About this ATALK
In this ATALK, Rita Rendeiro talks about the complex world of ๐๐จ ๐ง๐ฎ๐ ๐ผ๐ป๐ผ๐บ๐ ๐ฎ๐ป๐ฑ ๐ผ๐๐ต๐ฒ๐ฟ ๐ฟ๐ฒ๐ด๐๐น๐ฎ๐๐ถ๐ผ๐ป๐, and discuss the challenges and opportunities they present for SMEs and big companies.โฃ
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Discover:โฃ
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๐นThe importance of understanding EU Taxonomy, CSRD and SFDR requirements for businesses.โฃ
๐นBalancing regulatory compliance with internal and external stakeholder pressures.โฃ
๐นThe role of larger corporations in supporting SMEs through this transition.
๐นThe significance of incremental change and identifying material topics for sustainability strategies.โฃ
๐นThe potential value created by adopting sustainable business practices.โฃ
๐นThe role of technology in facilitating measurement, reporting, and transparency in ESG performance.โฃ
๐นThe importance of honesty and commitment to continuous improvement in ESG reporting.โฃ
๐นThe future of data repositories and standardization in ESG reporting.โฃ
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Learn how to navigate the ever-evolving landscape of sustainability regulations and how businesses can turn these challenges into opportunities for growth and success.
Transcript
Joana Alves, Co-Founder at APLANET, interviewed Rita Rendeiro for this ATALK. You can find the full transcript of their conversation below.
| Joana Alves | Welcome to ATALKS, where sustainability has a voice, at APLANET, we have created this space so that we can discuss the most important sustainability hot topics and for that we interview relevant sustainability professionals from different sectors and geographies so that they can share their experiences with us. Today, we’re delighted to have Rita Rendeiro with us as a guest from Portugal. And to introduce our guest speaker, Rita Rendeiro, who is currently operating partners sustainability and regulatory at Maingreen Capital Partners, which is a Portuguese private equity firm focusing on environmental impact investments. She holds a degree in law and executive training and sustainable finance from the University of Cambridge. She is a specialist in financial and regulatory law with over 16 years of experience in the legal area. Having worked in law firms with international presence in the capital markets regulator and in banking asset management. Additionally, she is the current president of Direito Mental and NGO dedicated to the creation of a positive and supportive mental health culture in the Portuguese legal community. Rita, thank you so much for being with us here today. |
| Rita Rendeiro | Thank you for having me. Good morning, Joana. |
| Joana | Good Morning. It’s a pleasure to have you here with us finally. And I have a few questions that I wanted to ask you. And to begin with you are a lawyer in the 1st place so and you just made a shift in the focus of your career. So I wanted to ask you what has made you want to become a lawyer in the 1st place and what has made you want to make this shift and focus your professional life and sustainability. |
| Rita | Thank you, Joana. That’s a big question. So yes I am, I have a legal background. So I’ve been a lawyer for some years with legal, with law firms. Then I also provide legal support at the regulator then within banking institutions and more recently I am dedicated to a private equity fund. But I wouldn’t necessarily view it as a shift in a sense that, you know, I see it as an incremental sort of process because being a lawyer is what you do is really you help people, you guide clients, you help them identify risks, you know ways to go doing your activity or your business. In a way that abides by regulation but also from a strategic point of view use on several occasions, you also help them identify opportunities. So you know in this sort of environment it comes as natural that sustainability for me as you know I’ve been mostly a finance lawyer. It kind of was an obvious compliment to what I was already doing because you know, you help people develop their business in light of this. New perspective which is becoming mandatory anyway. So there’s a lot of regulation to it and there’s definitely, you know the helping people navigate complexity side, solving problems, identifying risks. So in that area I think that the shift is not that great when you take a closer look. |
| Joana | Yeah. So you basically you didn’t quit the law, so you just focus the expertise that you already have in law and focused into sustainability because you have a background in finance as well. And there is this new big area called Sustainable Finance and being you and experts or having you been specializing in your work experience in the past year in this area of sustainability. Can you explain to us what is the relationship between sustainability and finance and why is it considered such an important risk? That has to be quantified and managed from an investor’s perspective. |
| Rita | Well, well, first of all, in picking up on the first question, I think that what really made the sustainability agenda come, you know, front and center was regulation. Before that, you know, there was a reputational side to it. There was an engagement side to it with your stakeholders, with their employees. But you would do it on the basis of, you know, your own will of being a good person, a good company, you know, out of what people call traditionally corporate responsibility.ย And I think when regulation kicked in, that became so much more than that. And regulation kicked in to help to shift the financial flows to sustainable initiatives in businesses, and this is a consequence of the identification of risks and also corresponding opportunities related to these ESG factors. So this is not no longer just, you know, something that I do because I’m a responsible company or because I want to create engagement. I do this to add value.ย And so sustainable finance really is this tool that you cannot ignore in today’s businesses, but it has several sites to it and the first one I believe which is why sustainable finance is relevant is that if you are not financially viable or sustainable. I think you may just stop there because you know, there is no other sort of sustainability on top of that that is going to be able to help you much more.ย If you are not viable, you cannot help your employees. You cannot as a company, you cannot, you know, provide your services or sell your goods or improve or innovate or invest in technology. So I don’t think you can really detach financial viability and sustainability from the other sorts of, you know, being sustainable in the sense that you do not compromise the resources of the future with your current operation.