Investing in Sustainable Finance Education and Research with The Schulich School of Business

Roman Dubczak: Hello, everyone. I’m Roman Dubczak, Deputy Chair of CIBC Capital Markets. At CIBC, we imagine a more sustainable and inclusive world where everyone’s ambitions are made real. To foster this ambition, we are activating our resources to create positive change and support for solutions that address climate change. As a thought leader in the field of sustainable finance, one of the ways we are accelerating climate action is through strategic partnerships that promote peer learning and collaboration across industry, government and academia. For instance, CIBC recently partnered with York University’s Schulich School of Business to establish a research chair in Sustainable Finance. This research will enable new ideas and a new generation of leaders in the growing field of sustainable finance supporting the transition to a low carbon economy. But with intensifying environmental, social and governance challenges, many businesses today are at a crossroad on whether ESG should be managed as a risk or an opportunity. So how will business schools adapt the knowledge creation for sustainability challenges, and will sustainability research deliver the real world impact businesses need? Here to provide further insights are Detlev Zwick, Dean of the Schulich School of Business at York University in Toronto. And CIBC’s new Chair in Sustainable Finance at Schulich, Dr. Olaf Weber. Thank you for joining me here today. Dr. Weber let’s begin with you. First, please accept my congratulations on your recent appointment as the inaugural CIBC Chair in Sustainable Finance. It’s a great honour and privilege to have you taking on that role. In your career, your research has focused on the intersection of sustainable development and the financial sector. Can you share a little bit about the thesis that you have explored and what new challenges you see in sustainable finance today?

Dr. Olaf Weber: Yeah, sure. And thanks a lot first, for the engagement of CIBC, that I can work on that topic at the Schulich School of Business. During my main career, my main interest was about the impact of the financial industry on society and sustainable development. So that’s a bit different from the usual work in business schools that are more looking at the impact on businesses and how businesses can deal with sustainability questions. and we see currently how important that is. We have COP28 and the question is, “how do we finance climate change mitigation in climate change adaptation? What is the role of the financial industry? “Two years ago, there was a big initiative to go net-zero and to the industry is discussing how they can contribute to addressing climate change. So I think, these are very important issues, as well as others. We have seen in 2008, the financial crisis. We have seen how big the impact of the financial industry can be on society. And we have to figure out how can we deal with these issues? And we have to figure out how can we deal with these issues?

Roman Dubczak: Okay. Thank you. Detlev Zwick, Welcome. What makes Schulich a top research-oriented school in the fields of responsible business? And how are your industry partners such as ourselves, supporting your work?

Detlev Zwick: Yeah, thanks Roman, and also delighted to be part of the conversation. And to your question, “what makes Schulich a top research institution for responsible business? “I think it’s really in the DNA of the school. Questions about Responsible Business, meaning questions where we explore what is the role of business in society more broadly, really started 30 years ago. We were one of the first MBA programs in North America to launch a business and sustainability program. And since then we’ve only deepened that commitment. We have now seven Research Chairs that work in this space of responsible business. Chairs in corporate social responsibility, in ethics, in social impact, and now, of course, in sustainable finance. And those global leaders, thought leaders in the space, of course, embed deeply into the school, a research culture around the questions of responsible business. In general, sustainability, in particular. And you don’t have to take it from me. Many surveys over the years consistently show Schulich as among the top three in the world in sustainability research. The Corporate Knights’ Better World MBA Survey, specifically Sustainability Survey ranking business schools on that dimension, ranked us number one in the world for citations in sustainability and number two in the world for research output. So again, really showcasing the depth, but also the breadth of research responsible business at Schulich, and Chairs alone can’t do that. So one of the elements that we’re really proud of actually, is that we see researchers really across all functional areas: marketing, finance, economics, supply chain, engaging with questions of sustainability in their work. And, I think, that’s one of the reasons why Dr. Weber was so interested in coming to Schulich. There’s a lot of cross-pollination going on. There’s a lot of opportunities to work with leaders in the field, in research, and I think it will elevate everyone’s research impact. And when it comes to industry partnerships, I think, it’s absolutely clear that our strong industry partnerships at Schulich, our main reason why we’ve been at the forefront for such a long time in sustainability research. We can’t just do it by ourselves.

Roman Dubczak: Yeah, look, congratulations. I think it’s a tremendous success and candidly, it’s led to this conversation. And to your point, to discussions and what’s going on. I’ll take the next question to Dr. Weber. This past summer, there was a lot of press.The Financial Times published a piece, was analysis done by the Social Science Research Network. It was in July of this last year, revealed that the most read research papers, those written by a business school’s management and economics institutes worldwide since 2020, are papers that discuss ESG considerations. Clearly top-of-mind for business leaders globally. Many of these papers are written with a certain skepticism about what ESG is and what it can actually deliver. And what’s your view on this debate? I know this is a very broad question, but what’s your summary view on this and how should businesses move past this polemic in order to deliver responsible outcomes for their stakeholders?

