Kicking off Sustainable Finance Live 2023 at Events@no6 in London, founder of ResponsibleRisk Richard Peers, highlighted the objective of this year’s event, to bring people together in their likeminded desire to drive sustainability in their work.

He outlined this year’s main theme: how to finance sustainable cities, what we can do to identify solutions and work towards resolutions through panel sessions, workshops, and the hackathon.

Peers explained that within the use case of cities, the panel sessions focus on nature, climate, energy, the just transition, and various levers of change such as data, AI, risk, and financial instruments. He pointed out that after the conference, the best ideas will be able to be put forward to accelerators and funded by venture capital to drive forward the sustainable agenda.

Peers provided an introductory explanation to ‘doughnut economics’ as a model for describing the strategies at play and resources available for those looking to put their ideas into action.

“There is this huge body of work, which talks about the outside which is the environmental consideration that we need to be aware of the ecological ceiling on the inside of the social foundation, of course, a huge part of what we'll talk about today with cities and when what is the safe space for humanity sitting within that doughnut and cities now? If you are going to build a sustainable city around nature, collaborating with public and private financing, both public and private. Having the metrics to prove that the citizens money is being used for the reason it was intended and transcending political cycles.”

In the first keynote of the conference, ‘How can the nexus of forces between nature, climate, energy, and society be addressed’, Mitch Cooke, director of sustainability, ESG, and sustainable finance at Greengage Environmental discussed how various cities are addressing sustainability and regulation with the resources and innovations they have.

He stated that Greengage works to integrate nature, climate, energy, and society – describing the intersection of all of these factors as “the sweet-spot”. His solutions-focused presentation aimed to define how sustainable initiatives are being delivered and constructed and how to ensure that green targets are met using the resources cities have at their disposal.

Cooke outlined various projects that Greengage is working on within London to make it a more sustainable city, focusing on current and developing projects that include sustainable design to form carbon neutral and green spaces, making more healthy, social spaces designed specifically for the local community.

His first example of sustainable design that Greegage has worked on was a collaboration with LendLease called Elephant Park in Elephant and Castle, London. The space aspires to be a net zero operation and has created a green space with enhanced biodiversity and a low carbon power plant that provides heating and hot water to over 3000 homes, community areas, and local businesses. Cooke details that the regeneration has created thousands of jobs in Elephant and Castle and formed more public spaces for the community.

“We used Elephant Park as a living lab. We have been talking to local residents and community groups, but also more widely to the sustainability and development network so we can share our learnings and form a town centre framework that sets out the vision for capital over the next 30 years. We have worked with the urban design team to set the urban greening toolkit that guides future developments to deliver climate resilient buildings and spaces, but also to encourage active travel, natural, and civic surveillance and the ability for community cohesion. These design output parameters are not just design aspirations, but based on a deeper understanding of the health and socio economic profiles of existing communities.”

Cooke highlighted how sustainable planning should address climate change and biodiversity through urban greening but also focus on the health issues within the community.

Another example that Cooke provided is a space opposite the Excel Centre that will offer affordable new homes, workplaces, and cultural hub with leisure facilities, cafes, and art spaces. It will be a green and sustainable location with heating and hot water through a zero carbon district heating network. He emphasised that a main objective of this project be to offer green spaces and create areas where people can form social connections to avoid the negative mental and physical health effects of loneliness, which is prevalent among the older generation and those that live alone.

Cooke concluded: “Cities are addressing sustainability and climate change through placemaking strategies. This requires systems thinking and collaboration designed for delivery and long-term operations. Unlocking these challenges requires a new look at partnerships leading between private and public sectors and a collaborative, not competitive, approach. This will require us to think about the needs of the community and how placemaking includes multi-layer benefits for nature, climate, and energy. Finance will play a pivotal role in more traditional mechanisms of government funding, and also more innovative methods of funding things like deep networks, renewable energy, impact investing, written bonds and sustainability-linked loans.”

