Pacesetters

The Green Machine: Bloomberg’s Curtis Ravenel on environmental economics

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Curtis Ravenel created Bloomberg’s sustainable business and finance group in 2006 with the goal of using data to improve internal operational efficiencies. Three years later, with $28 million in savings booked, his group branched out from cutting costs to bringing in revenue. Inspired by their own work, they started to work with the product teams to gather sustainability data for Bloomberg Professional service (Terminal) subscribers. Usage of that data has seen substantial growth since its launch in 2009.

Now, Ravenel is a driving force behind one of the financial industry’s most ambitious sustainability projects yet: developing financial

disclosure standards for quantifying risks and opportunities of sustainability issues. As a board member of the Sustainability Accounting Standards Board (SASB) and member of the Secretariat of the Financial Stability Board (FSB) Task Force on Climate-related Financial Disclosures (TCFD), Ravenel is helping to develop robust, financially related sustainability data infrastructure for the financial markets. He hopes this new data-driven approach will help investors make more informed investment decisions and help tackle climate change and sustainability challenges. Ravenel spoke with THINK Leaders’ Heather Green about how companies, investors, and markets can innovate around these new sustainability data sets and create value to their clients.

How did you wind up where you are today?
Out of college, I worked for an NGO in Washington, D.C. and got very interested in what I call ‘environmental economics’. I started working in the finance department at Bloomberg after business school, but I still had that environmental bug. So I wanted to see if there was a way I could leverage my experience in D.C. to bring value to Bloomberg. I wrote a proposal as part of a global leadership forum that Bloomberg developed. I was fortunate to have mine chosen to be implemented.

It was supposed to be an 18-month long project – and that was in 2006. Now we have a team of eight and we work with hundreds if not thousands of people at Bloomberg to drive value for ourselves, but also for our customers, partners, vendors, employees and the communities, in which we live and work.

What opportunities are you exploiting when it comes to sustainability?
Originally, it was really about our impact as a firm. I wanted to find a sweet spot. The thesis of true environmental economics is that the environment and economics aren’t opposed. People realize that now, but 20 years ago there was an assumed trade-off between managing your affairs environmentally and managing them financially. When I wrote my proposal, the primary purpose was to find the efficient frontier between financial ROI and environmental ROI; to use an environmental lens to look at our operations and decouple our growth from environmental impact.

We had a saying: If there’s environmental impact, there’s likely waste; if there’s waste, there is inefficiency; if there’s inefficiency, there may be money. Now our ROI is in the triple digits and we’ve been very successful at implementing operational changes that have financial and environmental benefits.

But that was just the starting point, right?
What we realized was that a lot of firms were going through this. Bloomberg sits uniquely at the interface between both companies and investors. A lot of companies were beginning to manage against these issues and a group of socially responsible investors was particularly interested. To create true sustainable value for Bloomberg, I thought we needed to not only be internally focused but also externally focused. Sustainability shouldn’t just be about cost savings, it should also be about the opportunities that it creates for us and our partners. So we began to collect environmental, social, and governance (ESG) data and integrate it into the Bloomberg Terminal. This expanded our contribution to the company from just cost savings to help drive revenue as well.

So through quantifying sustainability risks, a company can uncover new business opportunities?
That’s right. It’s two sides of the same coin. The one side is risk, the other side is opportunity. This is a big opportunity for a number of different industries if they invest smartly in providing products and services that help companies address sustainability risks and opportunities. I think by looking at opportunities on top of risks you truly embed sustainability into institutions.

Do you think most companies can profitably exploit their sustainability data?
As long as you stay within your wheelhouse and you’re smart about it, yes. I do think that most companies can find ways to turn sustainability into an economic benefit for themselves. Don’t try to do everything. Focus on what are you’re good at. If you’re good at making a certain product, then figure out how making that product can help solve a sustainability-related problem. Bloomberg’s goal is to provide transparency in the capital markets and to anticipate our customers’ future analytical needs. We think that relevant, robust sustainability data certainly contributes to our goal.

What role does technology play in helping companies and investors evaluate sustainability data
In a way we’re very lucky. We have so much unstructured sustainability data out there today and it’s proliferating. At the same time, we have the growth of big data, natural language processing, and data science. It’s almost like the timing is too good. I think you’ll see a lot of innovation around this kind of information during the coming years and the evolution towards integrated reporting. The end goal is integrated reporting, which creates integrated thinking.

How did Bloomberg get involved in SASB and the FSB TCFD?
One of the problems with sustainability information is a ‘signal-to-noise’ ratio problem. There is a tremendous amount of sustainability information out there that is disclosed by a lot of companies, but that’s not specifically designed for investors.

We thought that because of our unique relationship with companies and investors and because of our founder, Mike Bloomberg, we had a role to play in sorting through and helping develop standards and the data infrastructure that could benefit the entire market.

Can you explain what the SASB and the FSB TCFD do?
SASB and the FSB TCFD are both creating guidelines and standards for the disclosure and measurement of sustainability issues. They’re similar in that they are focused on the potential impact that these issues have on a company’s financial performance, as opposed to how a company impacts the environment and society. SASB is about all ESG factors. It’s primarily focused on the U.S. We thought it was super smart, because it required no policy intervention. You’re basically doing work to show evidence of materiality, which in turn requires you to disclose.

The TCFD is very similar and uses a lot of SASB’s work. However, it’s more global in its approach and it focuses solely on climate. We’re trying to solve this idea that climate change is a risk that Mark Carney (Governor of the Bank of England and Chairman of the G20’s Financial Stability Board) so cleverly coined as the “tragedy of the horizon”. There’s this idea that climate change is a big faraway problem that will materialize itself at some point in the future. By the time the physical risks become really big, it’s too late. This is why you need to think differently.

What the Task Force suggests is that the problem is already taking shape now – in the form of ‘transition risks’. Rapidly declining clean energy costs, accelerated deployment and policy initiatives around the world designed to manage pollution and other climate challenges are already affecting and will affect companies in the nearer term. Investors want to know if their investments are resilient to climate change.

Mike Bloomberg always says, you can only manage what you measure. Information is the lifeblood of all decision making. No matter the policy environment, better sustainability information leads to better decision-making and to better outcomes for businesses and society in return. It does create accountability and visibility and that is what really makes you think – and hopefully innovate!

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