Global Head of Sustainable Finance & Corporate Transitions
Amy West sees a strong future for the sustainable finance movement, despite the drastic changes in gas and oil supplies caused by Russia’s invasion of Ukraine.
“All of us have been surprised by the rapid trajectory of growth for ESG," or environmental, social and governance factors, said West, who is global head of sustainable finance and corporate transitions at TD Securities, a unit of the $413 billion-asset TD Bank Group in Toronto. It’s gone from being a corporate citizenship initiative or nice-to-have marketing exercise to a material, financial risk, she said. “I think people are realizing that ESG creates more sustainable businesses,” she said.
It’s starting to become a regulatory issue, too. The Securities and Exchange Commission recently proposed requiring companies to disclose their impact on the environment as part of their financial reporting. Companies’ ESG reports will eventually start to be audited, West predicts.
Investors and capital providers, including family offices, financial institutions, and asset managers, continue to pressure companies to lessen their carbon emissions, she noted. Capital providers are making this part of their risk assessment.
TD Bank Group is striving to get to net-zero emissions, and this is part of West’s job — helping the bank reduce its energy consumption and buy carbon offsets.
“As the price of carbon offset goes up and as emissions increase, we're going to get to a point in time where there isn't enough money in the world for us to buy enough carbon offsets to get out of the hole, it's not going to be economically viable,” West observed. The bank enforces energy efficiency principles in its buildings.
West also helps clients reduce their carbon emissions, which in turn will eventually bring down TD’s scope 3 emissions, the carbon footprints of the third parties it works with.
“If we lend money to a power company that is undergoing a transformation from a coal-fired power plant to solar energy, we inadvertently benefit from that,” West said. “So we should want to fund that and we should want to make sure that we're providing capital for that.”
In M&A deals, West’s team counsels companies to consider environmental concerns.
West’s group also makes sustainability linked loans. These are normal loans with interest rates that vary depending on the degree to which corporate borrowers meet spelled-out ESG goals. It’s a reverse incentive for TD: the better a corporate customer does, the less profitable these loans become for the bank.
But companies that aren't meeting ESG targets are riskier, West said.
“If we help incentivize the transition to sustainability with loans, we're actually helping our clients become a better credit for us longer term,” she said. For instance, if a consumer goods company makes its packaging lighter, it’s better for the environment and its bottom line.
And sustainability linked loans will eventually help TD meet its scope 3 goals.
For West, who is still in the process of building a new team, leadership includes trying to help everyone understand big-picture goals.
“I've had people say, well, how are we thinking about this?” West said. “And I'll have to say, this hasn't been done before. There is no blueprint. We're figuring this out together. If you have a good idea, please come in and share. We’re trying our best to be collaborative.”
She also values positivity. “Creating an environment where people want to come to work and want to do a good job, I think is really important,” West said. “Then hopefully our young people learn and they'll want to stick around for careers in finance.”