Bring everyone to the party for decarbonisation

Leading the SustainableFinance.Live's 2023 keynote session, Roxana Slavcheva, global lead for the built environment, World Resources Institute (WRI), dove right in to her session titled the ‘Role of AI in Decarbonising the Built Environment: An Urban Policy Perspective.’

With cities as the key focus, Slavcheva commenced by stating that we need to move beyond the typical slogans and catchphrases of the sustainability movement often heard at events such as today’s. “Cities are engines of economic growth and are where 50% of the population lives, cities produce 70% or more GHG emissions, 90% of residents in cities live in places that exceed safe limits or air pollution.”

We all know and understand the statistics, Slavcheva explains, but we can also look at cities as more independent entities that benefit from agility, and much like startups, they can experiment and “move fast and break things,” to learn, improve, iterate.

Slavcheva states that the building sector accounts for over one third of energy demand, and is the largest contributor to CO2 emissions. How can we move beyond the frequently heard slogans and questions and improve building decarbonisation?

Achieving decarbonisation would reduce cost, create jobs, provide cost effective energy capacity, improve human benefits (comfort, wellbeing) and more. WRI leads the response to this question with a framework. It approaches the issues through the Donut Economics model, featuring the three pillars: People, Nature, and Climate pillars of the donut as the built environment doesn’t exist in isolation. It's part of an urban system, which means that aligning this with the model must focus on championing regenerative and distributive policies.

“The WRI says that cities should really be approached as enhancing nature systems rather than the usual approach of attempting to bring in greenery and forests to cities. We need a systems change, and changes via linear models really don’t work.”

Bringing this to fruition for energy systems decarbonisation, for instance, requires addressing the four ‘Ds’:
- Decarbonisation
- Decentralisation
- Digitalisation
- Democratisation

In enabling the conditions for systems change, the WRI breaks the ecosystem into two categories, the human and the enablers. For the human breakdown, food, energy and cities are the three key pillars, while enablers, when viewed not as inhibitors but as catalysts for change, the WRI lists finance, governance and economics:

Another key enabler that the WRI focuses on, is that of technology. Specifically, AI.

WRI leverages its advanced data lab to leverage AI technology for a variety of purposes. The urban heat island effect, for instance, is being looked at to understand the air temperatures within and across cities around the globe. A similar initiative called Global Forest Watch is used to study the spread of greenery across specific cities and how, for instance, tree coverage may impact temperatures.

Data sets are only as useful insofar as they can be analysed, translated into useful policy tools and implemented. WRI advises policymakers and actors to take the evidence to create a data centered approach to urban development which tackles some of these challenges - such as the urban heat island effect. “That includes several focus areas of intervention. For instance, in the urban heat island example, we advise a city to look into not just tree cover but designing from multiple angles for a liveable neighborhood and to mitigate the impact of the urban heat island effect but also to create a more enjoyable and healthier space.”

Developing liveable neighbourhoods, redefining business and procurement models, reducing cities energy demands, resilient water systems and infrastructure are other focus areas the WRI also recommends.

“Decarbonising the built environment is a complex challenge, and it requires careful planning collaboration, the consideration of various stakeholders needs and interests, while balancing the multiple layers and dependencies involved. There is no one size fits all endeavour to decarbonise the built environment.

“That’s why the WRI looks at multiple angles, multiple entry points and speaking the language of the stakeholders. We engage with each category of partners and how they view their role in the system. Our role is really to frame and guide on city influence.”

For example, the WRI works with government to assist them advance their contribution to NDCs and the SDGs, increasing the city’s attractiveness in terms of investability and livability, as well as competitiveness.

“We also look into enabling conditions for reducing barriers, the degrees of freedom, classification of place and cities' challenges in different geographies. We work globally, looking at multiple stakeholder priorities.”

In addition to working with policymakers, the WRI also collaborates with affordable construction companies, data providers, real estate and asset managers, developers, investors that are concerned with climate risk for resilience and for their investment, maintenance, build infrastructure and insurance perspective as well.