ย So obviously it is important I think that’s sustainable finance evolves to tell you that you also need to take account of, you know, your environmental footprint, your social impact, your governance schemes that you internally follow and this interconnects because then you need to have responsibility at more level for environmental issues, for social issues, to be sure that you are living by what you preach and that this is at the heart and the core of your strategy.ย And sustainable finance does give you some some frameworks to deal with this, but that’s the end of the day, this is what it is. It is to say that. You know, I will give you these guidelines for you to follow as a company. And if you do this, for example in the taxonomy, you will be able to call your activity sustainable. But you need to be sustainable at your activity level, but also at your individual level as a company. You need to have you know, the people, the committees, the rules, the policies that you are required to have to show and to prove. That this is something that is really integrated into your operation, your company. |
| Joana | Mm, and now that you mentioned the new European Union taxonomy. I think that it’s important that I don’t know if you agree that without standardized KPI’s on sustainability, there is no way for an investor to evaluate the relative risk reward from sustainability standpoint, right? So that’s why the European Union created this taxonomy where it establishes a list of which economic activities are considered to be sustainable. And then gives incentives so that the money goes towards these sustainability activities. So can you explain this a little bit more how this European Union taxonomy work? And also I wanted to hear in your opinion, do you think that this taxonomy is enough to make the money move towards sustainable activities? |
| Rita | Well, yes and no. Meaning. Well, the taxonomy is very important. It’s important that it’s a milestone that you have a body of activities, of a classification of activities, that you can tick the boxes and say yes, this is a sustainable way to recycle waste. No, this is not a recycle. I cannot call this green. If I’m doing this activity, you know, by not following those standards. So what the taxonomy does. And it is a partial and very flawed body of activities because even though it does contain a list of activities, economic activities identified by Nas codes that you can consult, it leaves. Many other activities out of its scope because it focused on the activities that were most harmful for the environment. So it took an approach. You know, I cannot cover it all, otherwise I will be too late. I will not be able to kick in or to become to be implemented soon enough. So I will choose the most critical ones and then it will be an evolving body. I will get to the other ones at a later stage. So for example, if you produce cement. You can consult the manufacturing of cement activity in the taxonomy and check what are the requirements for you to be able to say I produce cement in an environmentally positive acceptable way. And this has underlying the taxonomy is it sort of translates into these activities what are operations in line with the Paris Agreement with your goal. Of you know within the timeline reach 2 degrees or well below 2 degrees and hopefully 1.5 which I think is a bit probably out of reach. But this is the importance of the taxonomy is that you can not only compare yourself, but you can objectively say you know at least at EU level we define that this would be the optimal way to operate this activity. Now this has this is great news. And it does help with greenwashing, with investor confidence with the companies making you know these are long term decisions of CapEx investment. What are your strategic areas that you’re going to focus on? How much do you need you know to keep pace with this transition. So this is very, very important. But on the other hand I think because the taxonomy only tells you what is green, what is like you know the best. Way the best performance for you to reach that level in that activity. It leaves out the path to getting there. So if you’re like operating at the suboptimal level, if you still need to make a transition, if say you want to get to green, which would be the best way of doing it, the one that the taxonomy recognizes, you may be in red, or you may be in yellow and you still need investment, you still need to be able. You know, to make a transition and during this process you are not really covered by the taxonomy. So I think a very important step was last year’s in the first quarter, around March or April there was a paper being released, a report on this transition aspect and the taxonomy. So a taxonomy for transition really, that covers this wider scope of entities that are not in line with the gold standard of the taxonomy. And it’s true and the critics have said that this may introduce maybe higher risk of some greenwashing because it has, you know, wider, wider Nets, so to say. But the truth is that I don’t think that realistically you can look at the world we live in and hope that you know, a gold standard taxonomy that covers I don’t know what 5% of economic activities in Europe or so would be the instrument that will enable you to do this, you know, world changing life as we know it’s changing transition. So yeah, I think there’s it was definitely, you know, milestone that we have this and all other countries and and and and very relevant players. You know, China has their taxonomy. There are dozens of taxonomies being enacted in different countries throughout the world. And in a way that is a step and I think that should be regarded as a positive development. |
| Joana | I totally agree that is a step but maybe it’s not enough to reach the goals of the Paris Agreement because as you said there is a gap as it doesn’t address all economic activities and also doesn’t address this problem of the transitioning companies. So what do you think should be the solution in this case? Does it have to be from the regulator, does it have to come from the regulator or it has to be like a systemic change where also the companies voluntarily start putting sustainability in the center of their businesses and trying to follow these guidelines that are made for other sectors and adapted to them as to have a sustainability economic activity? |
