The power of persuasion: Great Debate changes audience’s mind on self-reporting

With the carbon costs of travel in mind, Climate Innovation Summit session summaries are available online for those who cannot attendand for review for those present. These summaries aim to extract the key debates, dialogues, and learnings from each #MissionFinance session.

“The Great Debate: Can self-reporting ever be effective for investors?” featured compelling arguments from each side. Beginning with two-thirds of the audience voting in favour that it is, the debaters went on to explore the ways in which self-reporting might already be working—and might not be—as well as whether and how it might be improved. The final vote reflected a polarised audience, revealing the debaters had successfully changed people’s minds.

The panellists on the ‘for’ side were: Andreas Hoepner, Professor of Operational Risk, Banking & Finance, University College Dublin (UCD), Isabelle Laurent, Deputy Treasurer and Head of Funding, EBRD, and Hanna Waltsgott, Responsible Investment Analyst, Kempen Capital Management.

The panellists on the ‘against’ side were: Jakob Thoma, Managing Director, 2dii, Manuel Coeslier, Equity Portfolio Manager, MIROVA, and Dylan Tanner, Founder and Executive Director, InfluenceMap.

Laurent opened the discussion by illustrating how self-reporting is already effective: Four billion dollars have been raised to finance green assets in countries. Furthermore, transparency has been established as a core value of self-reporting.

Coeslier countered with the assertion that the most useful data is aggregated: “Even if we take climate change, even with the most known and used metrics, like carbon footprint, investors face different standards from different companies. For example, scope one and two and three. And, this data is reported with different assumptions therefore it’s impossible for the investor to aggregate the data in the right way.”

Waltsgott said investors already base many of their decisions on self-reported data, like financial statements, and that we can increase reliability and accuracy of data if:

  • Reporting is a requirement, according to sound standards that create comparability
  • It’s verified by an independent party
  • There are incentives to report accurate and reliable data out of self-interest

In his spirited response, Thoma pointed out that green bonds represent only one per cent of the total and they’re fraught with misuse and greenwashing. He said the conditions Waltsgott described will never be met, calling them a “pipe dream” and continued: “Self-reporting can be effective if unicorns fly through the sky.” Why? Because the data is two to three years old once it reaches an investor’s desk and because of granularity, making it impossible to compare it against other investments.

Hoepner walked the stage in an energised closing, claiming that ‘for’ is semantically contained within the debate question itself: “There’s an ‘ever’, it’s a how question.” He went on to explore what was needed for self-reporting to be effective, naming a change in incentives, that the data be verified by financially independent auditors, and that there be liability.

On the ‘against’ side, Tanner said, “The issue here is materiality. The opposition points out the conditions that need to be met for self-reporting to be effective but we’re nowhere close. We’ll have to rely on a ream of externals in a competitive market to reach what we’d like to achieve in the timeframe allowed.”

The final vote changed from its initial two thirds ‘for’ to ultimately favour the ‘against’ side, though it was extremely close.

The moderator, Professor Michael Mainelli, Director, Z/Yen, concluded, “Self-reporting is only a stepping stone to the future… If we get the economics right, corporates and behaviour will follow.”

He left the audience with a  final thought, a quote from The Hitchhiker’s Guide to the Galaxy:

“What we really need are rigidly defined areas of uncertainty and doubt.”

 
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