Faiza Oulahsen

Jeroen: First of all thanks a lot, Faiza, for taking the time to speak to us in the run-up to the Leaders in Sustainable Finance Event taking place on the 30th of January next year. Could you tell us a bit about yourself?

Faiza: My name is Faiza Oulahsen, I am 37 years old, and I am Associate Director Sustainability, working on ESG, at KPMG Netherlands. I have only just started in this role; until a few months ago, I worked at Greenpeace as a Programme Director. I spent 13 years of my professional life there, trying to make an impact, to make the world a more sustainable and fair. My mission has not changed, but I am now carrying it out in a completely different role: I transitioned from activist to consultant or advisor. As an activist, I used to kick the door open and tell companies what to do or point the finger. But we have seen a massive shift in society and politics in recent years: everybody now sees the urgency and need for this transition, which is very different than when I started 13 years ago. In this changed landscape, I now see it as my role to help companies with their struggles in making the transition.

Jeroen: I assume there are a lot of differences between your work at Greenpeace and the work you are currently doing. But if you could pick only one, what is the biggest difference?

Faiza: The biggest difference is that an organization like Greenpeace is an activist group: the point is to be disruptive, to challenge the status quo. As a member of such an organization, your goal is to shake up all the others in the field in which you are active, whether it is financial institutions, corporations or the government. In that role, you enable social change by catching them off guard. I believe that this disruptive role of activist organizations is crucial to driving social change. As a consultant, on the other hand, you do this very differently. Working in areas where change is already happening, you are basically there to support those actors in the field, particularly companies but sometimes also government. For me, that is the biggest switch: I went from being disruptive to being constructive.

Jeroen: Right. Now in my view, I see a lot of pushback on for example climate change, from legal areas, political areas, from a whole range of stakeholders like businesses who are reducing or failing to meet their targets. Do you perceive this pushback on transitions as well?

Faiza: I clearly see the trend you are describing, but I also try to zoom out a bit more. The transition we are talking about is incredibly fundamental: the climate crisis and the biodiversity crisis are about shifting our entire energy system, our entire economic system, how we go about raw materials, how we produce food and so on. Such massive societal transformations always come with progression and regression, with taking two steps forward and sometimes one or two steps back. So while I acknowledge the pushback you are talking about, I also see it as part of the game. In the Netherlands, for example, we are witnessing a pushback with the new government. Perhaps it is not as strong as one might have expected, but there are definitely some changes and some uncertainty of how this will impact corporations, for example. But at the same time, there is a push for more regulation and more policy. And I think it is inevitable that this will come, hopefully sooner rather than later and hopefully in a coordinated manner. But it can also come in a big step forward and then a big step backward. Or perhaps when we see the climate crisis and the biodiversity crisis evolve further, there may be some sort of shock response that results in policy. Nobody can predict how it will go exactly, but I do think that the current developments are inevitable and that these will continue to progress, regardless of what this path will look like or how many bumps we encounter on the road. I think it is important that the financial sector balances the trend of decarbonization and circularity with an acceptance of the risks that come along with this. The path to progress is like balancing on a cord: you might fall down, and there is a risk in moving forward. But there is also a risk in not moving forward. So the big challenge with these constant pushbacks is to keep an eye on the horizon, on the goal that you are moving towards, and to focus on balancing towards it. I would also say that the financial sector is hindered by its endless focus on returns on investment. The sector needs to understand that it is not just a player in the field but also an initiator, a strong enabler. Money makes the world move, right, so that puts financial institutions right at the beginning of the chain. This comes with responsibility: if you want to see change happening, you need to finance that change. So the financial sector is balancing on this cord, which comes with a lot of risk, and that might make these actors not too keen to leap forward. I think that the sector needs to actively strive for partnerships with the government and other entities that can help mitigate this risk, that can help with the balancing act. Such partnerships are essential to dealing with the pushbacks that you are talking about. And I also understand that there is some regulatory uncertainty. I think that there too, the financial sector needs to be proactive: talk to the government and create that investment stability. The financial sector tends to be quite conservative, so private lending and everything else will slow down if these hassles continue. So whether investments come from equity investors, state guarantee lending, private lending and so on, they will all need a bit of cushion to protect them. And the sector needs to create that cushion by reaching out to all of the other stakeholders that are involved in this process.