“Our role is to bring everyone to the party and enable them to work in a concerted effort,” adds Slavcheva.
Responding to an audience member who wanted to know where a region has done this in a way that isn’t too ‘expensive?’ Slavcheva argues that: “It depends what you mean by expensive, but I think it's a definitional point, I like the point one of the panelists previously made that it's more expensive not to do it!

“It's changing the reference point, that really matters here. I don't think it's necessarily the cost, there's always an assumption that there will be short term investment that goes in, but the cost of maintaining the current heavily polluting system is quite large.

"The cost of inaction, in terms of climate change, mitigation and adaptation is quite large. And so if you add up all of those current system maintenance costs in addition to the benefits that you get from a just energy transition, it's not expensive […] We don't have much time. We have targets and commitments to decarbonise the entire economy. The energy sector is a big part of our emissions trajectory here. So, ideally, it will take bringing in actors like all of us that have gathered here, to make the business case and to make the pledge and the commitment to do this as soon as possible.”

The bank’s role in financing sustainable cities

Moving swiftly to the interactive workshop, the session Sustainable Finance Live is known for was hailed as being a rapid cocreation opportunity for attendees and where ideas became reality in just an hour.

Led by Richard Conway, CEO, Elastacloud, Sam Gandy, head of innovation, Ecosulis; Jigisha Lock, head of platform strategy, portfolio, and ESG solutions, NatWest Markets; and Vian Sharif, head of sustainability FNZ and Founder Nature Alpha, FNZ, took to the stage to whiteboard the financial institution’s role in managing and measuring a climate transition when financing sustainable cities.

What must be considered before building a sustainable city?

To set the scene, Lock provided some statistics and revealed that 70% of energy consumption across the world occurs within cities, as well as 75% of emissions. Introducing the role of the bank, Lock asked: “What would it take to have a sustainable smart city? The key parameters are a smart grid, good insulation, water management, waste management, almost a self-sustaining local produce and a growing community, at a very high level.”

She continued: “How would banks enable that? Through a series of financial products. Those could be green bonds, sustainability bonds, sustainability linked bonds, carbon markets, project financing, pretty much all your traditional financial products with a sustainability lens on it, where the returns are not purely financial, but also environmental.”

Summarising the challenges that investors would face within this realm, Lock mentioned “measurability and scalability, which both impact profitability.” While non-financial returns are important for sustainability, if these do not translate into direct profit, banks could get penalised by shareholders.

In Sharif’s view, nature capital has a place in investment decision making and should be considered across financial services. Dependencies such as water and soil will need to be factored in for certain projects and what impact these will have or present a risk to the bank in future. “It is not only about the impact that we’re having, but also about the risks that we can mitigate for the future and how that might sustain the businesses in which we’ve just invested. When creating metrics, we must start to think about the materiality of investments, impact dependency, the risks presented to that investment in this situation,” Sharif said.

She added that the sheer amount of regulation incoming proves that there is a huge amount of awareness that wasn’t there before. Another element that must be considered is location specificity of biodiversity and nature. “As much as I love where we live today, it’s not quite the same in terms of biodiversity richness as a place in the Amazon rainforest. Biodiversity is specific to location and that is crucial in terms of all the regulation that’s coming up,” Sharif said.

The third piece of this pillar is the technology that is available to measure change over time, as well as the proliferation and accessibility of satellite imagery, and the ability to process satellite imagery of ecosystem change over time. Combined with traditional financial metrics at our disposal, the industry is in a place where these developments can be effectively measured, and standardised.

What needs to change for sustainable cities to be successful?

While organisations such as the TNFD are supporting standardisation, regulation remains generic and subjective. Interpretations in isolation could result in banks being called out for greenwashing, which is a genuine concern for Lock.

Context is key, and as Lock advised, what is missing from this area is “the space for dialogue, learning and experimentation as an industry.” In the same way, the understanding that one organisation cannot succeed alone, and partnerships pave the way for increased sustainability because each company can hold each other accountable with KPIs, is equally crucial.

