Insights

Originally published in FORUM Magazine, 03/20/2024

Michael Meehan

It’s difficult to believe that Forum for Impact turns three years old this year. Indeed, this partnership between myself and Simon Jacot de Boinod started a few years earlier in the pre-COVID era, in direct response to a rapidly growing interest in impact and sustainable finance within our shared networks. While just an idea at that point, I think it’s safe to say that neither of us had envisioned the success that FFI would become, the friends we’d make along the way, or how personally rewarding this journey would be. As we embark on our third year of hosting these impact finance dialogues together, I thought I’d provide a bit of a retrospective on the Forum for Impact initiative, and an update for my fellow Forum members on what’s to come.

For those who aren’t aware, Forum for Impact (FFI) is a collaboration among leaders in impact and sustainable investment. While related to Forum, FFI is a joint venture between me and Simon to create private, invite only dialogues to assemble global leaders to share their knowledge, stories, and journeys to inspire other investors to create positive impact in the world. FFI represents family office principals, investors, and private business owners brought together to promote the growing need to invest in companies seeking to generate positive social and environmental impact alongside financial return. Our mission is to engage the unengaged in impact finance, and to bring new impacts and opportunities for impact to our global community.

It is my firm belief that deep, personal relationships are the key to driving real change in the world. Ever since the first FFI dialogue – in partnership with the Bahamian government, investor consortiums, and Forum members – FFI has stayed true to this mission. Indeed, our conversation has grown from this regional focus to a global conversation on impact beyond the Bahamas to include Singapore, Zurich, London, New York and additional dialogues in 2025 and beyond. It’s been truly rewarding to see our dialogues engage a global audience and it’s been fascinating to learn first-hand how impactful solutions to critical challenges can transcend borders, with regionally-focused entrepreneurs, family offices, and investors finding new opportunities on a global stage. Indeed, it is one of the primary goals of FFI to be a “platform for impact” for its partners, participants, and guests to ensure we are bringing value to our trusted community.

While each region has its own priorities with regards to impact and investment, some interesting trends have emerged throughout our conversations around the world. Regardless of location, each FFI dialogue focuses on three main areas: entrepreneurship and young leaders, international collaboration in finance, and real-world examples of how investors can engage in impact in the region – a model of innovation, collaboration, and a call to action. For instance, for the Bahamas much of the dialogue has been around the blue economy, how to build resilience in the Caribbean, improving the lives of Bahamians, and innovative solutions to help make the Bahamas a leader in key sectors like blue carbon and technology. This has brought not only members from our investor and family office communities, but also engagement from government officials, multilaterals in development finance, banking, philanthropy, and foreign direct investment.

The FFI Asia dialogue in Singapore this year focused on many of the same impact issues for investors with a lens on Southeast Asia and the opportunities and challenges in the region and a focus on sustainable finance opportunities for international collaboration, with global leaders from the US, Canada, Singapore, UK, and beyond. Among the fund managers, private investors, family offices, and development finance institutions in attendance some common themes emerged in dialogue: that those of us with means can achieve more impact together than alone, and that impact challenges and opportunities around the world require the innovation, resources, funding, expertise, advice, and connections that our growing community can provide. My key takeaway from FFI Asia – and many discussions since – is that our shared vision of a global platform for impact is now coming into view. 

As with our dialogues, I always try to close the conversation with a call to action. So please join me in celebrating Forum for Impact’s third anniversary as our initiative embarks on its next phase of growth, welcoming new partners and participants around the world. A sincere thanks to our current sponsors who make these dialogues possible. But as with all successful dialogues, FFI’s success depends on the participants that have contributed to this critical global dialogue over the years, and each of you has our deepest appreciation.

Regardless of what impact means to you, I hope you can join us at one of our 2024 dialogues in Zurich, London, New York, or our main dialogue in Grand Bahama May 22-24. Today’s world has many challenges, but for every challenge there are opportunities emerging to address them. I hope to see you at our next impact dialogue to do our part in building a better world, together.

About a year ago I returned to the world of climate finance and was shocked to find two glaring inconsistencies. There was a significant amount of capital going into the market (with more to come) and, more critically, that the old approaches to financing critical climate projects hadn’t changed in decades. These two trends are incompatible, and without a new approach to climate finance, I worry we will not be able to realize the potential, and the necessity, of funding our climate transition. Especially concerning is the lack of institutional investment in the market, the lack of which creates significant volatility in carbon prices, reduced trust in climate solutions, and significant risk throughout the value chain.

This is the start of a multi-part narrative on how our approach to finance needs to change. In it, we will explore a range of issues, such as the lack of trust in the carbon market, the market’s approach to risk, the quantity-vs-quality problem in funding carbon offsets, new asset management approaches, the industry’s myopic focus on co-benefits, why thematic approaches to climate finance create more problems than they solve, why we may not want to be so enthusiastic to regulation and standards in carbon, integrated approaches to financing the offset market, the role of technology and AI, why net-zero isn’t the panacea we think it is, and ultimately how we can make changes today to bring more institutional investment to climate finance.

