The greening of green financial products

October 28, 2021

Greenwashing is of growing concern in the realm of sustainable investments. About half of all funds promising to be climate friendly, do not align with the Paris agreement. Most of these funds are based on relatively weak data and poorly defined environmental, societal and governance (ESG) factors. This, for instance, allows many traditional energy companies or tobacco firms to be included in ESG funds of for example BlackRock and UBS. It is no wonder that many call for clear standards and more stringent enforcement of regulation. In response, the EU is working on well-defined concepts and developing standards for benchmarking and reporting on the societal impact of a fund and/or company..

Yet, there is also a risk that strict regulation steers sustainable investments towards products with relatively easy-to-quantify outcomes. This will likely result in a strong focus on companies and incremental solutions that bring about a measurable, yet fundamentally limited, improvement over the status quo. More radical and transformative solutions, which are eventually necessary to develop a fully sustainable economy, may be left behind because they lack clearly defined metrics or because the companies supplying them are less equipped to produce the kind of data regulators and customers are looking for.

Burning questions:

  • To what extent does strict regulation indeed reproduce the path dependency of the current economic system?
  • Can initiatives that boost more fundamental transitions be regulated? If so, how?
  • Sustainability is a multi-dimensional challenge and few companies will (or can) perform well on all dimensions. Can investment regulations ever do justice to the complexity of such assessments?

Series 'AI Metaphors'

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1. The Tool
Category: Objects
Humans shape tools.

We make them part of our body while we melt their essence with our intentions. They require some finesse to use but they never fool us or trick us. Humans use tools, tools never use humans.

We are the masters determining their course, integrating them gracefully into the minutiae of our everyday lives. Immovable and unyielding, they remain reliant on our guidance, devoid of desire and intent, they remain exactly where we leave them, their functionality unchanging over time.

We retain the ultimate authority, able to discard them at will or, in today's context, simply power them down. Though they may occasionally foster irritation, largely they stand steadfast, loyal allies in our daily toils.

Thus we place our faith in tools, acknowledging that they are mere reflections of our own capabilities. In them, there is no entity to venerate or fault but ourselves, for they are but inert extensions of our own being, inanimate and steadfast, awaiting our command.
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2. The Machine
Category: Objects
Unlike a mere tool, the machine does not need the guidance of our hand, operating autonomously through its intricate network of gears and wheels. It achieves feats of motion that surpass the wildest human imaginations, harboring a power reminiscent of a cavalry of horses. Though it demands maintenance to replace broken parts and fix malfunctions, it mostly acts independently, allowing us to retreat and become mere observers to its diligent performance. We interact with it through buttons and handles, guiding its operations with minor adjustments and feedback as it works tirelessly. Embodying relentless purpose, laboring in a cycle of infinite repetition, the machine is a testament to human ingenuity manifested in metal and motion.
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About the author(s)

Fascinated by the interplay between technology and society, Sjoerd has studied the role of different actors in the innovation and implementation of new technologies throughout his career. At the thinktank, he is mainly involved in research and consultancy projects for clients, and strategic and thematic research for sister company Dasym. Among other themes, Sjoerd frequently writes and speaks about the power and danger of digital technology, as well as sustainability in both technological and institutional innovation.

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