Jeroen: That is a great, all-encompassing answer. If I listen to you, I think that a lot of it is about either short or long term decision making. But how important is the financial industry to driving change? Are they ultimately leading, or are they ultimately following – and should they ultimately be leading or following?

Faiza: That is a good question. In practice, the financial sector is a bit of both. But right now, we are in a transition, we are transforming. The basis of our economy is fossil fuels, and a lot of our assets are fossil based: not just the oil, coal and gas industries, but all the different sectors have a fossil fuel basis. This is currently shifting, so the focus will go from fossil fuel based to more climate neutral, nature solution based and at some point there will be a tipping point. This means that on both sides the situation is volatile, and somewhere in the middle there is a sort of vacuum. The financial sector can respond to this by just following the leading trend. But for these new green assets, that are not yet mature, to come off the ground, money is needed. That is how it is, it is very simple. This means that the financial industry is or should be, now more than ever because we are in the middle of the transition, not just an enabler or a facilitator but an initiator. Going back to my previous role for a second, I remember very vividly the period when grassroots and activist organizations were just starting to speak to financial institutions. This was around 2014, 2015, and the sector’s initial response was to say “we do not actually run those companies, we are just here to provide the money”. But everything in society functions by money. So the financial sector is definitely an initiator at this point, and it is important that institutions see themselves this way: whether you are an insurance company, a commercial bank or a pension fund, you are an initiator. An example of this is improving the sustainability of households with low energy labels. This is just not getting off the ground, despite the fact that the technology is there. Why is that the case? Because there needs to be a joint effort between the government, housing corporations and the financial sector, and financial institutions should be stepping up to initiate this. The same goes for SMEs, which thrive on short term types of financing: that is where the financial sector could play a big role. While this may be a different story with big corporations, we often forget the power of the small. SMEs comprise a large volume of the economy and can also drive the energy transition. Particularly the big financial institutions can be a game changer not just to these companies but also to the transition, by attaching green goals to the financing they provide to SMEs.

Jeroen: What I find very interesting related to this, is that you are saying that if you want to lead, you have to invest in everything that is helping the transition, right? But there are also many things that banks or insurers or other financial institutions simply need to stop doing. It is much easier to start lending to businesses that initiate green change, than to stop lending to fossil fuel businesses, for example. Quitting things is a whole different game, right? Starting anything is always nicer, even for individuals, than stopping something. That is not a question, but I am just throwing it in there.

Faiza: At the same time, I also feel that the financial sector seems to find difficulty in starting the new, in ramping up the volume in terms of financing that goes towards those green assets that are less mature, or those innovations that need to be scaled up. I often find that the perception of risk associated with these greener assets is sometimes over-exaggerated compared to the risk posed by fossil fuel assets. We have seen that these have become more volatile, and the risks involved in that tend to be ignored. At some point there is going to be a tipping point on the capital markets, for example, that could create a shock wave if there is no preparation for this. Or considering what happened in Valencia, for example, I am not sure which insurance companies were involved in that but of course that could easily wipe out any types of profit you made, right? And that is just one extreme weather event, some would say. So in that sense, you can argue that these seemingly high risk investments in green energy are also a lower risk investment because you mitigate more of the climate risk. Moreover, considering future developments with regards to regulation and subsidies, it is likely that fossil fuel subsidies will decrease and fossil fuel investment may get labeled more volatile and therefore more risky. So I get the feeling that while we know change is occurring, there is a degree of refusal to see this clearly and to hang the right price tags in terms of risk to both sides.