| Rita | Yeah, I don’t think unfortunately you will get away with it without regulation. So the taxonomy is is this list of activities that I was mentioning and but obviously it is not, it’s just a taxonomy, it’s just a classification system. It allows you to report, but it’s not mandatory that you, you know that you develop that activity in line with those requirements. You can either do it or not. If you don’t do it you have to say hey I’m not doing it yet or otherwise prove that you’re doing it. Now the taxonomy is the first step like I said, I think it should be important because it ties with other with other initiatives in Europe such as you know the disclosure of non financial information for big and coated companies. That is relevant. That will generate transparency. But again, that will not mandate you to operate in line with the taxonomy. It will just create transparency, right? Such as, you know, the value chain regulation, which is really valuable for your disclosure in terms of your value chain for, you know, human rights purposes and environmental impact purposes. But, so these voluntary or these transparency tools and the SFDR for financial investments and products are good transparency tools. They are not mandatory in the sense that they do not create an obligation for players to operate in that way. I think that would be a second step. So I think you will probably create financial incentives. People often ask, you know, what is the value for me to do that? So what is the payoff of my investment if I choose, you know, to produce cement in a greener way? What do I get out of it? And where, What do my investors get out of it? Because, you know, I have a fiduciary duty. First of all, I need to make money for these people. They will not, you know, and even if you think, oh, how greedy they are, sometimes it’s not even that. Sometimes it’s, you know, I have a pension fund. I have families, people who are getting old and who will depend on my investments to get their, you know, their, their, their pension payments, you know, their retirement savings. So basically this is an issue, this is something that is very relevant and in the future I think you through regulation, I very much thought it that you will get there on time, just voluntarily. I think you will need to ensure that the economy does penalize activities that are not carried out in the greener way possible. And this means you know the cost of credit even for banks, you know how they, how they have charges in their assets on their balance sheets for brown versus green, you just have the European Central Bank for example that had sort of tightened monetary policy and so stopped the massive consistency of easing mechanisms that were in place for the last years, and now they said, Okay, when we pick it up, we will make sure that, you know, our landing schemes will abide by these requirements. So we will land on more favorable terms to entities that are actually going to apply these funds in making this green transition. And that has a repercussion throughout the economy because when you’re talking like central, it’s like, you know, this is what actually ultimately finances the economy to a large extent. If you can get like asset managers, asset owners, banks and financial institutions to have this sort of incentives, cheaper capital, you know, charges to their assets into their accounts that actually deter them or make it less. Create less incentives or even disincentivize them to make investments on old economy so to say. I think that is where you will be in a position to say that we’re actually going to make this transition successfully. Now obviously without a taxonomy without you being able to say what is brown, what is green, how could you make this judgment. So this is a very important even though this is voluntary. This is, you know, setting the stage for what you need to do after. Without this, you wouldn’t be able to get to the second stage, which is creating regulation that will more forcefully, you know, direct you to this type of investments. |
| Joana | So, in your opinion, the regulator has to be the main driver that will move the financial sector to put the money where it has to be in sustainable activity. So there has to be a driver first from the regulator and then the financial sector to help companies make this shift to a more sustainable business models, right? Because… |
| Rita | I think the shift would happen without regulation voluntarily. Because at a certain point in time you would start to have like natural disasters and global warming and you would have, you know, huge amounts to pay by, say, insurance companies. Asset owners would probably lose a lot of many of on their investments. So would, you know, get to the conclusion that we need to revert this in order to be able to not to lose so much money. But the point for me it’s more a timing issue. We cannot, if we are going to wait for this to happen, then reverting this will be a really serious and lengthy process. That’s right to do it in the timeline that will make it less painful for everyone. I think you need regulation as you said. |
| Joana | Yes, I totally agree. And then moving to my next question, because this is related to your current position at Maingreen Capital Partners, so you are the operating partner responsible for sustainability and regulatory and Maingreen is a Portuguese private equity firm and it focuses on environmental impact investments, right? So can you explain us what is the work of Maingreen and what are the main goals of the funds? |
| Rita | Sure. Well, so Maingreen is as you said a private equity firm based in Portugal and its main purpose is to manage funds on behalf of investors with a view to making impact investments. Maingreen does not currently have any funds under management, so this is still a process, but the foundational idea behind this project was really one of helping redirect. Capital to small and medium companies in Portugal to help them make this transition to generate, you know, not only financial sustainability, so returns for these companies and for investors, but alongside contributing positively to improving their environmental impact or to the very least reducing their negative impact. If that was the case of specific activity, for example, now this is important because first of all because of the context in which this project is born, it was not until there was European taxonomy, you know, SFDR rules and transparency information obligations. That we felt that there was a framework that we could work with, you know, a level playing field, something that we could be objective about that wouldn’t be called greenwashing because there was something to compare to. So this again, even the story of this project is something that I think relates to the need that exists for people in general, but very specifically investors. Be able to compare what they are looking at to measure the outcomes, the non financial outcomes of their investments which shouldn’t be very different or at least you should be able to create like KPI’s and ways of measuring it objectively, even if qualitative but still objective to be able to report right. It’s not admissible, admissible for me to turn to an investor and say. I cannot calculate the return on your investments. I cannot tell you how much