The Global Impact Investing Network states, in its latest review of the development of impact investing at a global scale, that only 41% of the participants of its survey believe that there are enough qualified professionals to deploy impact investing at the pace that it is needed to comply with (i) current liquidity levels in the market targeted towards ESG; and (ii) climate change, social and governance challenges.
This is a pressing reality that needs to be, somehow, addressed. There are several reasons behind this gap. Let me try to address a few ones:
The Crypto Dilemma – Is Tech Always ‘Good’?
On one hand, there seems to be some sort of fascination with cryptocurrencies, and anything digital that would allow the monetization of invested cash in the short-term, producing immediate and disproportionately high returns. Naturally, if you promise great earnings, the market will be interested. Quoting Kevin Costner’s famous statement from the movie Field of Dreams, “If you build it, they will come”. Do not misread me, I am a believer in crypto – more on that later.
It may, therefore, sound logical to see people flock to courses that teach you how to get rich with crypto or how to establish your own trading platform. Furthermore, if Tom Brady, Gisele Bundchen or Larry David recommend that you invest your savings in bitcoins, you are going to be, at least, tempted. By now, I assume that most of you are familiar with the whole FTX legal saga and how it might affect endorsements of financial products by celebrities going forward. If not, you can read more about it in this great article by Ari Redbord on Forbes.
I was personally surprised when I saw, a few months earlier, the image of Susana Giménez, one of Argentina’s best-known entertainers, promoting Inbest, a crypto trading platform, as a rapid way to make money. The image was widely displayed in the back of a street bus in Buenos Aires, where the level of financial sophistication is much lower than in the United States. In fact, Argentina has the lowest banking penetration in all of Latin America.
While some of you may be familiar with the Tom Brady and the Susana Giménez’ ads, you may not know that it takes an estimated 1,449 kilowatt hours (kWh) of energy to mine a single bitcoin. That is the same amount of energy that an average U.S. household consumes in approximately 13 years. Crypto mining, at least for the time being, is not “sustainable”.
On the other hand, impact investments are perceived as projects with a much longer time horizon, whose returns are “barely visible” and whose target is related to projects that “can wait to be solved”.
Technology is, indeed, attractive to everyone, particularly the younger generations. And technology can make great things happen. Blockchain, for instance, can prevent the double counting of carbon credits generated through projects in the voluntary carbon markets. Also, crypto may become a very attractive tool for the savvy investor, permitting the development of several useful financial instruments in the future. However, it should not be perceived by the majority of the population as a way of making rapid returns – unless you have a big chunk of cash to spare, and you are not afraid of losing it.
Finally, I believe that both sustainability and decentralized investing may converge in returns to the investor in the medium- to long-term. A formula for rapid, excessive returns is usually a recipe for disaster.
Too Many Courses – Do They Actually Expand Knowledge?
This may sound counterintuitive. Rationally, if you offer more courses with a focus on sustainability and/or impact investing, you can assume you will have many more informed professionals. And the market will, consequently, grow. Well, this is not really the case. Quite the opposite – more and more people are getting increasingly lost in the “sustainable maze”.
Why is this happening? Well, sustainability and impact investing have become trendy. Anyone who can demonstrate a shade of green in its resume is jumping on the bandwagon. Unfortunately, this massive movement – without the relevant credentials to back it up – is confusing everyone, from executives to students, who are seeking to understand the topic.
If you browse the web today, you will find thousands of courses like the one above. I have not personally taken the course, but I seriously doubt that you can teach and learn sustainable marketing in 10 minutes.
And the buck does not stop there. “Sustainability for Dummies”, “Impact Investing in a Snap” and “How to Become a Chief Sustainability Officer in 10 Days” are some of the very bizarre course titles that I have found through a quick search on Google.