Using a rhino bond, where the return was an increase in a specific type of rhino population in a specific area of South Africa, as an example, Lock described how conservationists worked with financial services. “Conservationists on the ground tracking mechanisms to see whether the growth was indeed taking place, and looked at other kinds of capabilities or ecosystems that were necessary to harness that growth. I think we need to look at products and opportunities a little bit differently. This is a slight tension, but I think still relevant.”

Exploring India as a sustainable country, Lock also commented that the concept of a circular economy is not new. “If you really want to build new cities, especially in emerging economies, such as India, where we have a lot of new cities being built, new and special economic zones being created to promote employment or promote opportunities, we need to take some of those old technologies and capabilities and invest in them and that's where the investment comes in. Create new innovative products to scale some of those age-old practices and have the right KPIs to measure usability of it, so that you are powering these cities through some of that circularity that existed decades ago.”

Bringing the benefits of sustainable cities to improved mental health into the discussion, Gandy added this should also be taken into consideration when in the design phase, because of potential economic gain. “It can be a tricky thing to quantify mental health benefits compared to physical health, it's even more immaterial. But that should be taken into consideration when designing the cities, as the amount of potential economic gain from having healthier, happier citizens that are part of those cities, is tremendous.”

While the world does have a balance sheet, Gandy also added that “in principle, this is a step in the right direction. We were constantly developing and building a lot of the time on top of nature, rather than into it. It’s one of several different kinds of policies that has turned into political football.” Referencing the suggested restrictions on property developers and incentives for offsetting biodiversity, Gandy explored how governments are attempting to mitigate some of the negative effects that human development has on habitats, but more needs to be done.

It could also be argued that more needs to be done around the perception of success and as Gandy expanded on land abandonment in various parts of Europe where large swathes of land are rewilding, his view is that this progress needs to be more proactive. “Some people have the view that rewilding is where you fence off a large area of nature, take all the humans out and just let it go. That's not how it works. It can be not interfering with the ecosystem and letting natural dynamics push things along, but humans are often an integral part of rewilding projects, particularly in the early stages to push things in the right ecological direction. And obviously, there's got to be an economic incentive, as well.”

As a final comment on this topic, Lock added that financial institutions must have a fuller understanding of what data they currently have access to and can purchase. “Understanding what data we have and what our client base is, is critical, which to be honest, not all banks have, in context of sustainability. I've known banks that have gone and bought data for clients that is completely different to they serve.”

Facing facts, Sharif added that looking back at the last three years, the TNFD was merely a though and because of accelerated regulatory guidance and frameworks being released, a concrete narrative around these issues has been set.

“Investment decision making, including nature has changed beyond all recognition. And we've been doing this for the last three years, so where we are today is unprecedented regarding the engagement from the finance sector, and they're buying data. That hasn't happened until now, this quarter.”

Democratising geospatial data and informing AI usage

In the keynote and Q&A session, ‘What is the role of AI in sustainable finance as we consider the role of satellite based geospatial data in city design?’, speaker Donna Lyndsay, strategic market lead environment and sustainability at Ordnance Survey, explored the use of data analytics and geospatial technology in green urban planning.

Ordnance Survey has over 230 surveyors in the field that provide 20,000 updates a day and uses drone technology and satellite data. Lyndsay highlighted that satellite data allows the data to be kept fresh and up to date, and can be help inform the attribution of data using multi-spectral characteristics. She shared how data science is able to detect water pollution through the use of Smart Biospheres developed using geospatial technology:

“We spawned a project thinking about what are the some of the key pain points that going on at the moment, and what is possible, and how can we provide solutions? We worked with CGI to look at what we could do with data. We did trials and created models to look at whether or not we could detect sewage from space. Short answer is it's really hard. When you start putting together loads of data sources, you can start trading tools to help you predict when these events are going to happen. One of the models created was relatively good, and now we are testing it in the real world with the smart buyers here in North Devon, and they have over 50 sensors deployed in one of the river catchments so we can test whether the predictive algorithms are actually predicting the pollution event accurately enough. It's no good having a black box technology where you are not sure what the inputs are and what the outputs are.”