money you made because I don’t know something that is expected of an asset manager, right? So I think the future is pretty much the same for this non-financial information for these externalities that if they are material enough for your business, if they are, you know, capable of having an impact on your business or if there’s something that your business has a material impact. You know, on the communities or the environment or the outside because that often also translates into either risk or opportunities or fines that you’ll need to pay or, you know, that sort of information. I don’t see why that should be less relevant to investors, not to say the least because it always translates into money as well, right? I mean there is a sort of a stage when this, if this is a fine, if this is a reputational issue, I may sell less and my results get worse. So yeah, I think this was what was on the basis of this project and focused obviously on the Portuguese markets and you know what we have more and what our economic tissue is made of which is small and medium enterprises. |
| Joana | That’s very interesting and actually not just Portugal, but Spain, Italy, the UK are countries that are comprised mainly of SMEs, and these SMEs talking about especially about the Portuguese and Spanish companies at the moment, are most of them not obliged to disclose their non financial information according to the law. So they don’t have to comply at least directly with this non financial information disclosure. So do you think that because they don’t have these compliance obligations, do you think that they are still not aware of the need of putting sustainability in the center of their businesses? And what advice would you give to these SMEs for them to implement successful sustainability strategies? |
| Rita | I think the way the regulation, you know, the approach the regulation took in this respect was again you are not trying to cover everything in a first step or in the first stage because that wouldn’t be efficient. It would take longer. People would be just, you know, they wouldn’t focus enough. So in the same way that regulation first focused on the worst or more impactful activities for the environment in terms of the taxonomy, I think that in terms of disclosure and transparency, it also focused on larger companies. Because you need to set the tone, you need to, you know, give time for companies to adjust and that obviously larger companies have more or stronger resources to be able to address this. But especially for very, you know, tricky thing, which is if you target larger companies you know you will have smaller companies on their value chain. So if you design it well enough that you will need to gather information from these smaller companies, you effectively will create the need for partnerships for, you know, working together with smaller companies with the companies in your value chain. If you’re a large company to first step is always, you know, get the information, where is it? How can we measure it? Where can we, you know, write it down? How can we compare it year after year? And obviously for this you’ll probably also need to help them to give them some resources to give them access to training or to information or to systems or to knowledge, really. So it’s a literacy issue. So if you’re a small company, I would say something like, I don’t know, maybe your therapist would tell you which is don’t catastrophize. Don’t think in terms of all or nothing like it’s well, this is huge. I’m never going to do it. So I’m not going to do anything at all. Just going to lie back. Don’t do that. I think you know, starting somewhere is better than not starting at all because I don’t think this is going back. So for SMEs, I think the trick is really to just understand what is material to you, what is material to your, to the companies that you sell your goods or services to. What is that? And pick like the top two. Try to measure them, try to register them. Try to get help from those larger companies to be able to see how you can provide information, how you can start looking at it and what are the difficulties. What is keeping you from measuring this? What is keeping you from improving? What would be even, you know, the investment, the extra investment that you need and how can you go and get that? Because now you also have different funds programs that you can get funding for specific activities, you know, with next generation EU and the pay here, the Portuguese Resilience mechanism funds that are also to a certain extent dedicated to these sorts of aspects. So this is I think what I would tell small companies. I can understand it looks too big, but I think it’s about partnerships. I think they will beโฆ I think even between them for example, very interesting thing I was reading yesterday is that the UK watchdog in the UK is proposing to wave the, you know, the requirements in terms of competition for companies that they will actually allow a certain level of cooperation for the public interest in matters of climate change. So basically you know how there is all sorts of limitations for you to cooperate with your competitors or to exchange information because from a competition standpoint this is regarded. As illegal or as a restriction to competition and then you can have some exceptions, especially when you know public interests matter, are at stake and this would be one. And this is very, very interesting because I do think that for small and medium enterprises, partnerships in this regard, I mean the level of technology that sometimes you need to deploy. To measure, to keep track of things, even to invest in people with the expertise to help it to do this is much more viable through scale. So this is how I see it. This is what I would tell them, start. I think starting is key. |
| Joana | Exactly. And you mentioned very important topics because these companies despite not being directly obliged by the regulation, they are indirectly obliged because they are in the supply chain of the companies that have to comply with this regulation. So do you think that this bigger companies have the responsibility to help their supply chain to make this transition to a more sustainable business model? Or do you think there has also to be a systemic change and the regulator has to start addressing also this disclosure requirements for the companies in the value chain? |