Dr. Olaf Weber: Yeah, no, it’s a great question, of course and, we have to keep in mind ESG is used since the 1970s in a way. It started actually with social criteria. We had the union movement that tried to figure out, okay, how do, you know, how do companies treat their employees, and so what are the social criteria they use? So it’s a, in fact, the concept that it’s in place for a relatively long time. However, of course, it changed a bit in how it’s used. And so as well, we have socially responsible investing, we have green credit management and all these things that exist since some decades. It’s relatively new still, but it’s is existing. And now we have these ratings that rate the environmental and social governance performance of companies. And of course, they’re all financial instruments built on that. And they are analyzed on, “how is the connection to the financial performance? “Of course, that’s something that is very interesting. “What is the connection between the financial performance and ESG performance? “And I think, people thought it has too much explanatory value. So, of course, you cannot explain the performance of bank, of the company only with ESG criteria. It might contribute a little. And we, I think, we have to be careful in what we say there. So, but I think the main issue with the controversy is about the use. You know, it’s still a relatively new concept. And of course, there are cases we can say, in greenwashing, but also it might be that, we don’t exactly know how to use the criteria. And so it, might happen that you have some, let’s say, if you have an ESG mutual fund, that is not really what people expect because they might use these criteria. But at the end, it doesn’t mean that you that you only pick those that that are, you know, very great environmental performances, or so forth. So it depends how it’s used. And then a lot of the analysis as well, is kind of comparing conventional finance with ESG. And this is a bit of a dangerous field in a way, because, you know, many, many research on finance is very, kind of, experimental. I always say, “it’s done in space”. You know, you go up in space not to have any kind of external impact on your models. And that’s what you often do in science as well. But then you go back to Earth and then you realize, okay, if I have a drop of water, it doesn’t stay. It drops down. And so, and this is done, you create a kind of a model, a theoretical model. And then we tried to link ESG with that model. And sometimes it works, sometimes it doesn’t. But I think that’s a kind of a wrong approach. And we should integrate ESG directly into these models. So we have to stop thinking that we have financial models that are, you know, not addressing any external systemic issues. And then we have these ESG external issues. So one discussion again, it’s about climate change. Probably that’s systemic, and it won’t go away the next year. So it makes sense to integrate it into these models. While, otherwise someone in conventional finance would say, “that’s an external impact and we can kind of randomize all of these impacts.“ So I think that’s a that’s a big issue. So one is, research. We have to rethink the research. How we do the research. And the other one is, how it is used in a way, you know, “Is it really used the way that we think it should be used?“ And I think these are two, two main issues that contribute to this seemingly controversial discussion.

Roman Dubczak: Well then, ultimately you’re in the business of educating students and having those inputs. I can’t overstate how valuable that is in terms of the academic leadership going forward. Detlev Zwick I’ve heard you mentioned a few times that in order to produce cutting edge research, you have to ask interesting questions apropos of today’s conversation. But academia faces some tough challenges in how they define, integrate and prioritize sustainability into their research. And, you know, feeding off Dr. Weber’s comments, how does Schulich prioritize the skills and values needed to meet real world business needs, and how do you adapt the way to co-create those solutions with your industry partners?

Detlev Zwick: Great question. I’m a huge believer in the fact that the best business research is research that advances theoretical questions, interesting concepts, but also brings real world implications and impact to decision makers. That decision makers can use actually to help their efforts. And it’s something, I think, that’s helped at Schulich in part by the fact that our researchers, again, across areas, are not siloed away. They talk to each other as they share their research and again, many of them in the space of sustainability, responsible business. So a lot of knowledge transfer and cross-pollination on the research side, but of course also, the fact that we are bringing our researchers in touch with decision makers in businesses and government to generate questions that then produce answers that are theoretically interesting, but also have practical implications. And if just give you a couple of examples of what that can look like. We just had a professor publish a research paper. A professor in information systems, on greenwashing, publishing an analytical tool, a new analytical tool to detect greenwashing. So greenwashing, this kind of practice companies engage in misleading or falsely exaggerating perhaps, the environmental performance of the company. And so that’s a question, of course, of interest to a lot of stakeholders. And so, this tool will actually help those stakeholders: investors, shareholders, the public, government, with their analysis of the environmental performance of a company perhaps a sector. So driving, I think, concrete policy and business decisions. We just had a group Schulich researchers publish a paper where they’re looking at waste reduction. So a very interesting, important question when we’re talking about transitioning to a low carbon economy. And so the question they were asking was where is actually the greatest impact to be had in this production-consumption loop of goods and services? And we see a lot of attention paid generally to the consumption side. But then when they looked at the data, what they actually found was that much greater impact can be actually generated on the production side. So paying more attention to that part of the production-consumption cycle is going to be really important. So again, helping shift attention perhaps of policymakers, of business decision makers, to that side of the equation as well, really driving, I think, new conversations with those insights. And I think, for us, we see the same with the new Chair, the CIBC Chair of Sustainable Finance, the ability to talk to industry partners and business professionals and decision makers in the sector is going to help really drive relevant questions and generate impactful answers. It’s actually part of our strategic plan now at Schulich, to drive research impact.