She emphasised the significance of data collected by satellites, as they can assist in facing unprecedented change when it comes to climate change using historic data which can help understanding and monitoring of climate change as it progresses.

Open data can map thermal signatures that can chart where cooling needs to take place and where the heat levels are unsafe, informing urban planning designs for how to create spaces where natural cooling can be implemented and health services can be placed. The combination of data and intelligence can inform planning, visualise where change needs to take place, and form nature-based solutions to see what does and doesn’t work in the field, Lyndsay explained.

She continued that Ordnance Survey is prioritising data democratisation by using ChatGPT to allow people to monitor how their local areas are being impacted by climate change. Through their applications, people will be able to read thermal signatures, view flood zones, and learn more about the status of their environment.

She stated: “I think we can really democratise information to make it useful. People don't have to be specialists in geospatial information to use the data appropriately and meet their needs. We can make sure to control that input, make sure it's quality, that in the black box scenario you can lift the lid and see what's inside so people can trust what's going on.”

Alongside her explanation on the benefits and numerous uses of AI and data, Lyndsay warned on misuse of AI technology and data models that can share misinformation, develop bias, and distort the data output. People are able to cease emissions when satellites are tracking their data, and so they can try to game the system and manipulate the data collected to make it seem better than it is.

Lyndsay concluded that what Ordnance is doing as present as taking knowledge that has been accrued and applying it globally, collecting data for a purpose and data that delivers value. Through Ordnance’s technology, they would be able to find emissions that people are trying to hide based on location.

Following the keynote session, Darshna Shah, director of innovation, Elastacloud, moderated a panel on the role of behavioural science and the potential winners and losers when cities change to meet sustainable finance goals.

Joining Shah on stage was Guillaume Levannier, sustainable finance board member and asset manager, Lombard Odier Investment Managers; Walid Al Saqqaff, founder, ReBalance Earth; Jannika Aalto, program manager, sustainable circular cities and built environment, Green Digital Finance Alliance; and Adrian Sargent, CEO, Castle Community Bank.

Leveraging her background in neuroscience, Shah provided a fresh perspective on approaching sustainability and presenting the subject through from a scientist’s perspective. “We’re bombarded with a lot of data, it can seem overwhelming, and to form habitual change, we need to engage our prefrontal cortex, apply a lot of attention, decision making and to some degree, emotional regulation.

“And with that, we need to repeat behaviours before they can become habits. We have a lot of contextual stresses on us, whether that’s pricing and products or social norms, that may not always lead to the value and behavioural link that we expect,” Shah added. She went on to reference datasets provided by the World Resources Institute and highlighted three key studies into the Covid travel ban, community energy use reports, and menu language – which revealed sustainable benefits.

These include the realisation that work can be conducted efficiently remotely, awareness of neighbours’ energy consumption can help reduce usage, and adjusting how vegetarian food is described can reduce the number of meat dishes ordered. With this, Shah proved that “small incremental changes could lead to more widespread sustainable behaviour.”

But how can financial institutions plan for this, and what are the most important behavioural considerations? Walid Al Saqqaff, founder, ReBalance Earth, highlighted that nature must be considered in a very different way to carbon. “Whenever you want to prove biodiversity, you have to think in terms of decades, not centuries, and to do that, you need the buy in of the local communities. You need to understand what their existing behaviours are, why they established in that manner, and how you can move towards something that is more sustainable?”

Al Saqqaff also mentioned that aligning to the UN SDGs is an effective way of filtering through insights and understanding what the community is prioritising. “That can act as your lighthouse,” he added. A second consideration is to look into areas within cities that have been deprived for historical reasons, investment has dried up, and as a result, employment has suffered. By understanding the challenges that communities are enduring, the solutions to these issues can be extracted from data, as explored in the previous session.

While data can be gained from satellites or drones, Al Saqqaff explained that one of the greatest sources of information is in fact through people, “citizen science”, and creating that “feedback loop to correct AI models to apply a policy of equity and fairness. But are we all on board? Sargeant stated that all those attending Sustainable Finance Live are “motivated and want to see change, but it's a question of how do you then get that change through and how does that legislature or regulation come through?