| Rita | Yeah, I think there’s always the regulation part and I think you will see that. I mean you are seeing that right, like for a single use plastics for example, you know 0.50โฌ fee for plastic. Tupperwares for take away or I mean you are seeing that already. Carbon tax, carbon price, there is no wayโฆ I mean there we are, we are already there. This is happening. I think people are probably not yet noticing because you know there is energy costs, there is inflation and it’s โฌ0.05, not that much for plastic bag, but the foundations are there. So you know the pipes are there. Once you decide to, you know, use them, you already have the structure to impact the companies and through them their value chain. If they are not working at, you know, a level or performing their activities in a manner, there is in line with what politically and regulatorily we see as the transition to a greener, safer, more resilient economy. So this is not going back and this is going to happen and I think that big companies will actually help the entities in their value chain. And to be honest, for example, during the time that I spent in banking, this was already something that big companies would do for their supplies for their suppliers, so financial lending. Products like, you know, cash pulling between your companies or factoring or reverse factoring are all, you know, designed to help your suppliers have more liquidity so that they can invest more in producing the goods that you need them to supply you with. It’s not new that you help the smaller entities in your value chain one way or another to operate more efficiently because that benefits you. As well, right. You want strong, a strong value chain. You do not want disruptions. You do not want them to get broke, right. And I think this is basically the same logic. You will need some, I think, for it will be regulatorily driven at first, like I said, you know with increased costs, be it for the carbon, for the use of plastics or you name it. But I think it will then just become, you know, a way of ensuring that you are operationally strong. Which would be comparable to you wanting your suppliers to be financially strong. |
| Joana | Exactly, totally agree. And I think that this SMEs in the end they are realizing that they really have to internalize and integrate these ESG aspects in the center of their businesses. Because in the end, sustainability is not philanthropy or it’s not even just long term strategy is short term survival. Because in the end if you don’t ship your business model into a sustainable one, you will also lose your business and your clients. And we, we had a talk with with a professor from the UK, Alex Edmonds, and he has a book. Published that is called sustainability means profit. And at the end I think that if this SMEs create this awareness that if they shift their business models into a sustainable one, they were, they will in fact profit from that as well, right? |
| Rita | Right. But yeah, well, I totally agree and I think the way to take this forward is. For you to accept and realize that there is value and sustainability, but it’s not only, as you said, an extinction event in the sense that you will probably be out of business if you don’t adapt. The slight issue I see there is that having a PhD in your or three PhD’s in your board of directors of your SME probably will also translate into value, except that you’ll probably go bankrupt paying the wages of these three people, because that’s not in line with, you know, that’s not financially viable for your small operation. That’s why I think that in this first moment, while we are still making this mainstream, it’s probably necessary for some corporation, either like shared services or some sort of coaching from and support from, from bigger companies who have easier access to, you know, to knowledge, to training, to tools, to systems, to give literacy to these small, small companies. Having said that, I am sure that there is a lot of value. Not only you know that you can name all sorts of things like talent attraction, talent retention. You know you can have energy efficiency, you can have like resource efficiency. You can save on actually the amount of, you know, stock you need from certain materials to build the same things. You can have technology that makes it much more efficient to produce your items for example or to distribute them, you know, there are many sorts of adjustments that you can implement over time to help your SME that can translate into value and I think consumers are starting to value that. It’s not a clear cut. I think we’ve been seeing that consumers say that they have a preference for sustainable products. But it is you know the actual premium that they would be able to pay for that is is not is not yet clear I would say. I mean if it’s something you know manageable but in many cases they wouldn’t pay for example double and in many cases this could be what is at stake for as long as you know some technologies do not become more scalable. So yeah, these are the difficulties for this transition and for SMEs it’s not a winner takes it all. I think the actual path will be made of different solutions and different types of cooperation even in terms of you know financing for example, which will be probably you know some more publicly supported like we’ve seen these funds. The resilience funds, for example, some will be also banks and private sector, and it is really important to clarify how this can be implemented and how this regulation can transform from a framework into something that actually helps to shift the financial flows to more sustainable activities. |
| Joana | Exactly. You just mentioned a very important topic, which is that. This has to be translated and it has to be translated into processes. That because what I think is that somehow companies feel that these new regulations are still pretty much conceptual and there’s a big, there are different opinions on how to implement them. And especially at an SMEs level it’s more complicated because these SMEs don’t have resources. And you also, you also mentioned important things like it’s not just regulation, it’s the pressure of internal stakeholders like investors, employees and external stakeholders such as consumers. So I’m sure that this will help these companies to at least voluntarily try to ship their business model into a more sustainable one, but as you said, it has to be incremental, right? So start with choosing at least two material topics that create the most impacts in the company and then build a sustainability strategy from there. And sometimes, I think we already had this discussion, sometimes these companies already have a lot of environmental initiatives for instance going on that they don’t don’t even know that they can integrate these environmental requirements from clients and and and big companies right. Sometimes it’s just a question of fitting right? |
