Nordea's Head of Sustainable Finance Advisory, Jacob Michaelsen, kicked off Copenhagen Business School's sustainable finance webinar series, telling students of a "fundamental change" under way in financial markets.
Sustainability and finance are two terms that historically have not gone hand in hand and could even be perceived as conflicting. However, that is changing thanks to a fundamental paradigm shift under way in financial markets.
That was Jacob Michaelsen’s message to a recent online gathering of university students interested in the intersecting worlds of sustainability and finance. Michaelsen, who heads Nordea’s Sustainable Finance Advisory team, was invited by Copenhagen Business School’s Sustainable Investment Club to kick off its three-part spring sustainable finance webinar series.
As head of Sustainable Finance Advisory, Michaelsen works with engaging Nordea’s large corporate and institutional clients on the role sustainability plays in financial markets. For issuers, that includes how to incorporate sustainability into debt issuance, for example in the form of green bonds and other sustainable debt. For investors, it covers sustainability from an investment perspective.
“It’s certainly something we’re very much focused on at Nordea,” Michaelsen told the student audience.
A fundamental change in financial markets
The financial markets’ growing focus on sustainability is not stemming simply from a desire to do and feel good, but rather a changing financial and risk landscape, according to Michaelsen. He pointed to the World Economic Forum’s 2020 Global Risks report, which for the first time in the survey’s 10-year outlook found the top five risks to be environmental.
Political and regulatory developments are also driving the change, with initiatives such as the EU Green Deal and the European Commission’s Action Plan on Sustainability Finance making the EU the “gravitational centre of sustainable finance,” according to Michaelsen.
“What we’ve seen in last couple of years is a change in perception, willingness and the policy backdrop. Now we need to see a change in action, processes, management – and executing on it,” he said.
He told students that much like the university textbooks had to be rewritten after the financial crisis of 2008-09, the current financial theory will have to be revised in the next few years to reflect the ever-expanding role sustainability is playing in financial markets.
Sustainable finance in the classroom
Sustainable finance is already starting to carve out a space in university halls. For example, Magnus Trampe Broch, one of the organizers of the CBS webinar series, co-founded the Sustainable Investment Club in June 2019. He became interested in sustainable finance after working with ESG funds as a student intern at an asset management company. He decided to start the club to create a forum for students interested in the engagement between sustainability and finance.
“One of the main reasons I’ve been so involved in this is that I don’t see sustainable finance being incorporated into my courses. At least in some courses, I think it would be very relevant to include,” Broch said.
The club has since amassed 18 members and runs a simulated investment fund, managing a fictive sustainable equity portfolio. When they started the fund, there was the general impression that sustainable investments didn’t generate competitive returns, according to Broch. However, their experience has found otherwise.
That was a point Michaelsen also reiterated in his presentation, pointing to analyses finding that green investments have outperformed non-green investments both during the corona crisis and before.
“Many have historically felt that sustainability was something you did to look nice, but not something really driving returns. I’m here to tell you that is clearly not the case,” he said.
Michaelsen’s presentation was well-received by the students, according to Broch, particularly for conveying a complex subject in an accessible and understandable way.
He left them with a piece of practical advice, noting that pursuing an interest in sustainable finance could be good career move:
“We need people that do not simply come from a financial perspective or sustainability perspective but who are able to talk finance and sustainability at the same time. Take extra classes, do internships, get yourself engaged in the field. It’s only growing and will be an important part of the market in the years to come.”
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