Three interesting thoughts on the table this week. The first I touched on in a previous blog: COVID19 as an accelerator of good: Climate action. The second, also subject of a previous blog: Is the finance industry about to save the planet? Third thought is a new one, inspired by something I read this week: The COVID19 Pandemic is seriously narrowing junior bankers’ exit options.

Just to remind you, on the second point, The Economist, published in April 2020 the following piece, the trouble with green finance. This piece noted that ‘judged by today’s fundraising bonanza and the solemn pronouncements by institutional investors, bankers and regulators, you might think that the industry is about to save the planet’.

According to the website efinancialcareers, if you are a junior investment banker and you’re getting tired of putting in long hours while working from home, be warned that your options for escaping and doing something else appear to have diminished as a result of the pandemic.

In the past, even the recent past, there were a few real options for analysts and associates in investment banks:

  • The first was stick with it until vice president and beyond; then leave to work in corporate development;
  • Second, leave to work in strategy consulting;
  • Or, most popularly, the third, leave to work in private equity/commercial real estate.

It’s the private equity option that appeared to have closed down before the pandemic. Or so we all thought. So what’s happened since then?

  • We know that climate change is as serious a crisis as the coronavirus.
  • Most (polling suggests) want the environmental gains we are seeing now to continue once social distancing restrictions are relaxed.
  • Climate action will soak up lost jobs. For example, solar roof tops can scale up job creation – just like California did.
  • It’s an all-in moment: We must transform societies to be low carbon. and resilient and take the poor and vulnerable with us.
  • Carbon Pricing: Climate change policies lead to socio-economic impacts on different groups in society. The perceived fairness of how these costs and benefits are distributed over different countries, sectors, businesses, and households will affect the acceptability and effectiveness of proposed measures.
  • We must grow green bonds, ones that can allocate proceeds in line with the Paris Agreement.

All of these open up new options for our investment banker friends. Not only did we all rescue the banks at the time of the GFC. It now looks like we will save them again, more importantly their jobs, while all our own jobs are at risk.

The global ESG revolution is going from quiet to loud – VERY LOUD (Asia Financial Times, 26 September 2020).

This is why I suspect the Principles for Responsible Investments has recently released a Sustainable Development Goals five-step framework to support investors in creating investment outcomes that are aligned with the UN goals. This is not new. When I worked with colleagues at Arup and 100 Resilient Cities on city resilience strategies in 2016-2018, we mapped projects and KPIs onto the SDGs. Seemed intuitive at the time.

It is probably in part to do with the health of the planet that finance has taken an interest in the SDGs. It is also in part a survival instinct. Investors have come to realise that supporting the SDGs, will increase the positive outcomes and decrease the negative outcomes of their actions.

Focusing on SDG outcomes will also help investors: It will help them prepare for and respond to legal and regulatory developments, including those that may lead to asset stranding.

It is time for the two industries, finance and built environment to play more together. It cannot and should not be an everytime a firm hires an ESG specialist, the job goes to an investment banker. It should go to a built environment specialist. More on this some other time.