| Rita | I think so, yes. I mean in terms of environment for example, I mean social is a bit some aspects are a bit novelty, but in terms of environment, for example, I mean your license to operate requires you if you’re an SME in manufacturing, for example. I mean you do have those licenses, you wouldn’t dream of not having them, right? I mean, you wouldn’t even have a license, yeah, to operate or to have your, you know, your plants producing if you didn’t. Now and that that is also true for many social aspects, especially as far as your workforce is considered. We have had for the several years now strict employment rules and requirements in terms of you know employment, Social Security, working conditions, health and safety. And this is something that is already complied by most companies I would say. So this is information they have. And that’s also a good starting point. You know, it’s just, you know, taking stock of the fact that you are already doing most of it. So maybe it’s just a transparency part, you know, knowing where your data is, where information is, how you can present it, how you can communicate it. Maybe that’s the maybe that’s the tricky part because you know most especially small companies. Many times they rely on the great entrepreneur or a couple of them who had this great idea and were spectacular at executing it, and so they have flourishing business. But they are usually like the name. As the name indicates, they are usually small structures, at least centrally. And so, you know, charging them with additional reporting or transparency, your concerns that they didn’t have before in addition to the financial information can be daunting for them. So yeah, it would be a great first step to maybe just deconstruct a bit that scary idea and starting from the point where you think, you know, I already know most of this. I already have much of this information. |
| Joana | Yes, you said it can be daunting and most of the time it’s overwhelming for companies to collect their non financial information, their data. And to manage and disclose this data are there for compliance issues or for just to communicate to their internal and external stakeholdersโฆ |
| Rita | Another thing I would just said, because I think it is this is really, really important, is I don’t think that the people that were behind setting this all legislative and regulatory framework of the taxonomy and of the SFDR really anticipated that it would have this effect. But I think companies are looking at this like, oh, I need to look really good on this picture, right. So now I will need to tell the world how I’m doing on these KPI’s and if my activity, you know, meets these requirements of the taxonomy and how much of my CapEx or my, you know, my revenues is actually going to these very green and beautiful activities. And I really want to be able to say, you know, I’m great. I’m, you know, doing a lot about it and my activities are very green. So I think a very important thing for SME is that I would definitely tell them is don’t you know, don’t want to look good on the picture. This is just about you know, reporting a first time, you will not look good on the picture, but no one will because this is what we’re doing. If we did, we wouldn’t need these, these, these requirements, right. So everyone is so not there, none of us is there. But if you, you know, you don’t look that good on the picture today. That’s great because you will look much better next year if you just do a slight adjustment, right, because it’s about improving and your investors and your stakeholders and you know regulators will trust you more because they will see your commitments. So I think it’s not about starting as number one or in the first position. I think it’s being very honest about where you are and just you know showing your commitment to move forward and to enhance your development. |
| Joana | It’s crucial that you have that you know where you are in terms of your ESG performance because you cannot improve what you cannot measure as well. So do you think what you think is the role of technology here, like working as a lever to improve this sustainability management? |
| Rita | Technology is key on so many levels. First of all, because I think we all have the feeling that even though we need to plan this transition with the technology we have today, we keep hoping that, you know, the scaling up of technology will also help us get there, like carbon capture and storage mechanisms for example, or you know, some nuclear energy developments that could really take us off the hook here. There are different examples, but I think we rely a lot on technology from, if you want to say more productive or industrial perspective, then in terms of measuring and reporting and transparency, technology is also very relevant because this is a world of data. What we need is really to get hold of all this information to be able to report and to compare and to like you said, you know, you need to measure it to be able to manage it. And even when we discuss, you know, will we need regulation to kick in to force a little bit this transition to generate the right incentives. The answer is yes, like we just discussed. But you will not be able to do that if you don’t have the information. Right? If you don’t know from where to where do you want to move, where were you, where do you need to get? And that is based on data. That data is different from Portugal to the UK to Ireland to France to Germany. So it depends on so many factors, right? For example, circularity rates are different across Europe. The level of renewable energy in the mix that you use is also different, so it’s not the same thing using proxiesโฆ I think using proxies can work initially because like I said, it’s better to start than not to start and to create the muscle of measuring and of going and to this to make it in your culture, for you to commit to something, for you to make a path, it’s important to measure it. Even if you use a proxy at the end of the day, but at some point of maturity, which hopefully will be in the next years, you will need to have real data and you will need to compare it. And you will need to have repositories. There is a new European single Access point project that foresees that data reported under the taxonomy and this SFDR and by big companies under the CSRD will be submitted to a central repository of information and hopefully that could work as a as a more global data points because currently, as you know, I think people use different data points and there are good ones, but there are bits. Yeah, it’s just two scatters at the moment I think, but technology in these two pillars I think are essential in this challenging transition. |
| Joana | Yes. And having comparable and enough granularity in the data is fundamental, so businesses also can compare each other, right? And sure that they use a wide range of let’s say reporting styles and reporting metrics that can sometimes be overwhelming for investors, right, because it’s still a bit overwhelming because there is not yet a global baseline. There’s this will of the ISSB to establish a global baseline. But you think that it can be overwhelming for an investor to interpret all this data included in different frameworks because investors in the end, if they don’t find enough like market consensus or transparency, they will feel a bit scared of investing, right? |
