Eva Cairns

Hi everyone. I'm Eva Cairns you're listening to the abrdn Sustainability Inspires Podcast discussing all things relating to sustainability and responsible investing.

I'm delighted to have with me as my guest, Sonja Gibbs. Sonja leads the work of the Institute of International Finance the IIF on sustainable finance and sovereign debt policy focusing on research and advocacy for the institute's global membership across the financial services industry. Her research interests include the economic impact and financial market pricing of climate and ESG risks, sustainable investment, and capital markets development in emerging markets. She oversees the IIF weekly insight, which offers a concise perspective on global financial markets with an ESG lens. And the IIF global debt monitor which looks across mature and emerging economies for debt related vulnerabilities such as the rapid buildup in EM corporate debt levels. Her policy work on behalf of the IIF includes outreach and liaison efforts vis-à-vis G20, G7 the multilaterals global regulators and standard setters and the central banks and supervisors’ network for greening the financial system, as well as the Glasgow Financial Alliance for Net Zero. She also serves on the boards of the Integrity Council for the Voluntary Carbon Market and of Egypt's Regional Center for Sustainable Finance.

What an impressive career. Sonja has spent over 20 years in banking and financial markets most recently with Nomura International in London, where she was Chief Equity Strategist. Earlier positions include stints as a US Economist and Bank Credit Analyst in New York and Los Angeles. She is a Chartered Financial Analyst, has an MBA and BA from the University of California, Berkeley. Sonja's work is widely cited in the financial press. She's a regular speaker on sustainable finance and global debt issues at industry conferences and in the media. She and her team also host a popular series of IIF transition finance workshops, and ESG webinars. So, Sonya and I last met when we jointly delivered a panel at the spring conference of the Council of Institutional Investors in Washington, DC. And I was inspired by her strong articulation of the need for policy alignment and collaboration to enable sustainable finance. Sonya, welcome to our podcast.

Sonja Gibbs

Thanks, Eva. It's great to be here.

Eva Cairns

It's so fantastic to have you on board. And what an impressive career and background. So, I'm really, really excited to hear from you today. And wanted to start with something a little bit more personal, a little bit more lighthearted. So, you had mentioned to me that you recently started ballroom dancing. And so, in addition to all the work that keeps you busy in your personal life, embarking on something like that is brilliant. Can you tell me a bit more about what inspired you to do that?

Sonja Gibbs

Well, it's interesting, you know, and, you know, you had referenced the different things I've done in my career, I think it's a really good illustration of how many different paths lead people to sustainability careers. Right. So, I've done a bit of this and a bit of that, and somehow, it's all come together in the form of a real emphasis on sustainable development, sustainable markets, ESG, and so on. And I think there are a lot of people out there who have similar career backgrounds in different aspects of financial markets, or development finance, who are finding their way in these roles. But you'd mentioned the ballroom dancing, it's an interesting element of it, you know, as your kids get a little older and you have little time to free yourself which you don't always earlier on, that old work life balance thing. You know, a little bit of time has opened up to do something that takes you away from your day to day life, you know, whether that's work, whether that's your domestic life, and ballroom dancing is such an interesting field in that, you know, it's physically challenging, it's mentally challenging, and it also involves a tremendous amount of partner work. And to me it makes me think of all the different ways in which partnership and good communication you know, and aligning your steps, your movements, your musicality with someone else you know, it's to me there are there are analogies here for sustainability and working in these types of roles around the world because it has to be by definition, sustainable finance is a kind of partnership. We're not going to accomplish our goals without these types of partnerships.

Eva Cairns

Brilliant, excellent how you combine the work passion with the personal passion, ballroom dancing and I absolutely agree. I tried that once with my husband. And we didn't last very long, because we kept stepping on each other's toes. But back to your career in sustainable finance? Can you tell us a bit more on what really sparked that interest? You said, you know, there's many different paths and people come from different backgrounds. But what really inspired you? Or was there something that was that spark to say, this is the this is how, what I want to focus my career on.

Sonja Gibbs

You know, one of the very first thing that I did in in my career was to study languages, and specifically Russian, Slavic languages, and all of that. And that kind of took me into kind of economic and political analysis of what was then the Soviet Union, I'm dating myself, and emerging market analysis more generally. So I'm thinking back to the work that I did in the 90s, early 2000s, which was all about economic development in emerging markets, the beginnings of capital markets in countries in Eastern Europe, in Asia, Latin America, you know, so as these markets evolved, a lot of the conversation is around how are developing countries funding their growth? You know, by definition, these are countries that are not as wealthy, they don't have big savings pools, they don't have strong capital markets, or, or even institutions, you know, regulatory legal, central banking institutions to help govern these these markets. So how do you ensure that these countries are getting the kind of funding that they need? And when you think about it, if you fast forward to today, when we're all talking about sustainable finance and blended finance to support emerging markets, it kind of boils down to that, how do you help these countries build capacity and become hospitable destinations for investment funding, and develop their own markets in a sustainable way? So, I kind of highlight that is, for me, we know where it all started.

