Seminar on Sustainability in the Financial Sector with Princess Máxima

On November 24th, the seminar “Sustainability in the Financial Sector. Are we ready?” was held at Nyenrode. The seminar is one of Nyenrode’s 65th anniversary events that are being organized during the year. The conference was co-organized by the Nyenrode Corporate Governance Institute that is led by Prof. Dr. Mijntje Lückerath-Rovers. A very special guest to the seminar was HRH Princess Máxima who lectured about inclusive finance.
 

Prof. Dr. Mijntje Lückerath-Rovers, who was the host of the event, opened the seminar referring to the 65th anniversary of Nyenrode. She stated that Nyenrode, in its efforts to be a bridge between scientific research and the business community, is one of the most inspirational and dynamic organizations she knows of. Subsequently she introduced the theme of the conference: Sustainability in the Financial Sector. Even the title itself raises questions. Furthermore, in her view,it is harder for the financial sector to show to the outside world that it is working hard to become more sustainable than it is for most other sectors. And moreover, should sustainability in financial institutions only be limited to their own activities, or do we also want them to stimulate their clients to become more sustainable? 
 
Financial Inclusion: 'People, Planet and Profit’
The first speaker was Her Royal Highness Princess Máxima, who is also UN Secretary-General Ban Ki-Moon’s Special Advocate for Inclusive Finance for Development and Honorary Patron of the G20 Global Partnership for Financial Inclusion. She gave a speech entitled 'People, Planet and Profits Together: Financial Inclusion as a Path to Sustainable Development'. During the speech she emphasized that sustainability should contribute to all three topics: People, Planet and Profit.
 
During the seminar, HRH Princess Máxima was awarded the Postma Prize 2011. It is awarded to people who have performed an outstanding social service in the field of Leadership, Entrepreneurship and/or Stewardship, the leading themes at Nyenrode.
From left to right: HRH Princess Máxima, Prof Dr. Mijntje  Lückerath-Rovers and Rector Magnificus Prof. Dr. Maurits van Rooijen. The prize was designed by Pieter Kortekaas.

 
She said that over 2.7 billion of the 7 billion people in the world lack proper financial services, such as a bank branch, ATM or mobile phone. Princess Máxima stated that it would mean so much, in terms of job creation and production, if people and enterprises could be connected to the financial infrastructure. The next step would be for financial institutions to develop the right financial products and deliver them to the right persons or companies. They should be affordable and never lead to over-indebtedness. “Providing financial services that add real value to customers in a transparent and responsible way is at the core of financial inclusion”, she said.
 

Economic growth and the reduction of poverty consistently comes about with an increase in the use of energy. But if we look a bit further, Princess Máxima said, growth and environment are not necessarily contradictory interests, as some pilots prove. For sustainable solutions to reach a larger scale, tailor-made financial products have to be made that all people and companies have access to. Sustainability in the financial sector requires a long-term vision from both financial institutions and investors, she continued. Profits should be seen in that light. In her view, responsible finance will eventually lead to stability in the financial sector itself.

After studying the specific needs of people and companies, financial institutions can create relevant products based upon local contexts for people and companies, who should use them in a responsible way. That is the way to combine sustainability with both People, Planet and Profit, Princess Máxima concluded.
 

The Way to Regaining Trust
Dr. Alexander Rinnooy-Kan, Chairman of the SER (Social-Economic Council), started his lecture by referring to today’s Occupy movement that is protesting against economic inequality and corporate greed. He said that it is a signal of the decreasing trust people have in financial institutions these days and that surveys show the same results. Rinnooy-Kan then stated that CSR is the key to regaining trust. Sustainable growth should be the guiding principle. Because the world is a global village, legislation by governments can only be part of the solution. Companies themselves should take action as well to improve their own performances in the field of sustainability, as well as positively influencing the performance of their suppliers. At this moment, many companies cite examples that CSR can be equally profitable as choosing non-sustainable solutions, Rinnooy-Kan said. Some banks and pension funds have already taken the path toward sustainability. So, will the rest of the financial world follow? Rinnooy-Kan believes that sustainability offers plenty of opportunities for long-term profitability for financial institutions. In his view, it is the only way to regain the trust that has been lost.
 

Principles of Responsible Investment
Rob Lake, Director of Strategic Development of the United Nations-backed, Principles of Responsible Investment, stated that addressing ESG (environmental, social and governance) issues makes sense for financial institutions. Not only do the clients need the survival of the financial system, it is of utmost importance for financial institutions themselves as well. The BP pollution disaster shows that environmental and safety issues can also have a major financial impact on a company. In other words,  addressing ESG topics in a responsible, sustainable way is a necessity for the corporate world. 
 

A new, more responsible approach for finance is required. Luckily, there are alternatives, such as the Principles of Responsible Investment (PRI) for institutional investors.
 

Those principles are:
1 We will incorporate ESG issues into investment analysis and decision-making processes.
2 We will be active owners and incorporate ESG issues into our ownership policies and practices.
3 We will seek appropriate disclosure on ESG issues by the entities in which we invest.
4 We will promote acceptance and implementation of the Principles within the investment industry.
5 We will work together to enhance our effectiveness in implementing the Principles.
6 We will each report on our activities and progress towards implementing the Principles.
 
Lake emphasized that the PRI approach is not a niche market. The PRI network now includes 900 large financial institutions and represents 30 trillion dollar. It is growing rapidly, a sign that responsible investment has become mainstream. Furthermore, regulators increasingly include ESG factors in their policies. That means that institutional investors really need start thinking about integrating PRI into their own policies. And, as Lake explained, an ESG focus does not necessarily put pressure on profits, since academic evidence shows that PRI leads to very acceptable financial benefits.
 

Discussion
The conference ended with a panel discussion. Panel members were Claudia Kruse (APG), Marcel Jeucken (PGGM), Piet Sprengers (ASN Bank) and Marleen Jansen Groesbeek (Eumedion).  They shared their ideas about the possible gap between sustainability and making the long-term profits that their clients require from them. Another question that was addressed was: What is the responsibility of the consumer? Should they maybe act more as shareholders of the investors and ask those financial institutions to allocate the money trusted to them in a more sustainable way? The panel members do agree on one thing however: If we all as clients would accept lower interest rates, banks would adapt their investment strategies and we can help them to develop in a more sustainable way.