| Rita | Yeah. Well, I have mixed feelings about that. I’m notโฆ I’ve often wondered: who is the investor? I mean, who are we protecting or not because I think they don’t need protection, but because the investor, the client, the retail client, the person you are always looking at as the person that you are, you know, trying to protect in the sense of giving them the tools and the information they need to navigate the this world and this you know reality is often someone who cannot even get into a website today without clicking like 15 times. Because, you know, there’s cookies and there’s consent, and then you want to buy a mutual fund site and you need to sign like 10 different documents with regulatory information. Now, the same will be true for sustainability information. If you want to get a loan, for example, you get a lot of you get a set of documents that explain you how the interest rate works. Now, whether or not all of this information that you’re and the regulatory requirements giving to consumers and to investors is something that is what they expect. This is subject to, you know, stress tests and tests like you try to evaluate whether or not this is being helpful. But still I don’t think there are, you know, great conclusions about that. And so I think it’s true what you’re saying. There’s the risk that the information will not be sufficiently clear or simple. For them to understand, because this is a very complex, these are complex matters and especially in terms of reporting initiatives that already exist and the ones that are being introduced, many indicators are not known or immediately principal by a retail investor for example, or by I don’t know. Yeah, by retailing investors especially but the the efforts as far as European regulation is concerned have been in the in recent times to simplify that and the EFRAG which is European reporting entity is currently also working on the set of European reporting standards which will work under the CSRD, right? So you will have corporate sustainability reporting obligations under the directive, which will have to be transposed into each Member site, but then the reporting standards will be the same for everyone, right? And they are ensuring they are trying to ensure compatibility, as you said, with the ISSB, SASBI… So they are not trying to reinvent and to create a whole new set of Reporting standards of these closure standards, they are trying to build on the ones that are at the existing also with the concern as you said to to make it more comparable and more and easier for companies that already make this reporting individual investors and retail clients for example through in terms of financial products through the annexes of the SFDR, I think are already getting information depending on the use that is going to be made by actually the financial entities, the financial market participants that need to fill in that information. So hopefully they will follow a straightforward line and use simple language. But the way it is designed that that would be my expectation that it could be at least you know what is the purpose of this investment. How do you ensure that you only make sustainable investments? Then when you get to the KPIs, I think that how do you use the KPIs that they indicate there are your scope 1 emissions, your scope 2 emissions. This may be something that is not totally apprehensible to a retail investor. But I mean if you compare one to another, you don’t really need, you know, you can see that when investment has one of 10 and another 1, one for example, right? You may not fully grasp what’s at stake, but you kind of have the feeling that one of them is more impactful in terms of CO2 issuances than the other. So in that sense I think it might actually with time work. |
| Joana | And hopefully the market goes in the direct direction of conversions and interoperability and harmonization of standards, because I think it will help everyone from investors to sustainability managers. So let’s hope that it goes in this direction. And also, Rita, I’m going to change the subject completely because besides you being a sustainable finance expert, you also have other projects. You are a true entrepreneur. And you are leading important projects that address important causes and one of them is Women in ESG that you just founded recently. So can you explain this why it’s the main purpose of this project? |
| Rita | Sure. And we’re very happy to have you as our ambassador as well. So yeah, women, yes is really just more of a civic initiative. It’s not really an association because we do not, you know, pursue we probably will with time. But for the time being our main objective was just you know, to promote gender diversity. And to do that through the cooperation of a community of women that are specialists in the areas of which ESG, which is this acronym that we use stubbornly and that we need to really always explain what it means, but really women who are experts, be it in the environmental field, the social field or the governance field. This is very interesting because people will often ask me, but you think there is no gender diversity in ESG. Because whenever I look at, you know, ESG themes or experts or whatever, there are lots of women, much more than men. And that may be true. The fact is that this is not ESG because, you know, to be an expert in ESG, it’s a very difficult thing. How can you be, you know, if because an expert means you know a lot about each one of these things, right? So what you may find is that we have women who have great skills or competences or CV’s in environment for example, or in the social field or in governance. And so through the exposure of these talents. So the first initiative of the list is actually to have of the initiative is to have an online list of these women and what is their occupation and the link to their CV on LinkedIn because we see this as a way to actually ensure that you can create or empower them to access, you know, for example, executive nominations or you know, help them grow in their career with more executive positions or with the higher rankings in whatever their rules are. But also to make sure that you know, by making it easier to hire women for these positions that you can help level the pay gap that you currently have for the same positions between women and men. So this is really to advance what a women’s career can be in these areas, while at the same time we generate this community of women. Who can write articles together, participate in conferences, cross refer each other for say for positions for example, and we will have some points of actual physical meetings. We’ll have a master class now at the beginning of March, dedicated to the subject of gender diversity, but also each one of these environmental aspects, social and governance, and then we will also have regular talks, for example, on this subject, with the intention of also engaging companies and CEOs. And these communities to identify what are the obstacles, what is still preventing us from generating this equality in terms of positions and pay for between women and men. So yeah, this is intention. |
