Making a Difference Through Environmental Impact Investing: An Interview with Miika Korja

Conducted by: Editor in chief Kyra Ward 

Interviewee: Miika Korja


Kyra Ward: Where are you from and how did you become interested in matters of sustainable development and environmental science?


Miika Korja: My name is Miika Korja and I am originally from Finland. When did I get interested in sustainable development? I think that would have been in India. Actually, maybe even a step before that, you know environmental issues are quite big in Finland. I was a boy scout for fifteen years of during my childhood. We camped, went trekking, organized survival skills and training courses for kids. So, spending time in nature was always very close to my heart, something that comes from family.

After that I spent two years in India doing the United World College Program, and I think that’s when you really see the issues around plastic, pollution and environmental degradation. You see it much more clearly than, perhaps, in western Europe. The result of what happens when institutions don’t manage negative externalities… but, it’s not India’s fault, it’s more about understanding the scale of managing climate change, and I think combining those two stories, and I have some work experience from eco-tourism, so I did that for my gap year… I did help the organization and undersee the issues that revolve around logging, the rainforest, and everything. I think after that I figured out that I want to do policy, governance, economics. That to me it’s more about managing those institutions that aren’t working appropriately…

I did my Bachelor’s degree Policy Science and I did some more internships, here and there, then I did my Masters in environmental policy and economics, which is fun to combine the economics and policy and really look at environmental questions…I want to bridge the natural scientist and the policy making, economic, financier and I want to be, hopefully when I am a bit smarter, hopefully one day, I would like to be that guy who understands both sides of the story. I joined a green finance company, in London. I’ve been working there for two and a half years now.


KW: How do you differentiate the company you work for from other similar companies?


MK: I think the main difference is how we work under the hood. The talk I gave was about how to determine the green-ness of bonds and investments. What we do differently is that just because someone calls it green we don’t accept that…we want to do our own analysis. This is what everyone in our company does… We ask questions like, what does a company mean by green? How do you report about it? How transparent are you about your projects? And I think we find those questions super important, because if you don’t take this stuff seriously and if the market and the people lose their confidence in this idea of green finance then it’s game over…

So the first part is looking under the hood. The second part is reporting. I think that’s really what we take very seriously and is what we spend a lot of time looking at in the projects we’ve invested in and what they delivered. What did we achieve from the environmental point of view as well and environmental and social point of view on top of the financial return? Those two are the big differences.


KW: Do you think that sustainable development and environmental protection policies are conducive to the way our current economic system functions? As a society do you think we need to prioritize sustainability over growth?


MK: There are a couple of ways to look at it. I think the question is very important. Time horizon also impacts this question. I think so far there is no difference in pricing. So, when investing in green bonds, which is what we invest in, there’s no difference in price compared to normal bonds. So, in that sense you would not be giving up any return, or that is what we strive for. There is no pricing differential, otherwise, people might be willing to choose the financial return over sustainability, but our goal is to  keep the returns the same hoping that it would incentivize the people would adopt more green behavior, because they aren’t losing money in the process. That is how we act quite a lot as humans.

I think most economists would find that if you don’t take climate change and sustainability considerations seriously you are potentially losing out a lot in the long run. So, in order to maintain some form of growth, some form of development, sustainability has to be at the core of that, because otherwise… you won’t be able to just keep burning without restrictions … development banks actually assert that “to ensure future growth, there must be climate change adaptation included in that planning”. I think that concept of needing to prioritize sustainability is very difficult to show academically, but this is what people are commenting on right now… If you assume that you have to mitigate at some point anyways, you could argue that you are actually losing more if you continue to delay.

Nicholas Stern also argues that mitigating GHG emissions is cheaper in the short run rather than long run.


KW: Do you think there is a country or group or organization which has the capacity to lead the way on issues of climate change?


MK: I think California, which has been in the news, caught my attention just a few weeks ago. The governor pushed for a very ambitious environmental policy that was very impressive. China has also done an incredible job the past few years, it is getting incorporated into the 5 year plan, sustainability metric, which has pushed all the local banks to just issue green debts, which is good for funding, funds the heartlands, funds renewable energy projects. You know there are still a lot of question marks about how they fund them, but at least as a collective push, the government has said that they’re going to do this and then everyone was like, ‘yes sir’.