Eva Cairns

Absolutely, really interesting, as you say, particularly for growing economies, how to do that in a sustainable way. And looking at what we expect from certain countries in terms of their growth in population and economic growth and energy demand, you know, tackling that question is really, really important. So, one other area you're involved in Sonja is being on the board of the integrity Council for the Voluntary Carbon Market. Can you tell us a bit more about that? Why is it important? And what does this role entail?

Sonja Gibbs

So, I think everybody knows that to get to net zero, job one is to reduce our emissions globally, and everybody is working on that. At the same time, there are going to be some emissions that are impossible to eliminate, or at least eliminate now. And that was the important role of carbon offsets, you know, like you might buy a foreign air trip or what have you. But carbon offsets can only work if they are of the utmost integrity, if they do what they say on the tin. So, the goal of the Integrity Council with a voluntary carbon market is to create a global benchmark or a standard for quality in carbon offsets and the carbon credits that trade on them. So, in that sense, I would just flag that the Integrity Council has recently released the Core Carbon Principles that do exactly that, that set a benchmark for carbon offsets, carbon credits, the integrity of them, the standards of them. And we really expect that to be a driver of development of voluntary carbon markets.

Eva Cairns

And you've done some really interesting pieces of research. And a key area of interest is the challenge around financial market pricing of climate and ESG risks is something that was highlighted. Can you tell us a bit more about the research you've been involved in any key recommendations related to that?

Sonja Gibbs

Yeah, you know, on the research side, I think we kind of see the research in two separate buckets, as it were, although they're connected, one is on the analytical side. So as you say, market pricing, our markets pricing in climate in transition risks, or are they not, you know, do ESG stocks outperform, you know, non ESG traditional stocks? How does this all play out in, in debt markets? So that's one side of the research. Also, on things like, you know, how are different sectors evolving? How are they approaching transition, so that would be on more on the analytical side. The other side is what you might call advocacy and policy research, and we do a tremendous amount of that as well. You know, how regulators are constantly thinking about how to grow and mainstream sustainable finance, how to manage climate and transition risk. So having perspectives from the financial services industry, on all of these issues is really, really important. So, the research that we do, you know, thinking across both analytical and Policy Research, it's, you know, we make it available for our membership. Some of it's in the public domain. And but an important part of what we do is dialogue and interaction with standard setters with regulators, supervisors, policymakers, so that we can help them understand private sector perspectives when they're crafting, you know, the rules, the regulations, the policies that we're operating under, so that we can create the right environment collaboratively to scale up sustainable finance and transition finance.

Eva Cairns

Yeah, and you'd mentioned collaboration there. And I think that's absolutely key. We've got so many initiatives that are out there. I mentioned a few earlier that you're also liaising with like GFANZ and the NGFS as well as attending conferences such as COP27, what do you think is the key to these being successful, so what's working and what isn't when it comes to this type of collaboration?

Sonja Gibbs

So, I want to go back to ballroom dancing, and a lot of this is, is partnership and getting your steps in sync, right, I think GFANZ is a very good example here. Because when you think about it, the goals of GFANZ, and those, you know, as you know, span, things like transition planning frameworks, you know, target setting, portfolio alignment, the very technical side of all of this. Also, they have a whole workstream on mobilising private capital, they have a public policy workstream. So, a lot of that aligns with what we at the IIF do, and more importantly, what our members are doing in this space. So, it's really important that we not work at cross purposes, that we communicate clearly, that we work together, you know, toward these common goals. And for example, we we've been on a number of recent discussions with GFANZ, including GFANZ in the context of regulatory outreach. So, standard setters could reach out to industry to GFANZ, to gather perspectives. And it's a really important partnership and one that we that we value. On the official sector side, it's very interesting, because when you think about all the different elements of financial regulation, or financial sector policies, there are a lot of areas where you might have, you know, pushback or tensions, the financial services sector could say, you know, that's too much regulation don't go so far, we see it differently. But sustainable finance is an area where there's a lot of common ground, and opportunity for collaboration on things like understanding climate scenarios, you know, of the tools for measuring climate risk, you know, we're all seeking to answer the same questions. So, I think, successful collaboration, you know, a lot of it goes back to partnership, good communication, you know, constant awareness, that we're all working toward the same goals.

Eva Cairns

Yeah, absolutely. And our experience as being members of GFANZ as well, I think is exactly that actually to helping to develop best practice together, understanding the methodologies providing some consistency, but also, it's always good to hear that you're not alone with some of the challenges that everybody else is facing. And that in the finance industry, you also are, you know, everybody needs to pull in the same direction, including investors and policymakers providing the right incentives. I know you often speak about that as a key enabler. But more broadly, what are the key challenges you think, in the industry, that the industry is facing to really get us onto that path of net zero by 2050 that we're currently not on? And I guess, more broadly, any challenges that you've experienced in your own career journey would be good to hear about as well and how you've overcome them? So, two parts.

