Policy Can Help Finance Prioritize Sustainability – An Interview with Julie Segal

Hi Climate Community,

Welcome to this week's edition of the Climate Venturing Newsletter!

We are delighted to have Julie Segal from Environmental Defence with us. Environmental Defence is a leading Canadian environmental advocacy organization that works with government, industry, and individuals to defend clean water, a safe climate and healthy communities.

Julie, thank you for making time to share your insights with our readers who love hearing from influential voices in the climate ecosystem. We are fortunate to talk to you.

You are quoted in Canada’s top 30 under 30 sustainability leaders’ list that you never thought you would work in investments and that you are first and foremost an environmentalist. Tell us, how did you end up in investments?

I pursued business school because I was good with numbers but was disappointed there wasn’t as much math as expected. I didn't fully align with everything being taught.

After university, I moved into impact investing at one of Canada's leading private foundations where I managed a portfolio seeking environmental and social outcomes alongside a financial return. It was a perfect fit to use the expertise from my studies and my desire to contribute to sustainability. After five years in impact investing, I decided I wanted to help shift financial flows in general towards positive outcomes.

I decided to work on policy to readdress how finance works.

I moved into my current climate and financial policy role to help advance policies that shift finance towards the goal of a better, more liveable planet.

Why do you think the finance community is struggling to adopt an environmental justice approach and perspective when considering investments?

The financial system was designed for profit and efficiency, not equity or environmental justice. The goals can be redesigned to ensure investments are truly productive.

The system hits barriers when organizations try to integrate an environmental justice perspective because that's simply not what the system was built to do. “Doing good while doing well” is a common phrase. But sometimes investors should choose to advance environmental justice instead of exclusively maximizing profit.

Accepting other forms of value and returns is important. Moving towards environmental justice means choosing to prioritize people and planet over profit exclusively and transforming the purpose of the financial system to recognize the higher goals we need to achieve.

Research like the Dasgupta Review acknowledges that our economy relies on nature. It seems obvious that the economy is part of the world and the planet, but these puzzle pieces are not working in harmony. I think the first step to remediating this issue is to recognize it.

What can entrepreneurs and society at large do to incentivize capital into green projects?

Green entrepreneurs are already creating projects that are moving in a positive direction. For society at large, international and national policy is already guided by environmental justice in many ways. An example is how the United Nations ensures countries with the ability to pay for climate action step forward in supporting countries who’ve had lower historical emissions, in a principle known as “common but differentiated responsibility”.

Finance is an area that doesn't yet include principles of environmental justice at the core, so investors try to fit them within other, sometimes clashing constraints. Policies and incentives on spending mechanisms like the US Inflation Reduction Act, EU climate policies and Canada's price on pollution encourage capital into green projects. In addition to these incentives, we need to shift the rules and priorities of finance to motivate prioritizing a sustainable planet.

Do you think that climate targets are too ambitious? For instance, is decarbonization realistic when there are developing countries whose only source of affordable energy is currently carbon fuel?

Our climate targets are not ambitious enough.

Because decarbonization is harder in developing countries, Global North countries must cut emissions at a much faster pace to account for their own historical emissions, and to account for a realistic energy transition pace in developing countries.

Looking at the concept of a carbon budget, the slower the Global North cuts emissions, the lower the carbon allowance of someone in the Global South who is simply needing to meet basic needs. My perspective is that the green choice for the everyday individual should be made easiest by governments. Our policies need to be more ambitious so that no one must choose between basic health, energy and education services and this macro perspective of a liveable planet.

Keeping warming below 1.5°C is certainly a target and any warming is a political compromise, but it is also a threshold before things get too dangerous. Even calling emission reduction efforts goals or targets is not ideal because these efforts are essential for planetary health and social wellbeing. Not something we can choose to avoid doing.

What are some ways we can guard against the deception of greenwashing especially as companies become more careful about how they market themselves?

Policy is a clear solution to avoid greenwashing.

We trust financial statements because clear rules guide what to report. For ESG, sustainability, and climate, no rules exist to govern whether a company is green or whether it is honest about it.

A wealth of voluntary standards is cropping up internationally which can guide companies and financial institutions to credibly align with keeping warming below 1.5°C. Moving these standards into regulation is important to create a collective understanding of how credible the green claims are.

This guideline for a credible climate plan , which I co-authored, distills the scientific and economic analyses into steps required for a?climate plan to be credible. Formalizing these steps as policy in different areas can combat greenwashing and give consumers and investors trust in the green claims they see.

In your opinion, what part do youth in the finance industry have to play to enhance the role of the financial system in the fight against climate change?

Young people are often sustainability leaders within organizations. They come up in a world that prioritizes sustainability in a way older generations didn't understand to be possible and are gifted with a clear eye of how things currently work and how they can work in the future.

It's natural for individuals to look at what they can accomplish in their remaining lifetime so perhaps as people get older, they look at narrower areas where they can affect change with completion. Young people have the advantage of a longer horizon to envision much bigger change and are willing to go out on a limb to make that change happen.

What's one book you've read or podcast you listen to about sustainable finance that you'd like to share with our community?

I enjoyed reading “A Short History of Financial Euphoria ” by John Kenneth Galbraith. It looks at the historical periods of financial euphoria and crashes, and the lessons we can take to build a more resilient financial system.

I was on a podcast following up on COP 27, talking about what constitutes a credible climate plan. It was an excellent one-on-one about what climate policy has to do with finance.

Well, Julia! We loved talking to you - and thanks for sharing your insights! We look forward to following the amazing work you do!

All the best,

The Climate Venturing Newsletter team