Sir Ronald Cohen

Often referred to as the godfather of impact investing, Sir Ronald Cohen is the chairman of the Global Steering Group for Impact Investment. He has worked with Harvard Business School on research of 1,800 companies around the world, which found that more than 250 of them create more environmental damage than they do profit; while nearly 600 cause environmental damage equivalent to 25% of their profits. Mr Cohen is calling for the adoption of impact-weighted accounting to reveal a company’s true value.


bill winters sc

Bill Winters 

Standard Chartered CEO Bill Winters is also the chairman of the newly created Task Force on Scaling Voluntary Carbon Markets, created under the initiative of Mark Carney, the UN special envoy for climate action and finance. Mr Winters calls for a market solution to climate change through a larger and more active carbon credit market.

As progress on environmental issues stalls, is now the time to start imposing measures rather than relying on markets?

Mr Cohen: I think market mechanisms take a very long time to make their way through to a real tipping point. I think we've reached an historic crossroads, similar to what happened after the 1929 Great Crash, when investors sat up and realised that they had been investing in companies without understanding their true profitability. At the time, people argued that introducing generally accepted accounting principles (GAAP) and auditors would lead to the end of American capitalism. Of course, we all know that a banking system and investment markets depend on having reliable accounting and transparency on profit. There are more than $30tn of environmental, social and governance (ESG) and impact investments today, aiming to achieve impact as well as profit, and zero transparency on it. If governments come to mandate that in three or two years companies need to publish impact-weighted accounts, we would begin to see companies get into shape now.

Mr Winters: I am a fundamental believer in the value of markets. Now, there are alternatives. You could have governmental limits, allocate carbon quotas to market participants and ratchet them down. And then there could be very severe penalties, including jail, for people that don't honour their commitments. But I think that the markets are much more likely to be effective faster. To Ronnie’s point, however, if we don't have underlying transparency we can't measure whether people are actually taking the necessary steps and making investments to honour those commitments... And some basic tools are missing [which a market-based solution can help create]: what is the impact of a loan that Standard Chartered makes to an airline, how much of that carbon emission is credited to us, how much is credited to the airline, how much is credited to the passengers who are sitting on the plane?

Mr Cohen: Not every company is going to be able to get its act together and reduce its emissions. In the Harvard Business School data set there is one company delivering nearly $200bn worth of environmental damage a year, every year. I really don't think Bill and I are disagreeing. We need both [market and mandated solutions]. The question is: as it happened with GAAP principles in 1933, does Covid-19 today create an environment for governments to mandate, this time, impact accounting principles.