I think we all know that there is no positive impact or silver lining with wars and armed conflicts.
We won’t delve into the political dimensions of this conflict, however we’ll outline below some of the implications and impacts on Sustainable Finance of this specific conflict.
1. Dynamic Materiality
The conflict re-emphasizes the concept of dynamic materiality which is about materiality being a dynamic and ever evolving concept.
Sustainability, ESG and hence what issues we should focus on with Sustainable Finance is multifaceted and continued to evolve.
2. Accelerate Renewables Deployment
The conflict should also really drive the further accelerated deployment of renewables (especially in Europe).
Whilst in some cases renewables have been blamed for part of the whole reliance on Russian fossil fuels, there is no doubt that renewables are the solution for more energy security and less reliance on Russia.
3. Draw a Focus on Geopolitics for Critical Metals & Minerals (“Wake Up Call”)
The whole episode shows us that going forward, geopolitics will be structured differently and not due to reliance and power for many countries with fossil fuels.
Renewables will drive more decentralization, however, it should highlight the ongoing issue that critical minerals and metals needed for the shift to a low carbon economy are even more concentrated (in certain countries) vs. the spread of fossil fuel resources in the world.
This issue needs to be considered and planned out so we don’t have another over-reliance on Russian fossil fuel issues in the future.
4. Pave the way for Refugee Social Financing
The needs of minorities and various target populations is a key aspect of social use of proceeds financing.
This conflict should really highlight how social can be used as a key tool to alleviate and address suffering of these refugee populations.
It is also a test run for when we start seeing mass climate change driven refugee flows and hopefully by then social use of proceeds will be able to support and address many related issues.
5. Politics Greatest Obstacle to Netzero
As we know he great obstacle to reaching net zero is politics!
If politicians feel they will lose power due to climate friendly policies they wont implement them.
This conflict show the profound impact politics and geopolitics can have on food and energy security. Hopefully its just a limited dry run for the future.
We must push politics aside to achieve our goals and sustainable finance is a vehicle to fund this. Political will or political getting out of the way is the grease to scale this.
Some Final Thoughts…
The above shows and demonstrates that there is a great opportunity to use Sustainable Finance to reallocate capital to drive progress towards a more just and equitable world.
With armed conflicts such as the above and the impact on energy security there has never been a better time for Sustainable Finance.
