POLITICS & INSTITUTIONS - ECONOMY

Green finance: “investing means supporting”



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Flavia Micilotta of Deloitte says ‘sustainable finance’ can mean investing in a local business as much as investing in the latest technologies. Photo credit: Matic Zorman (archives) 

As part of the “Summer like no other” series, Delano and its sister publication Paperjam are looking at the people working in the grand duchy’s sustainable finance field. This week: Flavia Micilotta, partner and sustainability leader at Deloitte in Luxembourg.

Jean-Michel Lalieu: What was the trigger that pushed you to work in the field of sustainable finance?

I started my career at Euromoney magazine. It was a good opportunity to interact directly with investment managers and other financial players. It was also a very interesting time, because after the events of September 11 the world was still in shock. Shortly after I started the role, another event also strongly impacted the financial community, but in a different way this time: the fall of Enron. It left a mark on my life and my career in a significant way.

The scandal showed the financial community and listed companies that reputation and corporate responsibility have a direct impact on bottom lines. This case also made it possible to clearly define the importance of corporate responsibility. I wanted to be part of the solution that would help improve a system that was thought to be cutting edge and that had a pretty good regulating mechanism; this crisis clearly demonstrated the opposite. [Adam] Smith’s invisible hand does not compensate shareholders and the company in the same way. There are choices to be made and companies must be held accountable for these choices, and demonstrate how they integrate entrepreneurial responsibility into their business model.

At that time, Kofi Annan, UN secretary general, was in the process of establishing the UN Global Compact, a United Nations initiative that aimed to help businesses get a sense of their responsibilities. I found this particularly inspiring, so I decided to go back to school to focus on finding workable solutions so that I could play a leading role in this area.

What are you convinced about when it comes to sustainable finance?

Corporate responsibility and transparency have been the driving forces that have led me towards sustainable development. What I appreciated most was the sudden realisation of the importance for companies to be able to explain to a large audience how they work and the challenges they face. Such an inclusive approach opens up new possibilities for companies: to grow and connect with a community of customers who will have the opportunity to increase their confidence and their understanding of the company and the business world. This is clearly a winning solution for all stakeholders. Finance is unequivocally a crucial element in this regard. We are more inclined to invest in what we understand and what we trust.

In this regard, I think the financial community has not done all it can to ensure that its customers’ confidence grows as quickly as its products or technologies. Several financial crises have clearly proven this and the sustainable finance revolution we are currently experiencing will ensure that financial players change the way they work. By genuinely integrating sustainable development into its products and working methods, the financial community has the opportunity to increase its influence, gain market share and secure the trust of its customers.

In addition, it has the opportunity to become the driving force that the business world needs to become more stable and prosperous. The financial community is a formidable catalyst for a more sustainable economy as financial stakeholders can select the best players from the different sectors of the economy, and thus play a vital role in building a new economy.

What is your preferred work theme, or your favourite “fight” to take on?

I started my career in sustainable development at Deloitte as an intern in 2003 in the Florence office, after my master’s degree in environmental management at Sant’Anna University in Pisa. My research had focused on non-financial reporting because, already at the time, I had recognised the impact that reporting tools were going to have on the world of business and finance in the future.

Giving new meaning to reporting and broadening it to topics that were not initially part of its scope represented, for me, a new way of doing business, as well as the integration of a new approach to risks that is more inclusive and prospective. It is a demanding constraint for some stakeholders and, at the same time, an opportunity for others to demonstrate how sustainable development can be seen as an opportunity to really improve the way they work. Today, we are facing a lot more evolution from a reporting point of view.

The European Commission has made great strides in this regard, and we are still only at the beginning of new developments following the revision of the Non-Financial Reporting Directive, which will evolve into a European standard for businesses. I can’t imagine a better time for this to happen, when data has disrupted both sustainable development and finance. Today, there is a real chance that we can have better data, and create a reporting ‘platform’ that will link the two dimensions, creating new opportunities to become responsible investors.

Who is someone that inspires you every day?

Martin Luther King [Jr]. A life dedicated to a cause, determined to make a difference and to break the status quo. Equality of rights among citizens is something so basic and paramount, and yet, sadly, from 1968 until today, we have enough evidence that this is far from the case. Many lives have been lost in upholding rights which seem ‘normal’ to all, but are reserved only for some.

I am making the comparison here with sustainable development. This is something so fair that it seems to be taken for granted, and yet it is not the case. For this reason, industry and regulators, in particular, are trying to turn things around and get sustainability in business and the financial sector, and communicate to them through this new ‘language’. I started my career with a vision that someday this would be the normal way things were done and maybe it will happen soon.

I was very ill last year and my life was in danger. Suddenly everything was called into question and I had to put my life on hold for a while. This changed my perspective in the sense that it increased my determination to be successful in playing a role in making this change, and to do so while I am still able. If I could, I would say to myself, ‘I had a dream and the dream is now fulfilled.’

What “sustainable” investment would you recommend?

One of my beliefs is that having an impact is the factor that makes all the difference in any field, especially in investing. One of the categories of responsible investment that has gained exponential traction in recent years is, as it happens, impact investing. This is clearly explained by the fact that it speaks to more or less all types of investors. It combines financial returns with the ability to address an environmental or social cause, and the ability to chart how it’s done, with a view to tracking improvements while measuring the level of impact achieved.

This can be done on a large institutional scale or on a very small scale for any retail client. The best way to make an impact is to invest in something that is familiar to us, that we know well, or that allows us to make a difference in an area that is dear to us. This can range from supporting a local business in our community, to investing in sustainable funds or bonds financing the development of new sustainable technologies. Thus, it can suit all budgets and all levels of understanding of the investment cycle.

After all, investing means supporting, it is playing an active role in growing something that we believe carries values, and there is nothing closer to our destiny and our role as citizens on this planet.

Originally published in French by Paperjam and translated for Delano