In Conversation With Ms. Jyoti Bisbey, UNESCAP

Interviewed By: Deivanai Arunachalam

Jyoti bio photo January 2020

GDP growth has often been overemphasized as an indicator of a nation’s economic well-being.  Quite like sizing-up an individual by how much he makes, merely in terms of money. The obsession for materialistic success blinds many. Governments and nations are no exception – after all, aren’t governments themselves composed of apparently successful individuals?

Over the last few decades many developing countries have witnessed impressive rates of economic growth. Thousands have been lifted out of extreme poverty.  We live longer and better lives. Globalisation has helped us savour the best of the west and the bells of economic growth ring loud and clear. Yet, how many of us are truly satisfied and happy? More countries are moving towards a more wholistic sustainable living by including people’s happiness and planet’s health in the equation like Bhutan and New Zealand.  While we usually think governments need to take action, what about businesses?  What can they do?

The United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) attempts to answer these uneasy questions in its upcoming annual 2020 Survey.

The United Nations adopted the Sustainable Development Goals (SDGs) in 2015 – a blueprint to realize a better future for everyone. The UN emphasizes the need to achieve these interconnected goals related to poverty, inequality, climate change, peace and justice, by 2030.

We spoke to Jyoti Bisbey, Lead Development Finance and Economics Specialist at the United Nations ESCAP on an external assignment from the World Bank. Her research suggests how sustainability can be mainstreamed into businesses’ financing and investments decisions by adopting the Environmental, Social and Governance (ESG) framework.

What is ESG? Which ESG elements are examined before making an investment decision?

Jyoti:  ESG stands for Environment, Social, Governance factors, which when combined constitute sustainability. Today investment managers negatively screen companies based on ESG criteria, by excluding assets which are not ‘green’. This is only the beginning. As the market moves towards a better understanding of sustainability, asset managers should actively pursue and select only sustainable investments. This means moving from exclusion-based investment to inclusion-based portfolio management. As more investors and regulators seek information on ESG factors, fund managers are increasing transparency and disclosing fund activities. But we have a long way to go.

How is ESG going to help companies become sustainable?

Jyoti: Currently, the primary focus is on the ‘E’ of ESG.  This is because there is more information and normalization of data available to measure and track activities which directly impact the environment. These are called ‘Scope 1 and 2’ level emissions according to the Greenhouse Gas  (GHG) Protocol.  However, even these are underestimated as the true cost of carbon is not included in the production process. Any measure of profit (broadly defined as revenues minus costs) is dependent on the estimate of costs. We do not know the true cost of many of our natural resources because we do not price the externalities. Carbon is an externality. Lately companies like Mahindra & Mahindra ($10 per metric ton of CO2 emissions) and Infosys ($10.50 per metric ton of CO2 emissions) have come up with an internal carbon pricing.  Carbon pricing is the best way to reduce companies’ carbon footprint and report on GHG emissions for the “E” in ESG.

Here’s another example. Water is a commodity and it isn’t free. Water is under-priced globally.  Do we know the true cost of water? When we don’t, how do we incorporate its cost, say in the production of cotton? A cotton shirt is inappropriately priced too low, given the volume of water it takes to produce a shirt. We buy indiscriminately, based on flawed pricing, and leave substantial carbon footprints. Since we do not know the costs, how do we move to a sustainable profit model? These externalities like carbon, water and even land are not priced correctly. So we do not know the true cost of production.

What are the next steps in encouraging investment within the ESG framework?

Jyoti: Let’s take a coffee company for example and look at the entire value chain. Investors should be provided with information on whether wastewater was disposed correctly. On whether good labour practices are prevalent at the plantation. This way, the process of the value chain – from farming coffee beans, till the end consumer who purchases her morning coffee can be scrutinized. We need to implement reporting and disclosure standards that facilitate release of such detailed information along with an agreed set of standards for ESG.

There are several global financial initiatives such as the UN Principles for Responsible Investment (UNPRI), IFC’s Sustainable Banking Network (SBN), Global Sustainable Investment Alliance (GSIA) etc. Investors and companies often wonder which model to follow. India’s financial regulators –RBI and SEBI can adopt and endorse financial regulation on ESG and establish protocols for sustainability reporting. The regulator must define which standard will fit each of the three ESG categories.

Once a standardized regulation is established domestically, the ESG practices should be harmonized across countries so Indian businesses have a common framework.

What can the CFA Society do?

Jyoti: It is heartening to note that the CFA Institute has incorporated ESG in its curriculum.  CFA Society and members can help in three ways: First, think about how our financial system can adopt climate risks in financial reporting and disclosures. Second, what kind of analytical tools can be developed to support companies, especially the small and medium enterprises in understanding pricing of externalities? Third, CFA institute members who head investment companies must include ‘purpose’ in the traditional profitability model, transitioning from a model based on profit maximization model to one based on purpose maximization. This requires moving from a shareholder to a stakeholder approach, where a company operates on ‘do no harm to the people and planet’ basis.

About Jyoti Bisbey

Jyoti Bisbey is the Lead Infrastructure Economics and Finance Officer in the Macroeconomic Policy and Finance for Development Unit in the United Nations’ Asia HQ at Bangkok, Thailand. Currently on an external assignment to the UN from the World Bank Group (WBG).  Jyoti is leading the dialogue on SDG 2030 Agenda economics and financing issues for the Asia-Pacific region. At present, she is authoring the theme chapter of the flagship report– Economic Development Survey for 2020 on ‘Economics of Sustainability’.  She has also co-authored many blogs, an Infrastructure Financing book, available at UN ESCAP’s website and presented on topics such as SDGs and ESGs.

Jyoti specializes in Infrastructure Finance with an MBA from George Washington University and Mathematics in undergraduate from St. Stephens College in Delhi. Beyond work she enjoys spending time with her family and running.



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