Back in 2009, I was looking for ways to combine my interest in environmental policy with my interest in effective organizational management. I had always considered these two areas separate, but the more I examined the field of organizational management in the 21st century, the more I saw environmental issues becoming central to the field of management. This led to my 2010 book, Sustainability Management, and the development of Columbia’s Master of Science program in Sustainability Management. As we designed the curriculum, we developed an area of management study we required of all students that we called: “the physical dimensions of sustainability management.” This included: energy efficiency, renewable energy, waste management, climate science, environmental science, ecology, toxicology, hydrology, green architecture, and other topics that had a physical or scientific component that managers needed to understand in addition to typical management topics such as finance, organizational management, strategy, marketing, quantitative analysis, financial and performance management, and human resource management.
In the decade-plus since then, we have broadened the field to include issues of diversity, equity, inclusion, and access and added courses on forests, public space, the circular economy, corporate sustainability reporting, sustainable fashion, and a variety of new and fascinating topics. The area that has achieved the most attention has been sustainability finance developed and led by my colleague, Professor Satyajit Bose. We have pioneered a range of courses in this area, including green accounting, energy finance, climate finance and sustainable development, financing the clean energy economy, energy markets and innovation, sustainable investing and economic growth, and impact finance. New courses are being developed every semester, and sustainability finance has become very attractive to many of our students.
Last week, my colleague, environmental law professor Michael Gerrard, alerted me to some new developments in the green finance field. He sent me the link to a Bloomberg piece by William Patrick Geor Louch and Alastair Marsh reporting that “Private Equity Propels Top ESG Hires Into 7-Digit Pay League.” According to these reporters:
“Private equity firms, along with hedge funds, are significantly ramping up the amount they’re willing to pay specialists in sustainable finance, as a field once at the lower end of the pay scale moves closer to the top. According to headhunters, a growing number of ESG specialists are now being propelled into a completely different income bracket from the one they inhabited just a few years ago. That’s as the market for environmental, social and governance assets hurtles past $35 trillion.”
This is happening because the capital markets have finally figured out that corporations are not immune to environmental risk. Climate-induced drought and extreme weather can disrupt operations. Toxics and invasive species can harm ecosystems, and when contagious viruses are involved, can bring economies screeching to a halt as they disrupt supply chains which turn out to be less durable than we had thought. Some wealthy people and public pension funds are insisting upon “green” investments. We are also learning that just as companies need to pay attention to financial and reputational risk, they must also understand and manage their environmental risks. Corporate concern for reputational risk has grown to include areas such as diversity, equity, and treatment of workers. Corporate performance in these areas is increasingly an object of consumer questioning and consumer choice. Corporate governance, which in the U.S. has traditionally been a bastion of white male domination, is now subject to government and security market regulation. States like California are requiring diversity on corporate boards located within their jurisdiction. All of this requires management to pay more attention to issues of environmental impact, social impact, and corporate governance.
The mainstreaming of ESG resembles the growth of financial disclosure and the field of accounting back when the U.S. Security and Exchange Commission (SEC) was created and tried to make financial risk more transparent during the post-depression economic recovery of the 1930s. In the 1920s, stock market risk resembled a crooked casino. FDR and JFK’s dad Joseph Kennedy (the first SEC chair), changed that and built the modern stock market. Accounting began its climb to professional status during that time. I believe that sustainability management is seeing a similar evolution right now.