Sonja Gibbs

Yeah, no, I think to the first part of your question on that big global picture, probably one of the single most fundamental challenges for all of us is that climate change is such a global problem, but that each part of the world, country or region, like the EU, the UK, the US faces different local circumstances and local politics, because fundamentally, you know, climate change in the response to climate change. It ends up being a highly political issue and each country and region is going to see it a bit differently. And that puts a real risk of what we call fragmentation. So different approaches in different parts of the world if the EU is forging ahead, you know, for example, with a very proactive approach to transition planning or managing climate risk or transition risk, and other parts of the world are taking a more measured pace or imagine, you know, in the case of emerging markets, many of their policymakers and regulators simply have a long way to go, before they're at the same place in their country transition journeys. So you have different rules of the game, everywhere. And that makes it challenging for the financial sector, especially if you're a big global firm, you know, like abrdn, you operate in many, many countries. So yeah, you know, that's, I think, probably one of the biggest challenges. And as for, for me, personally, I think one of the biggest and yet most interesting challenges has been bringing together different elements of the things that I've done over the years that help inform what I do now, because sustainable finance, as you know, it's a really big, complex field. And there are a lot of areas that you need to come up to speed. And no matter how you approached it, if you come from capital markets, you know, that's going to be one type of background, if you're in development finance, that's another or if you're a scientist, and also if you are approaching this from a regulatory perspective, you know, if you're, if you're if your work is on regulatory affairs. So, I think each of these backgrounds has a different skill set. And where you don't have strength, you need to sort of build that up. And it's, it's been fascinating, right? So, for myself, I'm a capital markets person and I know a fair bit about emerging markets, I had very little background in regulation, when I started doing this work and, you know, needed to move up the learning curve quickly, because it's all connected. And it all has to be.

Eva Cairns

Absolutely goes back to your earlier point around collaboration would bring strength of different participants together as well, I think that's absolutely a really, really good point to overcome some of the challenges that we're facing there. And, and if you think about the IIF, what would you say, are the biggest ambitions for the IIF in relation to sustainable finance, if you had a crystal ball and could wish for anything, what would it be?

Sonja Gibbs

So, I think, given our mandate at the IIF, and one of the things at the core of our mandate is promoting sustainable capital flows to emerging markets, I think if we can collectively help create the right environment for that to happen. And whether that's by helping them with their own capacity building in emerging markets, helping build domestic capital markets, and facilitating international flows, all of that really matters. Because if we don't fund the transition in emerging markets, we will never achieve it globally. To do that, you need international alignment. So that's big on our wish list is helping create international standards, you have the International Sustainability Standards Board the ISSB, for example, you know, having a global benchmark for sustainability disclosures is critical. So, anything we can do to help that agenda. And more broadly, I think, in order to finance transition, to realise the potential of sustainable finance, or carbon markets, or whatever you're talking about, you need the right market infrastructure, and our membership across all different disciplines in the financial sector, they're exactly the right group of firms, they're going to help make that happen. building sustainable capital markets is absolutely critical.

Eva Cairns

Brilliant, fantastic. And we'll finish off with a final question for you, which is about inspiration and whether there's anything that has inspired you on a journey. That could be a book or a person, an event or film, anything you would like to leave the listeners with.

Sonja Gibbs

Do you know and going back to the whole kind of work life balance question, I draw so much on my own family for inspiration. So, my husband, for example, has spent his career in the UK Treasury, and then the IMF and then the World Bank. So, he's been very focused on you know, eradicating poverty doing all of the kinds of development finance work that the multilaterals work on. We have three kids. One is working in sustainable agriculture. Another is working in music therapy and with a particular reference to supporting low-income communities and others who wouldn't be able to afford this kind of training. And the third is working in environmental science so each of them in their own way, you know, are our pieces of the puzzle that we need to get to our net zero goals?

Eva Cairns

Absolutely. What a wonderful way to look at this. My two are still too young to be working that thing that they will choose sustainable paths like yours have. That's wonderful. Thank you so much for being with us today, Sonja. It's been a real delight to have you. Thank you so much for your time.

Sonja Gibbs

Wonderful to be here. Thanks, Eva.

Eva Cairns

You have been listening to the abrdn podcast Sustainability Inspires aiming to help you to get inspired and get involved. To all those who have taken time to tune in many thanks for listening. You can find all our podcasts on our website, goodbye for now.

Disclaimer

This podcast is provided for general information only and assumes a certain level of knowledge of financial markets. It is provided for informational purposes only and should not be considered as an offer investment recommendation or solicitation to deal in any of the investments or products mentioned herein and does not constitute investment research. The views in this podcast are those of the contributors at the time of publication and do not necessarily reflect those of Abrdn. The companies discussed in this podcast have been selected for illustrative purposes only, or to demonstrate our investment management style and not as an investment recommendation or indication of their future performance. The value of investments and the income from them can go down as well as up and investors may get back less than the amount invested. Past performance is not a guide to future returns, return projections or estimates and provide no guarantee of future results.

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