Upskilling the investment profession with climate knowledge

Friday 25 February 2022

Windfarm

Author: Monica Filkova, CFA

The financial sector has such a prevalent role to play in the transition to net-zero, and the CFA Society UK takes its responsibility to offer investment education very seriously. Over the past few years, CFA UK has launched two sustainability-focused certificates that specifically address ESG and climate change, the most recent one being the Certificate in Climate & Investing (CCI)

In recent years, there has been a noticeable shift in public opinion on the need for concerted and significant action to address climate change. We all remember the feel-good news stories of clear blue skies as emissions and air pollution rates dropped when we were in lockdown - and how, unfortunately, they reversed as soon as lockdowns started easing. Coupled with technological developments, policy and regulatory change, there has been a build-up of pressure for investment professionals (and the wider financial industry) to act fast and do more to affect change in the real economy.

The CCI qualification has been developed by a large cast of subject matter experts and investment professionals, working with CFA UK staff. What we set out to achieve is a qualification that provides the basic knowledge and critical thinking that is necessary to allow investment professionals to make better investment decisions.

When we started working on the syllabus, we quickly realised that the materials needed to act as a framework for analysis to give investment professionals a jumping board to continuously upskill their knowledge. The space is ever-growing, and the climate agenda is ever evolving; it is impossible to capture the rapid pace of change in one syllabus or exam.

Keys to success

One of the keys to success is developing the right mindset, as well as an appreciation of climate science, the impacts and dependencies, the challenges, risks and opportunities, and the interconnectedness of issues. For example, one of the main challenges I hear discussed in the climate investing sector is the lack of data, or the lack of relevant informative data. Data availability and good data are important. However, when developing the CCI we started to understand that it is not about having an abundance of data - in some cases this might actually be unhelpful. It is about getting the right data and being able to dissect its meaning before using it to inform investment decisions. It is about understanding the gaps and limitations, and still being able to move forward in a considered and informed manner.

When we think about climate, we are acutely aware that we must act quickly to effect change. We need to realise that the impact of investment decisions today will have long-term consequences for the climate, for people, for nature. So, yes, we need to constantly raise our level of knowledge now to inform our decisions. Even when investment time horizons are short, the analysis needs to go out to 2050 and beyond to capture these time scales and implications for the real economy, and that is a fundamental shift in thinking about risks and opportunities.

Reaching a tipping point

Undoubtedly, climate change and pressures on nature are two of the biggest and unprecedented challenges we – humans – have caused and now face. There is a need for broad-based action to mitigate the impacts, adapt to changes and reverse losses where possible. For the financial services industry this means understanding the impact each and every investment is having on the climate, and truly engaging with the changes that need to be made. It is so much more than just a tick-box exercise. It transcends dedicated investment products; it is relevant to listed and private market instruments, to companies and countries, to securities and real assets, to engagement with investee companies and investing well for beneficiaries.  

We have reached a point in time where action on climate is at a tipping point - much of the work needed should have been done yesterday. But it is not too late. Scaling up action and concerted action can still bring about change for a healthier, cleaner future. Climate concerns are escalating, but our appetite to solve the challenge must not diminish.

The Certificate in Climate & Investing seeks to create a practical framework where all investment decisions can be understood through a climate lens, equipping candidates with the knowledge and critical thinking skills they need to drive change now and in the future. I’m proud to have been involved in the development of this new qualification. 
 

Monica Filkova, CFA, Chair of CFA UK Certificate in Climate & Investing panel

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