Furthermore, when I look at the professionals teaching some of these courses, many of them are not “practitioners”. That is, people who have worked on impact investing (i.e., actually doing deals with an impact approach) for an extended period of their professional lives. Usually, what you get is a mix of former government officials, regulators, or full-time researchers. Again, do not get me wrong, ESG research is great (I personally rely on it a lot), and regulatory bodies are essential to the effective functioning of an industry.
I am not discarding the credentials of anyone in that group. I am rather wondering whether these otherwise-capable professionals are capable of teaching the public how to make sustainable investments.
In full disclosure, I teach impact investing courses, both at the corporate and the educational level. I have been doing it for only 3 years, but have been lucky enough to teach clients from several large Latin American corporations, students from top-notch universities in Argentina and Colombia, housewives, architects and musicians, among others. And I rely a lot on research papers and documents from regulatory bodies.
During the very first 5 minutes of my first session, I usually ask a question related to my attendees’ prior knowledge of impact investing. Over 90% of my class usually answers, “zero”. There are many institutions that are approaching impact education in a more “integrated” way. Several consulting firms, universities and other academic institutions use practitioners to provide the student with the full experience. And this is a win-win proposition. The market is evidently interested. And bringing in practitioners will likely open up new business opportunities that your students did not even know existed before they took your course.
Bearing all this in mind, my main recommendation when you look for a course on how to learn to invest with impact is to ask for the detailed syllabus. If the programs offers a mix of theory and practice, you may be looking in the right direction.
A Lot of Information – Does It Really Help?
The internet is great. It gives us access to a huge amount of information in nanoseconds. Right and wrong information. The algorithm cannot really tell the difference. For instance, as I was updating my classes, I tried a search on “how to structure a green bond”. I got over 100,000 hits. Now, I doubt there are 100,000 different ways of structuring a green bond – there are probably a couple – but the Internet will not tell you which one is right, which one is wrong, and which one is irrelevant. You will have to figure it out.
Unfortunately, we often run into “gurus”. The “guru” of green bonds. The “guru” of impact. The “guru” of carbon markets. I believe that, if you proclaim yourself as a guru of anything related to impact investing, you are doing a disservice to the community. Simply put, it is impossible to know everything about a topic that is constantly evolving and where new announcements or developments are made every day.
An article on “how to structure a green bond” from last year may not be relevant anymore. There may be new taxonomies. New regulations. New markets. Unfortunately, many people who write these guides and these articles do not take the time to look at the latest trends and update their materials.
Which brings me to my last point.
Information Updates – Is Sustainability Set in Stone?
The answer is a resounding “no”.
In our team, we find ourselves updating a significant portion of every course that I teach from one seminar to the other. There are some foundations that we can, of course, keep, but each course changes by at least 30%. That’s why we invite students who previously took our class to attend a few sessions of the new version of the course, so they can catch up on the newer trends.
This year, for instance, we are literally doubling the amount of content in the course that I teach at the Maestría en Finanzas Di Tella. We are the first Argentine university that is offering a 10-class course on impact investing, 100% per student demand. And we are introducing new topics, like mandatory and voluntary carbon markets, race-related and Islamic finance. And we’re expanding other ones, like measurement of impact investments (and the whole impact of the International Sustainability Standards Board (ISSB)) – much of which stemming from insightful pieces developed by experts in regulation.
Furthermore, we are developing and teaching at least five new cases related to greenwashing, a problem that has increased since last year (four of these new cases are based on data that we obtained from very well written research papers).
Summary: The Picture Has Never Been Clearer
All in all, I am convinced that we need to reinforce the importance of the development of more high quality impact education. Our professionals need it. Our students need it. Our planet needs it. The situation is crystal clear. Even if you don’t buy into our moral arguments, buy into the business one: impact investing is a great, practically unexplored market where significant returns can be made while doing good at the same time.
So let’s, all together, teach people how to do it in the best possible way.
Pablo Verra is the Founder & CEO of Verra Impact Consulting, a boutique firm focused on sustainability, decarbonization and ESG training. He is also the Academic Director and Professor of the Impact Investing class at Universidad Torcuato Di Tella.