Guest speaker: Julia Walker, Executive Director at Refinitiv, Member of the UN Secretary Generals Task Force of Digital Financing of the SDGs, Asia Pac Chair of the International Regulatory Technology Association
Reaching the SDGs: The Critical Role of Financial Industry Players
Episode 3 | Duration: 26 minutes
Are we, as investors and industry professionals, capable of helping to reach the global goals set by the UN, and why should we care? We can have a role in enforcing the UN’s Sustainable Development Goals (SDGs) while also creating new economic opportunities. Learn more about the ways the financial industry may contribute to combating global challenges and meeting the SDGs in our interview with Julia Walker, Executive Director at Refinitiv, and author of “Sustainable Development Goals: Harnessing Business to Achieve the SDGs through Finance, Technology and Law Reform.”
Keesa Schreane: Welcome to the Refinitiv Sustainability Perspectives podcast, where we share examples of leadership and innovation. Small entrepreneurial businesses, large megacorporations and all types of enterprises in between are seeing a global shift in perspectives around the role of business and society, from ESG investing to sustainable finance to social impact in our communities. We're on a journey to leverage data and intelligence to make the best business decisions possible.
Today's guest is Julia Walker. Julia heads Asia market growth and strategy at Refinitiv. She focuses on financial markets, infrastructure and risk intelligence. Her work in financial services includes names such as UBS and Royal Bank of Scotland. And she's a member of the United Nations Secretary General's Task Force on Digital Financing of Sustainable Development Goals. She's also the author of “Sustainable Development Goals: Harnessing Business to Achieve the SDGs through Finance, Technology and Law Reform.” Julia, welcome.
So to kick this off, just to talk about the U.N. specifically during Climate Week very recently and Greta [Thunberg] and her remarks and her comments. To say she challenged the business world is definitely an understatement. ‘How dare you?’ That's definitely more than a challenge. What do you think the impact is that this teenager is having on our conversation around climate change and our conversation around the environment in general?
Julia Walker: Thanks for the question. So it has been an extremely busy week here in New York, and Greta's call was extremely passionate, on point and bold. I guess the question is, is the alarm there? Is the crisis there and the answer is yes. In regards to the SDGs, we're four years into them. The Sustainable Development Goals, 17 goals that 193 countries have agreed on. But four years in, no countries are on track at all. And we are rapidly going towards a future that is going to surpass that 1.5 degree Paris climate agreement, which is embedded in SDG 13, which is very problematic. It does start to move into cataclysmic ecosystem failure. I think her speech was a wakeup call. It's saying we have to change in regards to the SDGs. They're saying that business as usual is not an option. So we can't go along just continuing doing what we're doing. We need to have quite significant transformative change. So, yeah, I think she's pretty much on point.
Schreane: So look at the broader picture. You're mentioning the SDGs. I know that there are separate 17 of them, but what is the overall spirit? So if you look at the SDGs very broadly, what what are we trying to accomplish with these? What is the hoped-for outcome?
Walker: So the SDGs seek to end extreme poverty in all its forms and to have in place the building blocks of sustained prosperity for all. Prior to the SDGs, those were the Millennium Development Goals, which actually made a huge amount of progress and poverty was halved in many countries and a lot of progress has been made. But this one also encompasses that we are leaving no one behind. By missing the SDGs, we’re leaving millions to die unnecessarily and heading towards a world that just isn't sustainable, which will have dire consequences for future generations.
Schreane: So the SDGs and you've made the case for the importance of them. We're looking at 2030 to have this accomplished. That sounds pretty aggressive to many folks. So in terms of where we are now and the work that we have to do over the next 10 years, how can we get on track to accomplish these? You said that right now no country has really been able to accomplish all of them. So how can we get on track?
Walker: So today we have enough money to achieve the SDGs. The amount of money needed is enormous. It's about $4.5 trillion per year, but it's not for lack of money. It's more for how we channel the money towards the SDGs and that's the focus of many discussions. And that can be done in many ways. And it will be done in many ways.
In the book that I've just published, we look at it from a few different ways. We look at how you will finance them and the role of the international private sector. We look at the role of asset managers. So what can they do? What products could they build for their retail clients out to invest in the SDGs? And also, what's the role of the rating agencies? So we have a contribution from Moody's Investor Services around, well, how would you price sort of sovereign debt? So there's a lot of things that can be done to to finance the SDGs.