Roman Dubczak: I definitely agree. Like certainly, you know, for example, COP28, everyone’s watching that and that’s going to sort of set the direction as to where the discussion goes for the next year, but more importantly, couple of weeks as everyone puts it into place. But maybe getting back to Dr. Weber and practicality, so to speak, as you know, as the Chair-holder in sustainable finance, you know, outreach and engagement are going to be key aspects to, you know, forging connections with the industry, government, establishing a hub of activity where, you know, financial institutions, regulators and leaders in an investment industry can come together to form new, sustainable and ESG investment standards, measures, that sort of thing. What’s your near-term plan and how where how do you think you’re going to prioritize this engagement? To paraphrase Detlev Zwick, you know, “what interesting questions are you going to pursue to generate near-term activity? “so to speak, in this discussion on transition to a low carbon economy?

Dr. Olaf Weber: Yeah, Yeah. Thanks a lot for the question. I think one of the first things I want to initiate is a kind of Bay Street sustainable finance roundtable. We call it like that. So to see internally what are the main questions in the industry and how of course, how can we react as academics to these questions? And having, yes, represented from the financial industry, but also other stakeholders in there as well, sort of figure out, you know, what should we address and what are the future steps, what banks and other financial players can do? So that’s something that I want to do. The next one, for instance, for a research project, I applied for a project recently. What I usually do, and did as well. I try to have an advisory board. So, if I have a research project, and it’s sustainable finance related, I want to have an advisory board from the industry that can help as well, you know, and kind of get feedback. Are we on the right track?

Roman Dubczak: Very healthy. Very healthy.

Dr. Olaf Weber: Addressing the questions that are really interesting. So that’s the research part. Then another one is teaching, of course. So my idea is to develop a course that we can do here downtown, and with students, and work with financial the financial industry as well and figure out, okay, what other questions you want to address. So, you know, asking CIBC, “Do you have some kind of project? What is an interesting question that students could address? “And then, use that course as an experiential learning course that helps the students, of course, to learn about the sustainable finance in the industry here, and, of course, then to create a connection between students and the financial industry. So that’s from a teaching point of view. That’s something that I really would like to do. Questions, in general is, of course, as I mentioned, “what is the impact of the industry? In Canada, we know we have to do a transition to a low carbon economy, “What is the impact of the financial industry? How can they invest? What are the risks? What are the opportunities to address these questions? “That would be one important question. Another one, and I know that, from many conversations to, you know, in the professional world, it’s still, it’s data gathering. You know, how do we know..? How do we get climate data, for instance, from our clients, or ESG data if you want to analyze them? That’s still not solved. You know, from the academic point of view, we are kind of always on a high level and discussing complicated issues. But in fact, we need to get reliable and valid data. So that might be another very interesting question that we can address in this kind of, of course, is research. Another one is, “how do we integrate all this sustainability ESG into general conventional business? “The experience probably is that, of course there are many at CIBC, and other banks as well, that are very much into sustainability, but others probably have never heard about it and, you know, don’t address these questions at all. So that’s another question, “how can we integrate ESG and other sustainability questions into conventional financial decision making? “So, these are some of the aspects that I would like to address.

Roman Dubczak: Yeah, no, I think the dialog that will ensue about the allocation of capital is something that can’t be done in a vacuum. You obviously need to get the inputs from practitioners and Bay Street, as you call it, is a very logical place to start, as an input. And then, other factors need to be considered. But staying with you for a moment Dr. Weber, The Government of Canada recently released its Fall 2023 economic statement, in which it announced a number of updates, including the launch of a one and a half billion dollar critical minerals infrastructure fund, an expansion to the eligibility of the clean technology and clean electricity investment tax credits, and the release of an updated sovereign green bond framework that will include nuclear energy expenditures for the first time. Quite a watershed, I would say. These announcements help to accelerate private capital investments in Canada’s clean economy. How, with the evolving investor preferences, taxonomies and international best practices, is the government doing enough fast enough to incentivize climate action to achieve ambitious climate targets? Where do you see Canada by 2030 and 2050?

