–> This is a pre-event interview in the run-up to the Leaders in Sustainable Finance Event on 26 January 2023
Jeroen: I’m glad, Piet Klop, that you’re taking the time to talk to Leaders in Finance in the run-up to the Leaders in Sustainable Finance event. First of all, it would be great if you could introduce yourself.
Piet: My name is Piet Klop, I’m currently Head of the responsible investment unit at PGGM. Which is one part investment advice and one part investment support.
Jeroen: About your background, have you been long with PGGM or have you been doing very different things before?
Piet: I’ve been doing very different things before, I’ve been with PGGM now for ten years. Longer than I would have ever imagined. I started off as an agricultural engineer and I’ve been working in mostly developing countries for the better part of twenty years. I eventually evolved from engineering to economics. I got myself a second degree in applied environmental economics and then took that to finance.
Jeroen: Now being in finance for a while, what do you enjoy about it?
Piet: What I really like about finance as it currently is, is that my impact logic or my impact career seems to be converging with the interest of the financial sector right now has developed into. Real world outcome, so real world impact. And I like that that is slowly coming together and it’s not just a matter of how companies or investees are behaving, it’s also what they’re actually doing to fix some of these big global problems that we have.
Jeroen: What is in your words, you’re already kind of referring to it, but what is in your words the biggest challenge or the biggest task for the financial sector in your view?
Piet: That answer comes in two parts. A big challenge we still have is better understanding of these not yet financial risks. Climate change, workforce scarcity, biodiversity loss, social inequality, you name it. All these things that have been out there in the world that sooner or later, and in some cases sooner, will have a material impact on our portfolio. So it’s just good long-term risk management in a way, accept that they’re risks that we still don’t quite fully understand. A consequence of that is that we need to be much better at developing scenarios that we can trust to construct our portfolios around and those scenarios require a whole lot more than just looking in the rear-view mirror. The next twenty years are going to be dramatically different from the past twenty years. So that’s one. Outside in risk. The other one, a pretty big challenge, is inside out. To stuff the impact negative or positive that our investments have on the world out there. To measure that impact and to maximize that impact is an equally big challenge. So risk analysis, scenarios and also impact measurement, and indeed the impact management.
Jeroen: I’m sure you’re very concerned about the current state of affairs of the world in terms of, you name it, everything is related. Whether it’s climate change, biodiversity loss or social rights, the list is endless, unfortunately. But from a financial institution perspective, you already said that all of your assets are potentially under threat. What are other big risks for the financial services industry in the next few years?
Piet: There’s a familiar risk that will always be with us, which is short termism. The risks that we either don’t fully understand or will play out in the long run or are only slowly coming down upon us. They will always be hard to deal with in a sector that is very much geared towards short term profitability. And it will always be there. I think another challenge – they are obviously all inter-related – is that we need to be much better understood, so communications are a big deal. Especially if we want to do justice to the things that we like to talk about. We call it 3D-investing these days. Risk, return and impact. Whether it’s talking about pensions with purpose, whatever label we want to put on it, we have to make sure that the outside world actually understands this and doesn’t accuse us of greenwash, sometimes rightly, sometimes not. And indeed, appreciate the new found role that we like to fulfil. Appreciate that you can’t succeed in a world that fails. You can’t enjoy your pension. So we need to do something about that too. And that’s not always easy to accept or to perhaps understand. But that’s definitely what I believe, it’s going to be the name of the game for the next 20, 50, or 100 years.
Jeroen: So we are in a massive transition, or at least we should be.
Jeroen: Is there any upside, is there any great opportunity for the finance industry or is there only risks and downsides?
Piet: No, there are opportunities too, definitely. I think it’s important to understand the risks first, but once you do, there are always opportunities. There are opportunities in scarcity, there are opportunities in constraints, whether they’re coming from Brussels or whether indeed there are climate caps or carbon prices being introduced, there are opportunities everywhere. My worries come from the idea that even though I can see the solutions, they always tend to be slow solutions to fast-moving problems. It’s not that they’re not there, they may not be fast enough or big enough. But I’m not pessimistic in that sense, I can see that a lot can change fairly quickly. If you look at the past year, there was an acceleration like we’ve never seen before in things like energy security, climate action et cetera. I’m a guy who always wrestles with the question whether the glass is half full or half empty. But it’s technically half; it’s not one or the other.
Jeroen: I loved your statements around slow solutions for fast-moving problems. It may not a good way of thinking, but if I think about that, you sometimes may need a short-term crisis to get to faster action, right? Although we don’t want it.
Piet: And it’s painful, you have to suffer pain for it, literally, every day. Part of me thinks that this is exactly what was needed. We can’t talk about climate change and our ability or willingness to do something about it if you’re not prepared to pay more for fossil energy. We’re doing it right now. And that’s the crisis.
Jeroen: It’s terrible, because many people are paying the price for that. But I see what you mean. The last question for now, we are organizing this Leaders in Sustainable Finance event, we have key notes and c-level speakers, also non-financial industry leads coming to talk about their transitions and what they think they should get from the financial services industry. We have NGOs and so forth. Are you looking forward to this?
Piet: Absolutely, I’m looking forward to this. What makes this event, Leaders in Finance different from all other events, is that hopefully we’re not going to be mealy-mouthed about this. I don’t necessarily want to hear good intentions, I would rather go to the nitty gritty or what a transition actually means. But you’re coming from the business side or the opportunity side, there are a lot of details that will determine whether we succeed or fail. So the more precise, the more specific, and in a way, the more uncomfortable this conference is, the better. I know there are a bunch of NGOs that are going to make our lives very difficult, be my guest. Please, do that.
Jeroen: Wonderful last sentence! Thank you so much, Piet, for taking the time and I’m looking forward to see you there.
–> Piet Klop, is the Head of the responsible investment unit at PGG and is a member of the Advisory Board of the Leaders in Sustainable Finance Event that takes place on 26 January 2023.