For some observers, this trend became obvious at COP26, the periodic trade show of the climate industry, which seemed to have been dominated by corporations. According to the New York Times opinion writer Christopher Caldwell:
“The big annual United Nations forum for debate on climate change ended this month in Glasgow in a way that left many attendees bewildered. Money men have taken the thing over. COP26, as the event was called, was less like its predecessors and more like a second “Davos” — the January meeting of the World Economic Forum where the global economy’s moguls and regulators meet to map out our economic future. Dozens of private jets arrived for COP26, bringing investors and fossil-fuel lobbyists in embarrassing profusion. The finance writer Gillian Tett noted that between 2015 and today, the “tribe” of COP attendees had been transformed from one of “environment ministers, scientists and activists” to one of “business leaders, financiers and monetary officials.” That is bound to render the movement’s tactics and goals less democratic…”
Perhaps, but I don’t see much democracy in global diplomacy in the first place. You have diplomats from democratic states negotiating with diplomats from autocratic states, and diplomats from the developed world negotiating with diplomats from the developing world. National self-interest dominates these discussions. The public is not consulted and the linkage from unelected diplomats to elected officials and then to the public at large is tenuous at best. After 26 of these meetings, awareness has been raised, and climate change is slowly moderating, but far too slowly for anyone to believe the status quo is working.
We know the problem and have even figured out the solution: We need to make a transition from a fossil fuel-based economy to one built on renewable energy. The transition will cost a lot of money and lots of money will be made and lost while it’s underway. That seems to have attracted plenty of attention from people who ignored environmental sustainability before. I have a hard time seeing that as a bad development. Caldwell is correctly concerned about the entrance of these financially self-interested folks to an arena previously dominated by mission-driven advocates, and conflict-averse relatively ineffectual bureaucrats. As Caldwell concludes in his Times piece:
“At Glasgow a few self-nominated representatives from a very rich industry laid claim to a special role in shaping the human future. In doing so, they opened a rift. Climate activists were skeptical, noting that many alliance members continue to be involved in financing oil extraction. The bankers of the alliance, on the other hand, seem to believe society is ready to follow their lead. Voters, not bankers, should be the judge of that.”
If only there were some place for voters to express themselves. Again, I don’t see much democracy in global diplomacy. I see sustainability and climate policy as an arena for competing elites. The government leaders in charge so far have made some progress, but the forces controlling the fossil fuel corporations have dominated. They already play “a special role in shaping the human future.” This is not something new. What is new is that some of them have figured out that their wealth will not be worth much on a planet degraded by the onslaught of environmental destruction. They have discovered the reality of environmental risk. I think it’s called enlightened self-interest.
Yes, self-interest is now at play in an arena that was once the province of mission-driven advocates of environmental sustainability. But here’s my take on this development, and I confess that it’s based on decades of being shut out of the mainstream. My interest in environmental policy began in the fall of 1975 when I wandered into Professor Lester Milbrath’s graduate course on environmental policy and politics at SUNY/Buffalo. Back then, environmental protection was a fringe issue, far from the mainstream of policy and governance. In 1977 I started working at EPA staffing a working group on public participation in America’s brand-new water pollution programs. EPA was seven years old and, five years earlier, Congress had passed the 1972 Water Act over Richard Nixon’s veto. In 1980 I worked in the Superfund toxic waste clean-up program, and in 1985 I worked on the program to eliminate leaking underground storage tanks. In 1987 I was able to start a tiny concentration in environmental policy at Columbia’s School of International and Public Affairs. In 2002 we started the MPA in Environmental Science and Policy program at Columbia. Through all those years until Barack Obama became president, the environment was a small and unimportant part of the political scene. We sat at the kid’s table. But then-President Obama started discussing climate change with global leaders, and by the time we established our master’s program in Sustainability Management in 2010, I could sense the growing momentum behind the field of environmental sustainability and sustainability management.
These seven-figure ESG jobs and the corporate leaders at COP26 mean that sustainability management has hit the big time. Yes, there are dangers in this development, but there is opportunity as well. The scale of change needed to build a renewable resource-based economy is huge. We need capital and organizational capacity to achieve this change. We also need public policy and public investment. The Biden Administration understands this, and the president’s infrastructure law and Build Back Better bill provide the public leadership we need. We need both elected leaders and business leaders to get this job done. We are in a new and scarier world, but its arrival couldn’t be timelier.