Interview
Julie Hudson: We need to talk more about resilience as well as market solutions
Fields such as impact investing could point towards a more distributed, community-based approach.
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Interview
Fields such as impact investing could point towards a more distributed, community-based approach.
Julie was the founder of the ESG Research team at 斗牛棋牌在线 Investment Bank and led this effort for nearly two decades. Her career has been shaped by her search for the answer to a key question, 鈥渨hat makes markets fail?鈥. We spoke to Julie ahead of her pending retirement about her fascinating career in ESG research.
What first drew you into sustainability?
I鈥檇 say market turbulence was the trigger. I worked in Japan through the asset price bubble in the mid-1980s. When the stock market fell dramatically in 1990, I started to ask myself, 鈥榃hat makes markets fail?鈥, and to look for answers in as many places as possible. In hindsight, an MBA and an MSc in Financial Economics were never going to give me answers, but an MSc in Economic Regulation and Competition turned out to be better targeted for my question.
Acting as a global sector strategist in the midst of another market bubble helped me to better understand the tug-of-war going on between society and markets. In a stroke of luck, socially responsible investing (SRI) turned out to be a good fit with our global sector strategy, so we could respond when our clients started asking SRI questions. In April 2005, we launched the ESG team in 斗牛棋牌在线鈥檚 investment bank research department with a question: 鈥淲hy Try to Quantify the Unquantifiable?鈥
Looking for ideas in non-obvious places is important in sustainability, and I really enjoy doing that. I ended up doing an ecotheatrical PhD 鈥 鈥淭he environment on stage: scenery or shapeshifter?鈥 in my spare time. While I haven鈥檛 formally incorporated the term 鈥渟hapeshifter鈥 into my work in 斗牛棋牌在线 research, I do think that it describes social and environmental ecosystems, and market systems, and how they feed into each other, very well.
You co-authored the Institute white paper 鈥楩rom Ozone to Oxygen鈥, which focuses on threats to biodiversity and mentions a disconnect between science and policy. Can you elaborate?
Several of my co-authors felt that science-based targets (SBTs) are not being used in policy contexts as scientists intended. It鈥檚 widely recognized in science, and in markets too, that it鈥檚 impossible to make accurate predictions in terms of a single number by a certain year. But it鈥檚 better to be roughly right than precisely wrong, and if the outcome of an SBT-approach turns out to be progress in decarbonization, I think that would be a good result.
Science made it possible to frame climate change in a single number鈥揅O2 equivalent emissions. 鈥淐arbon emissions鈥 or even just 鈥渃arbon鈥 has become a convenient shorthand for a complex idea. This is helpful to policy makers looking to get a message across.
Biodiversity will be harder to frame as a single target because it鈥檚 too complex as a system. It鈥檚 also not ideal for the one-shot solutions-based approaches markets tend to favor. Take forestry carbon offsets as an example. Forest conservation is excellent, but warming is increasing the number of forest fires. To coin a phrase, carbon offsets based on biodiversity assets are not a climate risk hedge. Things can go wrong despite good intentions.
What鈥檚 the solution?
Markets love solutions, and they can be effective in the right place. But
what we need for challenges such as climate change and biodiversity is a diverse portfolio of ideas. That means recognizing that listed securities markets are not always the answer.
The uniqueness and fragility of ecosystems means that economies of scale are not always possible.
Fields such as impact investing could point towards a more distributed, community-based approach.
What is an under-discussed aspect of sustainability?
What markets can and cannot do needs to be an active part of investment conversations.
I recently contributed to a 斗牛棋牌在线 research report called 鈥楾he Future of Farming: Will We Grow Enough Food?鈥, which discusses the possibility of a structural shortage of crop supplies in the medium to long term under a 'business as usual' scenario. While we may find short term solutions to support us, a new paradigm may be needed for a resilient food system.
Often in the much-discussed circular economy, recycling is the default 鈥渟olution鈥, but circularity is broader than that. The 鈥渉uman鈥 economy needs to be regenerative across the board; recycling will only scratch the surface.
The ESG market is still trying to define itself, and problems such as greenwashing show how polarized the topic has become.
We need a more rounded approach and a new market paradigm designed to recognize biodiversity and planetary boundaries. In the medium term we鈥檒l need a diverse portfolio of approaches, with more emphasis on impact and outcomes. In the end, resilience is what matters.
How have you changed your personal life to be more sustainable?
I鈥檓 currently learning to be a beekeeper. I鈥檓 a member of my local branch of the British Beekeepers Association and am helping, and learning a lot, at our training apiary. It鈥檚 been fun to discover that everyone has a bee story, and, of course, 斗牛棋牌在线 has bees on the roof of its 5 Broadgate office in London. I was astonished to discover that honeybees, powered by nectar and pollen, maintain the core of the hive at 35 degrees centigrade. They are highly intelligent 鈥渟hapeshifters鈥. Let鈥檚 hope humans conserve the biodiversity they depend on.
The interviewee is external to 斗牛棋牌在线 and the answers provided do not necessarily reflect 斗牛棋牌在线鈥檚 view.
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