| Joana | It’s a very important project because, as you said, although there are many women working as ESG managers, although it’s very difficult for this professionals to be experts in all the three pillars of sustainability, but there are still a lot of women. But that is not the main problem, because there’s still a problem with the pay gaps and also with the lack of women in board of directors, for instance. |
| Rita | And leadership roles. Really, yeah. |
| Joana | And leadership roles. Yes. So congratulations for that, for the initiative. I’m very glad to participate in it as well. And but besides this, you also created another one, which is you are the President of the Direito Mental, which is an NGO dedicated to the creation of a positive and supportive mental health culture in the Portuguese legal community. So why did you decide to create this organization and to address this problem, which as we know, is historically neglected by society? |
| Rita | Yeah, so yes. I co-founded the Direito Mental Association with other three friends in the legal profession. I think it was very similar to when you to when you identify, you know we need a gap in the markets and you decide to do something about it. So we were all active in the legal profession, the four of us, we had had either directly or indirectly like we all knew of stories or experiences with lack of a good mental health in the legal profession, because it is very intense activity, like the way you are always dealing with deadlines, with clients, with teams that are usually not that large. You are constantly doing 10 things at a time and it can be exhausting. In a profession that is quite traditional, quite conservative, so yeah, you can get extreme levels of pressure and I think we had all witnessed that and because it was our field of activity looking at other countries, and specifically the UK, where there is the law care, which is a charity dedicated to this, to this area, in the legal profession. So we decided that it was time to create one, to offer the Portuguese market, this association which is committed to, you know, working with legal professionals, with law firms, with people that provide support. To this activity as well, their families and students with a community where you can, I think first of all try to fight the stigma around mental health challenges because that is a very important first step for to start to change the culture a bit. To create more confidence in people and make them feel better on a daily basis and feel that they have. They can have the support if they need. So this is not a charity or an NGO dedicated to provide support if you have actually mental illness. That is not what we do. What we want is to promote. Mental health, good habits and to you know help be a driver of change in this in this culture and in this profession that allows you, you know to be the best professional that you can be. Because mental health is a source of you know many costs for companies and for people and it does prevent you from having you know the better performance that you can have if you didn’t have to deal with, you know, low productive people, absent people, disruption to your teams, disruption to your operation. So this is an investment that in our view and going back to what we discussed earlier, you know, where is the value in sustainability. I think when you start really digging deep into these issues, you can find the value and you can see that you know by not. Adopting certain strategies, certain solutions, you are actually worst off down the line as a company, as a community. So these are examples. This is just another example which obviously you know I co founded because this is in my area of activity, but this would be relevant obviously for many other industries and professions. |
| Joana | And it’s a very noble project also because it was for many years neglected by society. I think it gained a different relevance now with the pandemic, because there is there was still a lot of stigma around mental health problems, but I think that the pandemic came to exacerbate these topics in society, so initiatives such as this one are fundamental to raise the stigma and to give support because it’s something that is present in our lives. So thank you Rita. And lastly, we always make this question to our guests, who would you like to see here interviewed at ATALKS? |
| Rita | That’s a difficult one. Well. On the, you know, on the field of impossibility, so, you know, daydreaming. One person, I would love to hear about these topics today would be like Carl Sagan. I really am so curious to know what he would say of all of this and whether he would say, oh, you know, quit the taxonomy. That’s just not going to work. Just do something else. Or, you know, I’d love to see that sort of appreciation today, but knowing it’s impossible. I think Professor Elena Fragas from Coimbra, she’s an expert in biology and ecology. She’s UNESCO chair as well and in the board of the Fundaรงao House. I really like her views because not only she’s very knowledgeable on these more environmental issues, but she also has strong views on the social aspects and especially as far as gender diversity is concerned. So I think she’s a person that can really, you know, give you food for thought in so many aspects. I would probably recommend that. |
| Joana | Thank you so much. We’ll take your suggestions into account. We are also daydreamers, so we never know if we can interview Mr. Sagan. Fortunately, yes. Rita, thank you so much for your most valuable inputs. It has been great to have you here today. |
| Rita | Thank you Joana for inviting me and congratulations on your podcast. Very very important to create literacy in these areas of expertise. |
| Joana | Thank you so much, Rita. That’s the main purpose, is to create the space so we can create literacy and exchange ideas with professionals in the field of sustainability, such as yourself. So you gave an extremely important contribution. So thank you and for everyone who’s listening, I hope you have enjoyed it and see you in the next ATALK. |
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