“We need the support of the cities to allow the framework to happen, but then, we also need the finance to flow through. Both councils and governments need money to support it, which can come through private investment,” – although this is occasionally difficult to garner for certain types of communities and companies. All panelists agreed that partnerships are the way forward, particularly to ensure that frameworks such as these can be funded.

Jannika Aalto, program manager, sustainable circular cities and built environment, Green Digital Finance Alliance, drilled down into this and said that although the term “cocreation” has become a buzzword recently, but “there is real value in meaningful engagement early on with local communities.”

Guillaume Levannier, sustainable finance board member and asset manager, Lombard Odier Investment Managers, provided a concluding comment on the use of data and said that when working with small to medium sized businesses, in addition to engaging with the communities, banks must also focus on the “risk of buy ins into ideas, and the knowledge about the risk.”

Green energy transition can be driven by demand

“We are told consistently by financial leaders that trillions of dollars of capital are committed to transforming economies cities, etc. to achieve net zero, yet many of you have noticed that the despite the large amounts quoted the flow appears to be a trickle,” said Simon Perham, head investor outreach Europe, at Carbon Tracker, who moderated the first panel of the day at Sustainable Finance Live 2023.

Perham was joined by Kaj Embren, senior advisor, Kaj Embren Ltd; Sophie Kempthorne, innovation lead, Innovate UK KTN; Vera Kuki, UK lead for sustainability in financial services sector, IBM; and Amandine Tetot, head of project finance, Triodos Bank.

Initially, Perham asked Kempthorne about the argument that some of the biggest barriers to investment in gaining clean and affordable energy are not technological, or financial, but human. In response, Kempthorne said: “We're asking local authorities mainly. Capacity and skills to develop the pipeline of projects needed to decarbonise local economies is one of the biggest barriers, not technology. Local and city authorities are well positioned to drive this. They are responsible for governance, for planning, have the reach across the public and private sectors at the local level, who are key drivers for mobilising these projects and mobilising the capital that we need for those projects to do that. Yet they are the organisations within the public sector that have the least capacity at the moment to do that.”

Kuki developed this point further and she stated that the “technology exists, however, we need the upstream and downstream in infrastructure for clean energy to work.” Embren added to this and believes that “the political sector has a critical role to play. This is a human issue. It's about leadership. It's about bottom-up top-down.”

On this bottom-up perspective, Tetot emphasised “how powerful the bottom-up small projects can be on many aspects, including creating capacity. We've seen so many small communities we started financing probably 10 to 15 years ago, with a small project here, with an idea, only volunteers and now they’re proper large organisations.”

Looking towards the cost of green energy, Kempthorne argued that, “if we balance the local energy demand and supply in a much more clever and integrated way that utilises digital optimisation and enables local energy market structures to open up investment locally in those solutions. We can save a huge amount of money just by driving down demand and better managing demand and supply at the local level."

She gave the example of their “Greater Manchester local energy market project, we invested up to £3 million in it, initially, a relatively small amount of grant funding, and the local energy market model that they were able to develop showed that within the first five years, they will be able to save £40 million a year in negated grid reinforcement costs.”

Kempthorne further argued that “citizens hold the key in providing consent for all those changes we need to make to our cities and towns, and that enables demand for those products and services. And that in turn, drives adoption and deployment. So, ESG isn’t just a nice to have, it’s something real that is grounded in the reality of our everyday lives that drives return on investment.”

On the topic of ESG data, Kuki argued: “We need to recognise that new standards will be emerging, new data will be available, level of granularity will be higher, and actually the calculation methodologies that will be used will get more scientific. That's why I think we need to get more transparent and need to stop hiding behind data.”

Tetot emphasised the importance of “remembering the role of financial institutions in working with their existing customers.” She further elaborated that “it's also about working on bringing along those customers or counterparts that you already have. If it's not about climate mitigation, it's about climate adaptation. So you challenge your existing customers and partners and projects.”