Then I look at the technology aspects and that has also been coming out quite heavily in the Secretary General's task force of digital financing of the SDGs. So the use of technology is a powerful way to achieve the SDGs.
And I'll give a couple of examples there. One, particularly around inclusive finance or banking, the unbanked populations providing digital identity for all. At the moment, about one in five people don't have a formal identity. And then if they don't have an identity, it's very hard for them to get bank accounts and access to financial services, which is just key.
So there's been a lot of work happening on inclusive finance. How do we have remittance windows? How do we have different payment platforms that enable people to have bank accounts and receive funds? And if they've got family overseas, receive those funds more cheaply without having huge fees.
But the digitization of finance also is unlocking more opportunities in places like India, for example, where they have implemented an I.D. system that could add, ha, it's part of the India stack. They have saved about, I think about $9 billion. That money would have been lost from corruption because they could move money directly from the government to individuals. So technology in the digital version of finance offered huge opportunities in terms of hitting the SDGs, and that's a key focus of the U.N. at the moment.
Schreane: So it sounds like even though $4.5 trillion a year, which is an enormous amount of money, is needed, we do see a path in terms of how we can get that money. You mentioned the digitization of finance and how companies can reduce their costs. Do we see other ways or companies really looking at needing to come out of pocket in terms of financing this? Are there some creative ways or are there innovative ways? Are there tech driven ways in terms of digital identity and other things that will really allow for the entire amount?
Walker: So to finance them, I guess the key message is that the government sectors or the public sectors can't do it alone. It will be the private sector stepping in to finance it. And there's a lot of discussion around blended finance. You know, how do we have structures where the private sector can step in as well to assist? There'll be things like infrastructure where we have a $3.66 trillion dollar infrastructure gap to be able to finance the SDGs again and to hit the Paris agreements. There's opportunities there. You know, what is the role of the pension funds? So some of the largest pension funds in the world have about $140 billion under management.
They could put that into longer term investments and thus sort of driving for systemic change.
Schreane: So at the end of the day, these are things that they can do. The pension funds can move in that direction. These firms can move in that direction. Why should we really care? Why should they care enough to want to be creative and rethink how they use their funding?
Walker: So, it is good for the planet. But I guess there's now been a number of studies that are saying that you can create positive returns. There have been arguments in the past that doing good in an investment portfolio doesn't necessarily generate alpha. That position has been disproven. There's been over 2,000 studies and most financial services company and I've looked at UBS wealth in this book., UBS are very firm on saying that, you know, there is part positive correlation and that their investors are ready and able to invest. So there's obviously great environmental, social reasons, but, you know, money can be made from it as well. So there's a lot of opportunity in this. From a thematic point of view. People are waking up to sustainability. They want sustainable products. There are big thematics around millennials and women that care about this stuff. And so from a business point of view, there is a large opportunity to capture by focusing on these areas.
Schreane: So let's talk about Climate Week. Your work with the U.N. and just digitization, the task force that you're focusing on. How do you see things moving forward in the future? How did Climate Week and how does the work that the U.N. is doing? How is that progressing in terms of what you're doing with the SDGs and what your role is and really bringing awareness to the financial services community in general?
Walker: So it's been a busy week. This task force came into existence at the end of last year. And so today, actually, they published their interim report. They are different members of the task force from the U.N. agencies, from the private sector, from technology companies. And a number of them have been starting to talk about. Well, where they've got to.
It's varied, it's varied. There's some amazing things that are happening, there's a huge amount happening in the payment space in Africa, in Asia and Europe. So I won't go into all the details of what people were getting into. But some of the key thematics that are coming out is the role of citizens. So the financial sector, in many ways, people don't really connect with it. You know, it's a big beast that many people don't understand. But the financial sector is supposed to be safe harboring people's investments. That's their money that enables the financial services sector to to exist. So the digitization of finance can enable them to reconnect a bit more with it. So there's new ways of funding like peer to peer lending and crowdfunding, just different ways of generating credit and credit history and credit scoring. And that's been quite an interesting focus. There's been a lot happening in China. So Ant Financial is on the task force. And Eric, Jim was talking about what Ant and Alibaba have been doing in terms of the unbanked in China. There was Eco Cash from Tanzania who now have 80 percent of all GDP going through their platform. So it's quite interesting to look at what is already happening in most of these countries to enable prosperity in general.