Dr. Olaf Weber: We see on the one hand, we see government inputs and financial, you know, inputs. But what I always missed is the connection to private investment. Now we can set up a government fund to support whatever green technology, but that’s a certain amount of money that’s gone sooner or later. And then if we have a change in the government, maybe the whole program is gone. So what I always thought is, “why don’t you have a public-private blended finance approach? And say, okay, we put in some money, but this money is only available if some other private investors are involved as well.” So let’s say, you know, you have a have a new technology than what the government or the federal fund puts in half of it and the other half comes from industries. This would all de-risk, in a way, and help to support the transition to a low carbon economy. So, I think we need more of that and we need to think about what kind of financial mechanisms can be used because, I think it’s pretty obvious that we can’t do it. We don’t have enough money that the public can just do all these investments and grants. So I think it’s very important to have a public private partnership in this regard. And for me, then the hope is as well that, you know, once if investors are involved, then these programs will stay because you cannot just cut these things and then, you know, have them stranded. So, that’s something we can really, I think, we can use these kind of mechanisms to have a more stable and longer term finance. The place of Canada, we are lagging behind. And I was what, two or three weeks ago on a sustainable finance conference, and they were kind of accepting that. So, you know, it’s not that everybody thinks we are leading, but I think it’s pretty… it’s obvious. And we see also in the US with this infrastructure grant and these things, you know, there’s lots to do there are many opportunities. I think the best is if you have an economy in transition, that’s something where you need investments, where you need engagement and all that. It’s better than just this stagnating economy. So, I think we have to do much more there to catch up with others as well, and especially in the integration of private finance into public investments. I think that’s, it’s really something we need and where we have big opportunities as well, because I know, pension funds, banks, other investors, they are keen on investing in green. You know, if you have a green bond, it’s always oversubscribed. So everybody is interested in being engaged in that. And so we have, which we should offer more in that regard.

Roman Dubczak: Okay, good. Thank you. Detlev Zwick, as you premised earlier, Schulich is one of the world’s largest and most influential academic centres dedicated to sustainability and knowledge development. What influence over the short and long-term do you hope Dr. Weber’s, pioneering research will have for our mutual clients, pioneering research will have for our mutual clients, your clients, our clients, and impact on the general discussion in academia? For all of our research at Schulich, we of course, hope very much that the research Dr. Weber carries outwill help businesses and policymakers with their efforts to move towards a low carbon economy. It’s a goal we all share. It’s a goal industry shares as well. So research around energy transition, transition to a low carbon economy, grappling with the political, governmental, regulatory questions and challenges of a sustainable financial system. I mean, those are fascinating questions, and Dr. Weber’s work is firmly situated in that nexus, and his work is really at the intersection of corporate sustainability, performance and financial performance. And as we just heard, there’s so many interesting and really important questions for businesses for government in that space, to be explored. And I think finding really good answers to these questions will really determine how we make the energy transition to a low carbon economy transition happen, and how quickly we get there. But as Dr. Weber already mentioned, research is just one aspect of the impact that CIBC Chair in Sustainable Finance will have at Schulich. Another big and important part of his work will be in the education and training of the next generation of business leaders. And here Dr. Weber has an incredible track record. He’s a really committed educator as well as researcher. Dr. Weber created one of the first courses in sustainable finance in the world. He has now supervised more than fifty students in sustainable finance at the Masters and Ph. D. level. These individuals are now already out there making a difference in the leading companies and in academia, really helping Canada transition to a more sustainable economy, really helping also deliver goods and services in a more sustainable way, and really trying to make the world a greener, a more sustainable place to live. And so for us, we’re really excited to have a researcher and an educator of Dr. Weber’s statue at Schulich and of course, delighted and grateful for CIBC’s support and partnership to make this happen. It’s really an incredibly exciting transitional period in the world and sustainable finance is going to play a really pivotal role in shaping the future and leading global business schools such as Schulich with a long tradition of leadership and sustainability. For us, it’s a fantastic place to be.

Roman Dubczak: Great. Well, look, thank you. Your word of making a difference, I think, is the operative word here. It’s very important to CIBC. And I know, as you stated, it is to you to make a difference, a positive difference, in this narrative and to be engaged in it and to help drive the world of decarbonization, sustainability, and to educate the next generation of leaders, which is what this is all about. So thank you very much, Detlev Zwick, Dr. Weber, for attending here today. We really enjoyed working with you and look forward to much more engagement in the future. And with that, I just want to thank all of our clients for joining today and look forward to having conversations with you again soon. Thank you.