Think at London Business School
Professor Julian Birkinshaw and others from the LBS community offer their views on the UK capital.
By Rosie Parry
In 2008, four MBA2009 students – Emmanuel Coucke, Kitty Lee, Jeik Sohn and Daniel Hanna – launched the first green search engine from the School’s Regent’s Park campus. It won the London’s Entrepreneurs challenge but didn’t get sufficient momentum and was wound down a few years later. Undeterred, all four have gone on to have successful careers in finance and consulting. One of them – Hanna – managed to combine finance with a continued focus on climate change. He is now the Global Head of Sustainable Finance at Standard Chartered Bank.
“I was lucky to work with Emmanuel, Kitty and Jeikh on Gearch and they helped me understand you can look at a problem differently, like combining tech with green change,” recalls Hanna. “In fact, I am still learning a lot from them and the wider alumni network. I recently spoke to Daniel Saunders who was also in our class and has launched an electric vehicle startup called Zeti and Alexander Orjan Pedersen who set up a renewables company, Empower New Energy.” He continues: “I look to them for inspiration around the changes that we can bring.”
This focus on drawing inspiration from and collaborating with others echoes back to Hanna’s learnings during his MBA. “Being fortunate enough to go to London Business School gave me the opportunity to broaden my skill sets but also learn from some truly inspired individuals – staff, guest speakers and peers alike,” he recalls. “And it’s not just the finance side of things, but crucially about strategy and organisational behaviour. I continue to draw on the lessons I learned both in the classroom and outside it today.”
Hanna is also inspired by and works closely with LBS alumni in his own company. Lina Osman, who now runs Standard Chartered Bank’s sustainable finance franchise in the Middle East and Africa, has “helped close some really innovative transactions.” That includes financing Southeast Asia’s largest floating solar project, which can reduce the impact on land from large-scale projects while generating enough electricity to power 50,000 homes and offset 214,000 tons of CO2 emissions. “My wife is also an alumna and her drive and thoughtfulness is a daily inspiration.” Hanna adds.
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Hanna is big on straight-talking, particularly when it comes to sustainability in business. “As the world has focused on COP26, it is waking up to a radical rewiring of the global economy that will be required over the coming years.” There is no time for excuses. Instead there’s a real opportunity for people to create green jobs, while improving standards of living and creating value in markets, he says.
Hanna’s passion about economies, emerging markets, and what drives them, is deep-rooted. As a child of Irish and Egyptian immigrant parents he learnt how countries can “go through a radically different economic path, in the space of a lifetime.” He still has an old photograph of his Egyptian grandmother leaning on a flash car, enjoying the trappings of a wealthy society, and another of his Irish grandparents outside their humble home which didn’t have running water. “Since then, Ireland has jumped to one of the highest living standards in the world, and those images act as a real reminder of how quickly economies can turn around, and both grow and retract,” he adds.
“A radical rewiring of the global economy will be required over the coming years.”
After leaving LBS in 2009, Daniel rejoined Standard Chartered Bank, the British listed emerging markets focused bank, and after a stint running their Southern Africa commercial and investment banking business from Johannesburg, led their public sector, blended and development finance team globally. For the last three years Hanna has been applying that experience to his current role.
“Standard Chartered is one of the key banking partners of the World Bank, United Nations and regional Development Finance Institutions,” says Hanna. “We were helping them deliver financing solutions that could help tackle climate change and other environmental and social challenges. It became increasingly clear that there was an appetite from the private sector for these kinds of solutions too”.
“The record growth of sustainable finance, or finance with environmental, social and governance (ESG) focus, has been good news,” acknowledges Hanna. “This momentum is crucial but we need to catalyse much more, standardise the market, and above all democratise access to sustainable finance to have a real chance on impacting climate change”.
“No-one can do this alone. The new financing required to keep global warming to an increase of just 1.5 ˚C may be as high as US$8 trillion annually while the UN estimates that the funding gap to reach the Sustainable Development Goals (SDGs) by 2030 is US$2.5 trillion a year,” he reveals. “We need to really mainstream sustainable investing or ESG (environmental, social and governance) to achieve anywhere near those kinds of numbers.”
Part of the solution will come through innovative financial products that can bridge investor interest with impact on the ground. At Standard Chartered that focus has seen the launch of a universal climate loan that encourages mid-sized companies to reduce emissions faster than their countries’ emissions targets, launching sustainable trade products to link financing to sustainable supply chains, or financing that requires carbon offsets to be purchased if certain ESG targets aren’t met.
He also warns of the issues surrounding transparency and greenwashing – where the environmental benefits of certain assets are overstated – as a roadblock to progress. “We’ve done surveys that show the lack of information and transparency is one of the things that holds investors back,” reveals Hanna. “There needs to be clear standards as an industry. There has been some progress from both the finance industry and regulators but we still have a bit of an alphabet soup of definitions, which makes it complicated both for investors and also for capital to flow to where it can have the biggest impact.”