So, I mean those two examples I think are ambitious. I think it’s quite funny in the context of the US where Trump has done what he’s done that the climate policy in the states still has a large economy and can have a lot of influence.


KW: Can companies do environmental policies without the state apparatus?


MK: It can happen to an extent. I think it’s a question of degree, and I think that if you don’t have any policy push for this [environmental policy] there will be a limited cost of impact.  I think if you push for it harder with clever policies, flexible policies, I’m not saying that you have to be very commanding kind of style, you know, ‘we demand that you do this, please issue green projects’. I’m saying more, very clever, government policy can definitely you know boost the impact investing market. Governments, for example, could require that companies need to disclose their greenhouse gas emissions. Here you’re not saying that you have to change your business practices, because if the government did that people would probably get angry, and say ‘no’.

Disclose your emissions… let auditors audit emissions from this that could potentially be quite interesting. Investors get some idea about how this company is moving, what are the operations at, just a bit more transparency around it, and this is something for example, France, has been pushing. They are requiring fund managers so this is actually more on the investor side than the corporate side, but still big fund managers, they have to disclose their carbon emissions, and data around carbon metrics. I think that’s an example where they require transparency, they don’t require you what to do just saying please keep the information out there. So that would be an example in my opinion of quite clever policy that can potentially boost this market…


KW: Let’s talk more about environmental impact investing. How does your team go about finding ways to address issues of inequality in the market? How do you grapple with issues of transparency within the companies you analyze?


MK: So, it comes down to, honestly, just analyzing and scrutinizing the company profiles and projects. We have basically four ways in which we look at it.

  1. The first is, what kind of sectors are they funding? Are those green?
  2. Second one is, do we have transparency around where the money is flowing? Do they disclose it really well?
  3. Number three, are they using any external auditors, any second party opinions around it? Are they perhaps publishing the money in the bond prospectus, which is the legal document for the bonds, saying that ‘we will only use 20%’ like ‘we will give you 80% of the proceeds on wind power and 20% on hydro power’ if that’s in a legal document then that’s very strong. It legally ringfences the proceeds around predetermined sectors, which creates confidence that the money goes to the right areas
  4. And fourth is that we look at the reporting. How do they actually report about this impact? So, that would be on the sustainability side, what, where are they investing it? How transparent are they reporting? Are there any additional safe guards around it and fourth how do they prepare it.


Those are a couple ideas of how we would look at it, then over we look at the issue of responsibility is the company also acting responsibly in general. Are they showing transition to the worst degree? Is this more of a green PR exercise? So that’s sort of it.


KW: What projects have you seen that have really interested you in the impact investing community?


MK: I’m going to give a bit of a different answer… I think what has been quite fascinating is to see the impact investing community, because it has such a broad range of issuers, different stakeholders who are involved. You have the banks, you have the asset managers–us, you have the consultants, the auditors, the think tanks, universities, all sitting at the same table and discussing how to do this. And even the loudest NGO’s who would often never talk to a bank, for example, would say ‘Oh my god, I would never sit on the same panel with a bank’ or ‘I would never issue a report at the same time or co-issue a report with a bank’ that’s what they do in this space.

Everyone is collaborating, and I think you know, not trying to sugarcoat it, but it’s been really impressive. To see that people are actually trying to collaborate, and people are not being hostile to each other because their profile might look funny. That’s been I think, one of the most impressive things I’ve seen.


KW: What do you think the greatest environmental or environmental policy issue of our time is?  What do we do now?


MK: I think we are at the point now, as is illustrated by the IPCC report this week [the week of the 9th of October 2018] for example, that we are really getting close to a breaking point. I genuinely don’t think we have much time to get our act together, and I think ultimately I would encourage people to think of scale… We need to de-carbonize very quickly, we need to help the lower income, or lower-medium income regions to de-carbonize quickly… It starts from basic things, like you can ask, where is your pension saved?… Is that invested in something that is generating good? Should academic institutions probably push for this harder? …That would be something of scale, you know that the university could be pushing for to divest, but then you need to invest somewhere else are they investing in the green investing? That’s one thing of scale that comes to my mind, but I think I would just encourage people to think of like management, we need structural changes now. It’s too late to start switching lights off… I mean it’s still important, we should also do that, but we also need like, big changes.


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