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Mili Fomicov, Research Associate at Imperial College Business School’s Centre for Climate Finance & Investment, tells us why all industries need to act urgently in the fight against climate change
Beginning her career in the world of finance, Mili Fomicov, Research Associate at Imperial College Business School’s Centre for Climate Finance & Investment(CCFI), found herself increasingly attracted to the idea of using capital to target ESG (environmental, social and corporate governance) goals rather than purely financial ones. After speaking to the former head of the CCFI, Dr Charles Donovan, about taking classes on how to achieve this, she started her transition to a life in academia.
Now, she offers a vital dual perspective on climate finance as both an academic researcher and industry insider; in addition to her role as Research Associate at the CCFI, she also works for a climate fund.
“I wanted to tackle sustainability and I wanted to see how we could be a lot more vigorous in terms of how we incorporate climate considerations to really deliver climate outcomes,” she says.
The power of financing
Her focus, she says, is bringing more transparency and vigour to climate investing in as many organisations as possible. “Our job is to clearly spread the message that climate change is irreversible, it is a systemic risk, and we need to act now and collectively.”
In her role at the CCFI, she works with businesses across several sectors and says every organisation will have a different transition path to greener practices: it depends on the sector and industry. She cites oil and gas as an example of an industry that needs to change very quickly in order to reach “an acceptable level”. On a more positive note, however, many large players in the food and beverage industry have transformed their policies on recycling, with many now implementing 100 per cent recycling targets. “There is a lot of commitment to much greener practices but there is still a lot to do. Every sector has a role to play.”
Despite the responsibility that lies with all businesses and industries, Mili believes financial institutions are particularly important because of the role they play in funding other sectors.
If the banking sector focused on better lending and investment practices, they could change certain structures to make decarbonising cheaper, and transfer that cost to those who are not taking similar steps, she says. “Financial bodies have the power to influence every other sector because only a few of them can rely on their own retained earnings.”
Climate change is irreversible, it is a systemic risk, and we need to act now and collectively
However, as with any new field, there are some challenges that make Mili’s work and that of the CCFI tough, and among these is the quality of available data.
“It’s not just that we don’t have enough data, we don’t have very consistent data. We’re looking at how we can provide more standardised metrics and we need a lot more transparency,” she says. This is key because high quality data is essential when it comes to firm-wide, forward-looking metrics that provide a better understanding of how companies are transitioning in comparison to their competitors.
The future of green finance
Despite the hurdles involved in her work, Mili feels optimistic about the way the tide is turning on climate change within investor communities.
“Attitudes started changing a few years ago, but what is happening now, which is really important, is that central banks are saying this is a systemic risk. A few central banks have made it clear that climate change affects price stability and human stability, and having formal institutions acknowledging this creates a lot more awareness.
“I believe this is a very critical step in highlighting the incredible need to act urgently; it flags to many players that this is serious.”
The shock of the coronavirus (COVID-19) pandemic could also play a role in businesses revising their current policies, she argues, with many leaders having already been forced to rethink how their organisation works in a post-pandemic world.
“I think as businesses reconsider their operations more broadly, there could be a transition towards greener finance,” she says. “When thinking about the ‘new normal’, it’s also possible businesses will be more open minded about drastically shifting and changing things.”
This is an interesting moment where companies may find themselves able to be bolder in their actions and move faster, she says, noting the far-reaching changes to banking that took place after the 2008 financial crisis.
“The key to winning people over is highlighting the fact that even if you don’t care about sustainability or climate change, even if you just care about shareholder value, the total value of a lot of assets will be impaired – and will affect everyone.”
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