There is a real need to democratise the benefits of sustainable finance. Too much focus is on achieving another record amount of sustainable finance, the finance sector needs to recognise that impact matters just as much as volume. In essence the question of “where” may be more important than “how much”. “A dollar invested can have a significantly different outcome depending on where and how it is deployed,” he says. “A solar project in India will help avoid more than seven times the CO2 from a similar-sized project in France given the current sources of power on those countries’ grids. We need to focus more on how we move capital from Lyon to Lucknow.”
Funding is not flowing to the countries at the greatest risk from climate change, but which have the biggest opportunity to jump to low carbon technology, Hanna concedes. Less than 60% of the financing needed to achieve the SDGs in low and middle-income countries is being met. In Africa, this is as low as 10%.
Standard Chartered is focussed on redressing that: of its US$ 9 billion of verified sustainable financing, 70% is in emerging and developing countries. “Asia is home to 80% of the world’s population who may be flooded if there is a 3°C rise in global temperatures,” adds Hanna, “while Africa has at least 19 coastal cities with a population of more than one million at risk from climate change.”
“If you can't measure it you can't manage it”
Hanna is quick to add that banks are rightly criticised for not moving fast enough. Standard Chartered has committed to be net zero in its own operations by 2030 and recently released its interim 2030 targets to move its financing onto a pathway to Net Zero by 2050. It has also announced a commitment to mobilise 300bn US dollars in green and transition finance by 2030 focused on emerging markets.
“We have committed to become net zero in our financing by 2050 and see our interim targets as an important milestone towards that. It is challenging as 33 of the 59 countries in which we operate don’t currently have a net-zero 2050 commitment,” reveals Hanna. “Nevertheless, by the end of 2022 we expect all our clients in the power generation, mining and metals, and oil and gas sectors to have a strategy to transition their business in line with the goals of the Paris Agreement.”
Other short-term ambitions include hitting a billion dollars of revenue from sustainable finance. “We want this to be one of the core growth areas for the bank as a whole and we are very much focused on embedding it into almost every product and client conversation,” says Hanna.
To speed that process up he suggests organisations collaborate and encourage “clients, suppliers and stakeholders to share knowledge and work together.” Data also has an important role to play. “We’ve just gone through an exercise of contacting 2,000 of our largest companies and telling them what we think their emissions impact is,” notes Hanna. “For some of them that was the first time that they have had that sort of information all in one place and having it enables policy and process changes. It’s the old adage of, if you can't measure it you can't manage it.”
Hanna believes himself to be lucky that at Standard Chartered senior leadership have been ready to support and prioritise sustainability from the off. “Having support from the top down is crucial,” he says, “that kind of leadership is important but so is giving everyone the opportunity to be a leader; you've got to create those opportunities for people across the organisation to come together, to suggest things and feel that they're part of that change. This is really key,” he adds.
That approach has resulted in many successful products and investments at Standard Chartered. “I’m very lucky to work with inspiring people, who all feel like they have a voice to create really meaningful change,” says Hanna. “The ideas behind our innovative sustainable finance products have come from lots of different people across the sustainable finance team and wider organisation”.
For example, while the sustainable finance team implemented Standard Chartered’s non-profit one billion US dollar COVID fund, which has financed vaccine procurement in Africa, PPE in South Asia and retrofitting steel manufacturing plants to make oxygen tanks, the idea was proposed in a completely different bit of the firm.
“Banking is often just a mirror to the economies that it operates in so it’s important to look to the real economy to improve the industry”
Hanna is also passionate about the banking industry learning from other sectors when it comes to building future success regarding sustainability. “Banking is often just a mirror to the economies that it operates in so it’s important to look to the real economy to improve the industry,” he says. He lists Unilever, Tesla and Microsoft as brilliant disruptors, whose innovations in sustainability have shaped their own industries and beyond. “Truthfully, I think finance has a lot to learn from the real economy and major innovators,” admits Hanna. “We have more to learn than we have to teach.”
To do this he sees cross-industry collaboration as the natural next step to drive change. “To tackle something as complex as the sectors which carbon is deeply embedded in, where alternatives aren’t yet commercially viable, needs collaboration,” says Hanna. “Solutions need to involve not just direct manufacturers but their suppliers and clients, too. To create real change you need to take an ecosystem view.”
“I'm a glass-half-full kind of person by nature,” he admits. “There are a lot of things wrong with this planet but I think when you have the opportunity to do something innovative to help mitigate those problems and work towards a better, fairer society then that’s worth getting excited about,” he smiles.