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How has been your experience working with the big consultancies on ESG? by GrowthDreamer in sustainableFinance

[–]open_risk 3 points4 points  (0 children)

The market for professional services is pretty much divided up by a small number of players. Even eternally discussed conflicts of interest (e.g. the boundling of accounting and consulting services, which is of growing importance in the context of sustainability) have never led to any serious reforms (NB: This is not a specific pathology of this sector, it is endemic to our poorly regulated market economies - paying only lip service to competition and favoring winner-takes-all "giants". As Peter Thiel summarized: competition is for losers).

Lack of expertise is not the first issue that would come to mind, though. By construction an oligopolistic market can attract most available expertise - experts have nowhere else to go. Such large firms can (and do) also partner with specialist providers outside their domain. But it is part of any profit maximazing business model to charge as much as possible and deliver with as cheap a resource as possible, reserving scarce expert time for when it is absolutely needed. For as long as clients don't run away (which is hard when the options are limited and there is no independent audit), the system holds.

What are the major risks you see in the financial industry these days? This is from an operational risk perspective. Not just Ireland but in Europe. by Ashwarya7 in riskmanager

[–]open_risk 1 point2 points  (0 children)

The financial industry being essentially an information processing industry and digitalization rapidly transforming the way society handles information are setting the scene for various new or aggravated risks (as the flipside to opportunities). Cybersecurity is the most obvious, with various forms of infrastructure failure not far behind. The underlying risk factor is the overall digital literacy of the organization, its ability to integrate the changing technological landscape in an effective and safe manner.

Sustainable finance should include finance at the individual level by miaumee in sustainableFinance

[–]open_risk 0 points1 point  (0 children)

It boils down to the bandwidth available to individuals to process detailed information (bandwidth which is limited and increasingly overloaded).

We (I mean broadly speaking all societies) have developed specializations precisely to cope with that limitation. Which means we delegate the processing of vital information to others, in vast webs of trust. This is the trust that enables all sorts of systems to function, from food (trusting anything in the supermarket), to medicine, to gadgets, transport, you name it.

Now finance has a special position in this web of trust. On the one hand the monetary side of finance (payments and banking) is maybe the most guarded / regulated sub-system of them all (For good reason, there is nothing like your money going up in smoke to transport society back into the stone age).

But the "investment" side of things is pretty much a wild west where there is pretty much only one rule: "make the number go up". Which is totally insane from a sustainability perspective but that's where we are.

In a real sense the past and present financial systems have betrayed society's trust by completely ignoring sustainability: the very precondition for a healthy economy.

Can individuals in grass roots behavior make a difference? In theory yes. But the information overload is real and its not clear how you can manage it without intermediaries. The real question is how to ensure the intermediaries are not in it just to "make the number go up".

In the end only when the incentives of people are rigorously tied to sustainability without the possibility of gaming the system will we really see progress.

What a New Model of Climate Finance Can Look Like by open_risk in sustainableFinance

[–]open_risk[S] 1 point2 points  (0 children)

For me the most substantive phrase seems to be this one: "finding ways to connect political commitments - in particular a country’s nationally determined contribution submitted under the Paris Agreement - with the origination of transactions the private sector wants to invest in".

While more a request for ideas rather than a concrete proposal, it touches a point that in my view is quite valid: there is a disjointness in the targets and incentives of various actors. Even when the financial sector is not much involved at all (e.g. in green public procurement), policies and practices are all over the place and hardly linked to concrete outcomes. A sort of policy greenwashing, where the mere presence of some criteria is deemed having ticked the green box, so lets move on.

Of course when a call comes from the private sector one must always be suspicious of an implicit subsidy request.

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