Schreane: So we talk about enabling prosperity. We talk about the underbanked and really helping to support that community. One of the things that was very shocking to me was the issue of human trafficking. And so I would like to know in terms of how we can support various communities, that community specifically, and just had to give some context. They're looking at the faces behind financial crime as well as the human trafficking, international labor.
The International Labor Organization reports that 152 million children between the ages of five and 17 are in child labor and 48 percent of them are ages five to eleven. So that's pretty, pretty egregious, tremendously disturbing.
And could you let us know with human trafficking specifically? What are some of the goals and how can financial services firms really play a role? Is it only supplier led? Are there other things that they can really look at to play a role in defeating this?
Walker: So you're right. I mean, right now we have more modern day slaves than in any time in history. So it wasn't any time in history more than any other time in history. So, I mean, a lot has been written on slavery in the past, but now we actually have more than we ever have had. That number is around 40.3 million modern day slaves, which is just appalling. And your numbers there on child labor are accurate. In Asia, it's estimated one in 10 children are in child labor. So it's really disturbing.
So what does that mean? So, I mean, it's interesting, therefore, then to look at supply chains. Many companies have thousands and thousands of suppliers and their suppliers have suppliers and they don't really know who they're doing business with. So there is a great opportunity to bring a lot more transparency into supply chains, one by traditional means and two by emerging technology to be able to really understand the risk of the supply chains.
There's been a number of issues in the past and reputational damage to major companies that have been found to have had child labor in their supply chains. I mean, there's obviously the movement of sustainable fashion, which is hitting on this one too, because the end of the day, there are factories in low-income producing countries where companies don't have to pay much to the end person. And sometimes those labor standards are pretty poor.
So by having practices in place, having good governance, having good technology, having good supplier onboarding tools, there is an ability to bring a lot more transparency to that. And just to have the information to make decisions on whether you want those practices to exist. In terms of emerging technology, there's been some really interesting developments with block chain and in the supply chain. I've written a case study on ivillager, who I think is doing extraordinary things. They have been essentially tracking diamonds on the block chain. And I actually caught up with the founder this week and I further asked her, well, what does this mean for the SDGs? Has she linked to it all? Yes, actually. In one of the mining countries, they've actually found a set of women that used to go into the mines and come out with big rocks and just hand them over to the men. They didn't know what they were. And the men would clean it and sort of go, okay. They make a huge amount of cash off the back of that. So they've managed to take out the middleman. And then the money has gone back into that community. And that community of women have actually then invested that money in education and their families. And they probably will set up some gemology, you know, sort of education and start transforming the community. So it's really interesting with that example. I think with that new technology coming in is also driving a lot of prosperity. But if you didn't have transparency or you couldn't track it down the provenance of a number of these items, then that wouldn't happen.
Schreane: And so is that one of the key roles of the financial industry in terms of tracking this down, in terms of really having an understanding of what that chain looks like and where money is going, is that a key role that the financial industry is playing and can play into the future?
Walker: I think that a key role for more corporations so that the concept of provenance is where this could come from. So being able to track that back is key. I mean, the financial community is more around what financial products they can offer to the market and to be able to offer that they need to make decisions on numerous factors. The financial community needs a lot of data and willing investors. They need people to buy those products to be able to invest in different things.
Schreane: So everyone really has a role. If we're looking at the SDGs holistically and looking at what we all can bring to the table, whether you're a corporation whether you’re a financial services firm or any other type of firm, everyone can really have a role, whether it's selling those financial products to customers or whether it's really paying attention to the supply chain.
Walker: Absolutely. OK. So I think education is key. There's not probably a day that goes by that there isn't an article on climate or environment or something bad. And I think education is key. So that's one of the reasons I guess I wrote this book to bring different concepts together, to give people a bit more of an understanding of the different phases. So I look at, you know, what are the sustainable development goals and how they came about, how we could finance them.
What is the role of technology, but also what is the role of law reform? One thing that's really interesting with the Sustainable Development Goals is that it also provides a framework of what the laws ought to be. So in many cases, if you look at some of the laws today, and particularly like in securities regulation and capital raising, they don't support the SDGs.
