly due to the large number of ratings agencies in existence and the lack of transparency in their determination of an investment qualifying as ESG-compliant e.g. MSCI may determine a company as being so, but Bloomberg may conclude differently and it’s not clear in either case, what the determining factors of their decisions are.
- One that I’ve personally observed which is that there are different parties all working towards a sustainable world and carbon neutral world, with the same passion and intent, but in their own silo chambers; there’s a disconnect in the conversation between these parties, and tackling the climate crisis absolutely requires collaboration.
A commonly cited challenge is a lack of sustainability-related definitions, however both the EU Taxonomy report from earlier this year and the more recently published Investment Association definitions, address this. The former exists as valuable guidance to the investment community, albeit yet to be written into legislation, in understanding which operational activities constitute material importance when investment managers engage with companies and address their ESG issues. This is broken down by industry, as different industrial activities will have comparatively varying impacts and it will, like it or not, realistically take some industries longer to transition to a greener economy than others – bearing in mind infrastructural (in)flexibilities. The latter sets out actual definitions i.e. what is ESG, what does impact investing mean etc. in order to establish a consistent and easily comparable framework across the investment ecosystem.
As a firm, our main challenge is showing people how they can invest sustainably; there is growing demand for values-led investing, but individuals either don’t know how to go about doing so or feel intimidated by the financial sphere. Some maybe surprised by this last statement, but speaking as an ex-banker, I personally feel that some, not all, within the financial industry have historically tended towards the use of jargon terms which, are alienating and intimidating, rather than inclusive. What it means is that people feel disconnected from their money when they should in fact feel more comfortable with it beyond it just being a means with which they pay for goods and services. We’re working towards empowering people to make them feel in control and giving them a voice to transform companies’ current ‘business as usual’, to a new, sustainable status quo; one in which future generations can reap the same rewards as those afforded to current ones. This requires clear explanations and simple language.
5) And finally, as you know people are becoming more and more aware of the negative effects our consumption and way of life is having on the climate, and they are looking for solutions to change their ways. In your opinion, what is the expected effect of green finance on climate change? Do you feel this is a growing trend?
Absolutely, it’s been growing and it must continue to grow until green finance/sustainable investing is simply known as investing. This comes from significant factions and requires others to step into the ring too.
Awareness of both the climate crisis and the importance of action, actually walking the talk rather than just talking it, have been greatly propelled by Greta, David Attenborough, Extinction Rebellion more recently and for a long time, by distinguished scientists and academics.
Morgan Stanley state that 86% of millennials are interested in responsible investing and Deloitte have stated that by 2030, half of all assets under management will belong to millennials and those in Generation X – those who are currently working in the sector which is best placed to affect change – finance!
Nordea stated that directing your finances into sustainable investments is 27 times more effective than not flying, using less water, eating less meat and using public transport. Those things are important too, but from a relative impact point of view, controlling the financial (mis)fortune of companies by placing our money with those who are intent on doing environmental and societal good, will mean that those not partaking in the preservation of our planet, will get left behind and risk their own extinction.
Central bank involvement – I mean you have Mark Carney our Bank of England Governor who for a long time, has been a huge advocate for climate change, identifying too the gaps the financial sector needs to fill, specifically asking banks to make a greater push “As financial policymakers and prudential supervisors we cannot ignore the obvious physical risks before our eyes. Climate change is a global problem, which requires global solutions, in which the whole financial sector has a central role to play.” Stranded assets on bank balance sheets could lose their value and therefore pose a financial risk for banks themselves and the insurance sector involvement is primordial too, given their industry is built around risk management and the financial cost of severe climate events.
Associations such as UKSIF – the UK Sustainable Investment and Finance Association which Plenitude are members of, have successful campaigns such as their recent Good Money Week campaign #MentionThePension in order to encourage asset owners and individuals to question their investment and pension managers on how their money is actually being invested. If you’re a pension trustee, then you’re actually required by law to incorporate ESG factors into the pensions you manage.
I was just at an annual Sustainable & ESG Investment Awards ceremony on Friday, one of whose sponsors is Guernsey Finance, the representative body for the island which oversees the Guernsey Green Fund, allowing investment into environmental damage and climate change mitigation initiatives. The 17 awards themselves recognise the advances in green finance which asset managers, data providers and banks have been making, exactly because of their clients’ growing demands.
The GSIA Global Sustainable Investment Alliance biennial report of 2018, published at the start of this year, also stated “Globally, sustainable investing assets in the five major markets stood at $30.7 trillion at the start of 2018, a 34 percent increase in two years.”
My opinion therefore is that we need to look at the facts and acknowledge that sustainable investing, the current name for what will just be known in future as ‘investing’, is growing and here to stay. In fact, there can be no turning back!