One Industry, Many Ideologies: Exploring Sustainable Finance
By Alexandra Pyne, Strategy Consultant & 2022 Stapleton Fellow at Georgetown University
We are currently facing twin climate and biodiversity crises. In our efforts to solve them, the Western financial services industry is playing an increasingly central role.
At the most recent Conferences of the Parties (COP26 in 2021 and COP27 in 2022), financial institutions have emerged as primary voices in the global environmental conversation. COP26 resulted in a climate pledge that was signed by over 450 financial institutions, ten times more signatories than sovereign nation-states, which totaled 45. In the following year, COP27’s revolutionary inclusion of loss and damage funding in international climate agreements highlighted geopolitical movement towards market-driven strategies to address the environmental crisis.
Working from a desire to understand these trends in global environmental action, I dove into conversations with leaders in sustainable finance. I observed two prominent ideologies at play: the first, which frames sustainable finance as a smart business opportunity with strong economic benefits, and the second, which views it as a moral imperative with fewer economic motivations.
The first ideology – the financial narrative – focuses on monetary outcomes and the prevailing reign of market forces in determining personal and societal trajectories. One interviewee, who is a renewable energy financing specialist at a leading hedge fund, framed her motivation to specialize in sustainable finance by explaining that it was important for her to be “in the know” of what’s affecting the bottom line. Throughout our conversations, she never mentioned personal connections to the environment or the economy. This characterization of sustainability work prioritizes pragmatism and financial risk mitigation, leaving little room to discuss individual ties to professional work.
The financial narrative of sustainable finance aligns well with the sociological concept of identity minimalism, a term defined by a 2016 study of British investment bankers as “individuals largely [avoiding] relating identity to their work experiences.” Embracing these minimization practices, the financial narrative of sustainability deprioritizes personal passion and reinforces traditional business language, ultimately embracing the characteristics of shareholder capitalism.
The second group of sustainable financiers I observed demonstrates an alternate sense of professional identity and motivation for involvement in the field. These bankers were motivated by personal interests in societal and environmental concerns that predated their entrances into the professional sphere. They drew on a moral desire to make a difference and emphasized passion for their work. Many of these analysts described starting careers in banking, feeling unfulfilled, and later awakening to an interest in sustainable capitalism. Others could trace environmental connections to their childhood days spent hiking with family or learning about the environmental experiences of their ancestors. These compelling personal narratives create a noticeably different definition of sustainability than that of those who draw from traditional financial language to define sustainable finance. These language differences illuminate the reality that the current operators of sustainable finance have formed remarkably different ideologies to galvanize action around this singularly named cause.
These ideological designations are incredibly important in understanding the nuances of sustainable finance, as these differentiations expose various definitions for a concept that industry, media, government, and the public has described as a singular, monolithic entity.
Given these often obscured differences, the sustainability-focused goals of the financial services industry pose an overwhelming need for integrative and interdisciplinary knowledge, particularly as sustainable finance offers pathways for explaining non-financial value to financially minded decision makers. By definition, sustainable finance initiatives cannot solely focus on economic returns; they must incorporate expertise from natural scientists, human scientists, and other experts in order to actualize the lasting transformations these investment firms publicize.
Following these trends, the financial services industry and business at large have spent an inordinate amount of energy, time, and money seeking technical and quantitative solutions to the societal problems that stakeholders are now forcing them to address. As these incredibly brilliant – and remarkably different – minds are asked to work together in the name of sustainability, a gap in the new system has emerged.
New contributors to the success of financial markets have been socialized to think, process, believe, and imagine according to incredibly different models than those of traditional financiers. The differing ideologies within a single industry – and even single companies – underscore the likelihood of ideologically-driven communication roadblocks in sustainable finance.
The introduction of alternative mindsets and ideologies to the economy remain crucial for solving the biodiversity and climate crises at hand. However, simple inclusion of diverse voices is not the same thing as integration of their differences.
It appears that sustainable finance is at a crossroads, where their different conceptions of sustainability and value have been introduced to each other but are not yet properly integrating with and influencing one another. The next phase of this movement requires actors who can integrate cross-industry, cross-disciplinary, and cross-cultural frameworks into avenues for new-age sustainability.
Alexandra Pyne is a Strategy Consultant in the financial services industry and 2022 Stapleton Fellow at Georgetown University. She specializes in ethnography & economic anthropology and applies these research methods to environmental experiences.