Jeroen: I could not agree more with you. And actually what you are describing right now is exactly the point of view of the European Central Bank, right?

Faiza: Yes, they are quite forward thinking.

Jeroen: Do you see any significant threats or opportunities in financial services for the next five years?

Faiza: In terms of challenges, there is one on the innovation side. Take green hydrogen, for example, which is something that I worked on in my previous job quite a lot. Basically, we need green fuel: not just green electrons, which is electricity, but actual molecules that you can burn like we used to do with oil and coal and gas. To achieve this, a whole new chain needs to be set up. This entails a big investment, big potential but also big uncertainty. In comes the question again: how do you stay balanced on the cord? That is the biggest challenge. The industry will need to draft strategies for that, because it will be a volatile situation on both the fossil fuel side and on the green side. How will you create that cushion of certainty in that vacuum? One part of that is to work throughout the sector with different stakeholders to build new parts of the economy that we have not seen before. This is very easily said, but it is incredibly difficult to do it right, and I see that everywhere in the energy transition. Building up a new change is incredibly valuable and it can bring a lot of benefits, but it is also one of the most difficult things. And in balancing on the cord, the financial industry really needs to think about what role to play and how to gain control in that vacuum. Right now, the overwhelming majority of capital market volume is fossil and only a small part is green. How and when are you going to be ready for that tipping point? There will be a lower return on investment of fossil fuels, what is your strategy for that? And the other issue is that we tend to stare quite blindly on the return on investment discussions, but this is a trap: we end up actually forgetting climate risk. We know that there is a price tag, but we have not really quantified the risk more precisely for specific regions and specific sectors, and for long term consequences. On a very top line level, there are plenty of very daunting scientific studies. But for example in the case of Valencia, did we really know that this could have happened and what the price tag was for the financial institutions in the area and others that were involved? These calculations are not part of the stock market prices of most corporations. And perhaps we should not think of this from just a climate risk angle, but also from the perspective of economic growth. Leaving discussions on degrowth and postgrowth aside for a moment, we do already see a decoupling of economic growth and footprints, for example in China but also in the Netherlands: our footprint is going down – not fast enough, but it is going down. So wat is the investment opportunity there, but also what is the risk associated with a high footprint? Carbon pricing exists, whether you like it or not. So it is about putting a price on the physical risk, but also keeping an eye on the developments of carbon pricing, and also seeing that the decoupling of the footprint and economic growth was already happening regardless of carbon pricing. So in general, I would see there is a need for more nuanced perspectives on return on investment for in the future.

Jeroen: Thank you. Now my last question is totally unrelated, but we like to ask this to everyone we meet: do you have any tips for people that are at the start of their career in financial services?

Faiza: I think it would be to not get discouraged. I have spoken to many young people in the past few months, ever since I made the switch to KPMG. Many people want to make an impact, but they struggle to find a way to do so in a setting where a lot of emphasis is placed on return on investment, on making profit. My advice is to not get discouraged by this. Yes, there is a strong focus on dollars, on euros, but it is about finding a way to combine the agendas: fighting the climate and biodiversity crisis, and having nature-based solutions and decarbonization and climate neutrality can be combined with that return on investment. We are still looking for the right way to do this. But the transition is happening, and we need young people to make it happen. And perhaps this is also a message to financial institutions rather than to young people in particular: go beyond just being compliant. We are very good at just ticking the boxes and then we think are done, but that is not actually future-proofing your own institution and products nor the companies and organizations you invest in. So my message both to people at the start of their career and to financial institutions is to take the liberty to go beyond. In doing so, you will only help your institution.

Jeroen: Right, so do not get discouraged, which also means that we need to share a lot of positive stories, because there are so many negative stories out there. Faiza, I would love to hear more and we are very much looking forward to have you at the Leaders in Sustainable Finance Event. For now, thanks a lot for taking the time to talk to us today.