And in particular, look at SDG 8, “decent work and economic growth.” Yes, SMEs or MSMEs, you know, are the bedrock of society, really. But in many situations, they can't raise capital very well. So, you know, that is an opportunity to do some securities regulation change to enable them to raise more capital, to be more successful and to scale, at the moment. You know, it is some favoring the larger financial institutions in that regard.
Schreane: So the SMEs refer to the size of the businesses and MSMEs, so small versus medium and just in terms of small to medium sized enterprises.
Walker: When you look at fintech, so financial technology and things like peer to peer lending and crowdfunding, so alternate, I guess, financing models that are coming in with the introduction of fintech. In some countries, they could look at changing the laws to support that or to enable a lot more capital raising.
So there's limits on that. So we've written a chapter on that in the book, which is actually looking at Hong Kong, but it could be used as a case study for many other countries. And sometimes it would need to happen. You will need to change the legislation to enable us to hit the SDGs. So it's going to be really interesting, I think, for lawyers or for people that are looking into law to reflect on the SDGs and sort of think, stop and go. Well, hang on, do our current laws actually even support the attainment of the SDGs, in some cases, they probably won't.
Schreane: And speaking of laws, when the things that you point out in the book is with the UK is Modern Slavery Act of 2015, just as an example. Businesses publish the steps they've taken to ensure supply chains and vendors aren't tainted by human trafficking and slavery. But there doesn't seem to be strong consequences or cuts for companies that participate in this. So is that something that you think we will will tighten up as we move forward? What the consequences are for that?
Walker: Hopefully. I mean, some countries are making steps. And that modern day slavery Act 2015 in the UK was a great first step, but as times moved on, it needs to be really looked at. It doesn't have any teeth. You know, if we are serious about stopping that, then there will need to be more consequences. Same happened, I guess, with Australia. They've put an act in, but the question is, will it have enough teeth to do anything? NOw, you need to balance that with giving business enough time to understand and take steps. Because when things come in like this or even start with this, types of businesses need tools and education and a whole bunch of things to be able to go. But how do I get this information? How do I ensure that there isn't slavery in my supply chain? It's actually pretty tough. You know, there's quite a lot of technology that would need to be invested in and there's quite a bit of money to do that.
Schreane: Can partnerships help with that as well? Technology is key, but can partnerships help with that, too?
Walker: Absolutely. In many cases it's not about doing it by yourself. There's multiple stakeholders that need to come in. I think that's a really big thematic that's coming through. In the more government space, there’s public-private partnerships. But just in the business community, there are wonderful opportunities for partnerships. Some people have bits of it. Some people have the rest. And it's the combination of the partnerships that will really make a difference.
Schreane: And that doesn't have to be extremely expensive if we're just talking about dollars and cents in terms of partnerships, that can be something that's relational, I suppose.
Walker: Yeah, exactly. Exactly.
Schreane: So, Julia, what is the big idea? If we're thinking about themes, ideas that would really take us by surprise. The financial services industry, not NGOs. What big ideas do you see coming up in our ecosystem over the near term?
Walker: That's a tough question. I’ll reflect on some of the things that came out of this week. And since climate is a key thing that we need to focus on. So the SDGs … we would like to attain all of them. But, you know, climate action is fairly key at the moment. And looking at coal, so the phasing out of coal is extremely important. But putting a price on carbon is the other key thing. And that came up very clearly in the Financing for Development Summit. There's a lot of debate on that, but it seems to be the thing that can really make a difference. So putting a price on carbon and then companies will be able to to trade that and build that into their models. You know, we need to stop deforestation. Deforestation releases huge amounts of greenhouse gases. It's very close to my heart.
I'm based in Singapore and we've had the fires in Indonesia burning for many months now. To the extent that in Singapore we have the smoke. So we have the haze. That is literally with us at the moment and we can't go outside. I live in a developed emerging city and all the little kids’ outdoor school functions are canceled. We're all holed up inside. Everyone's buying air purifiers. Stuff's happening today and you get headaches, you get coughs, your chest is tight.
Our air is is not where it needs to be. So there's a lot of things that are happening today that we need to start acting on.
Schreane: Starting to act immediately seems to be the key here. Julia, thank you so much for joining us. It's been a pleasure.
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