00:00 [Music]
00:08 Hello Nicolas Motis
00:10 Hello Jean-Philippe
00:11 Nicolas Motis, you are a professor at the École Polytechnique
00:13 You are an administrator of the FIIR, the Forum for Responsible Investment
00:17 You are a member of the Climate and Sustainable Finance Commission of the AMF, the Authority of Financial Markets
00:22 ISR and Responsible Finance, second edition, Ellipse edition
00:27 Responsible Finance, a very original book
00:32 You are going to talk about it, a dialogue between academic and practitioners
00:35 It is not so frequent
00:37 That's it, the finance is responsible, 10 years later
00:40 It is still looking for it, but it is trying more and more
00:43 There are some signs that show that it is partly successful
00:46 Yes, it is partly successful
00:47 So, first point, first origin of this book, it is this dialogue
00:50 Yes, it is the second edition
00:52 We had made a first version of the book a little over 10 years ago
00:56 At the time when sustainable finance was not so developed
00:59 We made it with the main actors of the place
01:01 When we made it, we knew everybody in the field of sustainable finance
01:05 And when we made the exercise again, 10 years later, we realized that the field had exploded
01:10 So we integrated some new authors
01:12 And indeed, one of the key characteristics of the book is that we combined academic authors, researchers and practitioners
01:19 Often practitioners who have a lot of experience in the field, so they have a little hindsight on their subject
01:23 The great originality of the book is the recommendations
01:27 Yes
01:28 There are 10 recommendations to move forward
01:30 I want to say, it is the new mainstream now, the responsible finance
01:33 So, in part, but with all the weaknesses of the mainstream
01:37 Since in the mainstream, there is a little bit of everything and anything
01:39 And this is one of the subjects we deal with in the book
01:41 Is there not a very high risk of dilution of the responsible finance
01:46 And so, we have done indeed, beyond the chapters that are on more precise technical points
01:51 As in the first edition, we made 10 recommendations to move the domain
01:56 And especially to try to make a little more robust the concept of sustainable finance
02:00 So, first recommendation, we will not go through the 10 in sight
02:03 We will talk about the spirit of the 10 recommendations
02:06 I want to say, the spirit of the laws of responsible finance
02:09 Taught in high school
02:10 Yes, this is one of the general weaknesses that we know well in France
02:14 The lack of economic culture
02:16 And what we could see, both academic and practitioners
02:20 Is that when we talk about responsible finance
02:22 So, finance that integrates the issues of social, environmental, social society
02:26 In fact, we can interest extremely large audiences
02:29 And if we can interest these audiences, we might as well make them more competent
02:32 And to make a population more competent, we must start with the secondary
02:36 And so, the idea is to integrate in the secondary programs
02:40 Modules on sustainable finance
02:42 We made interventions, I made interventions for example
02:44 With the Association of High School Teachers
02:46 With the General Inspection of National Education
02:49 And the feedback was extremely positive
02:51 So, there is really material to go further
02:53 And to integrate these contents in the secondary education
02:56 And finally, to succeed in financial education
02:58 It's a real subject
03:00 Exactly, and to show that it's not only
03:02 There is of course an economic dimension
03:03 With profitability, volatility, etc.
03:05 But there is also a whole technical, environmental, social dimension
03:08 Which can be combined
03:09 And the concepts of sustainable finance allow to do so
03:11 That new savings accounts are by default responsible funds
03:15 Yes, so that's an ambition we have been carrying for a long time
03:17 Within the community of committed actors on responsible finance
03:21 At the forum for responsible investment
03:23 We also tried to push this idea at the time of the Pact law
03:25 We had partly succeeded because in the Pact law
03:28 There is the idea that in any life insurance contract
03:30 We must offer labelled funds to the savings account
03:34 But just offer
03:36 And so what we would like is to go one step further
03:38 And make sure that there are pockets reserved for sustainable funds
03:42 In order to develop this finance with all the savings accounts
03:46 One element that is obviously debatable
03:50 Is the extension of the horizons of finance
03:54 And in particular is very inciting on the title holding over time
04:00 That's one of the key points of the recommendations
04:02 As in the book, we tried each time to make accessible
04:06 Problems or terms that can sometimes be a little complicated
04:10 And so there typically on the financial issues
04:13 There is a structural problem, a short-term problem
04:17 And so there are financial mechanisms that allow
04:20 To give a bonus to investors who are committed to the duration
04:23 And this duration is essential because when we work
04:25 I also work on innovation management
04:27 So on slightly more technical subjects
04:29 When we look at the transformation and innovation management subjects
04:31 We can't do it in six months or a year
04:33 It must be done in several years
04:35 And so if we want to succeed in transforming the economy
04:37 Towards a more sustainable economy
04:40 We must succeed in aligning a little better
04:42 The horizons of investors with the technical horizons
04:45 Of the transformation of organizations
04:47 And for that, the suggestion that we make
04:49 Is to give a kind of bonus
04:51 And there are financial mechanisms that allow
04:53 To give a bonus to investors
04:55 Loyal to those who are committed to the duration
04:57 With companies in particular
04:59 - A policy of remuneration of leaders
05:01 Largely indexed at 50% on ESG criteria
05:04 - Yes, there is a progression on that side
05:07 There are more and more leaders who have ESG or RSE criteria
05:10 In their remuneration plan
05:12 But often it remains a little bit cosmetic
05:14 It doesn't fundamentally change their behavior
05:16 And so what we suggest is to go one step further
05:19 To half of their variable remuneration
05:21 Which is often extremely important
05:23 Among leaders of large listed groups
05:25 Half of the variable remuneration
05:27 On precise, opposite criteria
05:29 This is an important point in the recommendation
05:31 Which integrates environmental, social and governance issues
05:34 - And then, we will read between the lines
05:37 But stop underestimating the risks
05:39 - Yes - Especially climate
05:41 - So there are a lot of climate risks
05:43 The regulatory authorities have already launched tests
05:47 To test, for example, the robustness of the bank's assessments
05:50 In relation to climate issues
05:52 And we can see when we start to lift the carpet a little
05:54 The issues are major and the risks
05:56 That companies will have to deal with
05:59 Are risks that are not counted in millions
06:01 But rather in billions, even in tens of billions of euros
06:03 So that, we really need to integrate it today
06:05 In a much more explicit way
06:07 And take the consequences
06:09 On, in particular, the investment choices of economic actors
06:11 - And finally, I say finally
06:13 We didn't do the 10
06:15 But lift the brakes on shareholder commitment
06:17 There are bosses who will blame you
06:19 - Yes, they are not all
06:21 They sometimes have a slightly ambiguous speech
06:23 Since often they explain that shareholders
06:25 Prevent them from engaging in transition plans
06:27 But the technical reality, when we dig a little
06:29 Is that often they themselves do not necessarily
06:31 Always want shareholders to push them to do it
06:33 And so that's what we call
06:35 The shareholder commitment in the world of responsible finance
06:37 It's the mechanisms of interaction between
06:39 Investors who have an ambitious responsible finance agenda
06:41 And companies
06:43 And on these mechanisms of engagement
06:45 There are once again a number of technical locks
06:47 That could jump, especially in France
06:49 And it's a subject that different researchers are working on
06:51 By the way, today
06:53 - Responsible finance is armed
06:55 - We have a textbook today
06:57 To make a full overview of the subject
06:59 ISR and responsible finance
07:01 Coordinated by Nicolas Motis, Ellipse edition
07:03 Thank you Nicolas
07:05 - Thank you Jean-Philippe
07:07 [Music]
07:09 (upbeat music)