The goal of these narratives is to start a global conversation on these issues and explore new ways to approach climate finance, ultimately bringing more institutional capital to bear on our most pressing global climate problems. Creating a “village” around this issue is essential – it’s one of the reasons I joined with a small group of investors to create Canoe Carbon, a firm that promotes large-scale investment in the carbon offset market by introducing innovative financing models that help isolate investors from the regulatory and project risks inherent in traditional carbon offset investment – using technology, artificial intelligence, and research as a foundation.

I hope to explore these areas with you over the coming months and will be engaging with colleagues from around the market though various mediums to explore solutions to these problems. I’m genuinely excited to be focused on climate finance again – matched only by my concern and, at times, panic that we are not moving quickly enough to solve the climate crisis that is already at our doorstep. I hope you will join me in this dialogue, and I welcome your engagement.

I continue to believe that investors, in all forms, are the fulcrum upon which we will succeed or fail to meet the climate challenge. There are significant opportunities for investors out there, and there has never been a better time to finance climate projects – the key is finding the right ones and avoiding the bulk of the projects out there that carry unnecessary risk. Through this dialogue we’ll explore how we got here, what’s missing from the market, and explore some ideas on what to do next.

Next, we’ll explore how the lack of trust in the carbon offset market came about, and its impact on the industry at large. Look for that in my next instalment of this blog, and I’m looking forward to embarking on this journey with you. 

Originally published in The Economist, 12/18/2015 

Michael Meehan

How can foreign direct investment impact emerging markets that are already struggling with the effects of climate change.

The conversation around climate change is sometimes narrow and often centres on mitigation and adaptation. Frequently, businesses and governments tend to overlook its wider effects. Climate change involves more than carbon and energy, and the solutions encompass more than fossil fuel divestment and legally binding agreements. The way in which climate change impacts foreign direct investment (FDI) is an issue that is often neglected.

Thus far, discussion on climate finance has concentrated on positive innovations in the areas of renewables, carbon capture and storage, new financial incentives, and financial tools such as the Green Climate Fund – all of which have added to the climate change financial discussion. However, key areas like foreign investment, and trade and development are closely connected to the collateral damage of climate change.

In the wake of the economic and financial crash in 2009, investors looked to emerging economies as possible growth markets while rates in their traditional markets remained low. Since then, many corporations in emerging markets have been borrowing at an unprecedented rate, buoyed by low rates and favorable terms. The IMF’s recent Financial Stability Report estimates that corporate debt in emerging markets grew fivefold in the past ten years to $18 trillion USD. However, the much anticipated rise in interest rates by the US Federal Reserve and the accompanying rise of the US Dollar have triggered a reversal in this trend, increasingly shifting investment from emerging markets and back to the United States.   

On top of $1.23 trillion USD FDI which shifted away from emerging markets in 2014, some of these markets lost an additional $1 trillion USD in investment in the past six months alone.  The additional impacts of climate change and a shifting global ecosystem add a worrying level of unpredictability for developing economies. If such outflows continue, companies and governments will be under considerable pressure to reduce their focus on the non-financial aspects of their economies. One way countries do this is by competing against each other to offer favorable corporate tax schemes and other economic incentives.

Fortunately, some emerging economies and blocs are bucking this trend, such as ASEAN which witnessed another banner year in foreign direct investment, despite a decrease in global FDI. Although the area contends with a history of corruption and environmental degradation, the ASEAN economy is an important test case to ensure the right course of action is taken.

One way of ensuring the correct course would be the creation of a filter for global investment based on open standards. This would take into account the full scope of non-financial risks posed by climate change to ensure that global investment flows are considering such these risks. This would not be confined to just carbon and energy, but all effects of climate change, relevant to emerging economies.

Additionally, the Paris Climate Summit pledge of $100billion in public and private funding to developing countries on an annual basis by 2020 could help curb the tide of adverse climate change effects in developing countries.

While it is evident that climate change will affect our most active global economies, some solutions already exist. GRI Sustainability Reporting Standards are available and used by thousands of companies in almost a hundred countries, as well as dozens of governments worldwide. Employing an effective filter for FDI in emerging economies is fundamental to building a more sustainable economy and world.

Originally published in Forbes Magazine, 10/25/2010

Michael Meehan

In corporations across the globe from Intel to Xcel Energy , a new trend has emerged in binding executive compensation to progress made on corporate sustainability goals, including reductions made in energy costs and consumption. The changing legislative and financial landscape in the U.S. and elsewhere underscores the potential impact of this trend on every executive in America.

Managing executives based on performance to goals is nothing new. Management by objectives is a mainstay of most executive compensation plans to ensure pay and strategic growth are closely aligned. Most options packages include a vesting period to maximize the contribution of employees associated with organizational goals. Key performance indicators have been the benchmark system of HR departments for years. Performance-based pay is a common method of compensation.

But a new indicator of organizational performance has emerged that has potentially far-reaching implications: the achievement of sustainability goals. Sustainability has slowly moved into the realm of finance and corporate oversight as energy, carbon emissions, water, and waste have become financial assets in terms of reduced cost, risk mitigation and new lines of revenue. The Securities & Exchange Commission recently issued guidelines for corporate disclosure around sustainability because it sees this as a key risk for corporations, including the impact of climate legislation and even the physical impact of climate change.

Even shareholders are using their considerable leverage to move companies to address sustainability in their business plans. With the public outcry regarding golden parachutes provided to top executives and the subsequent financial collapse, executive compensation has become a highly visible, hot-button issue. So have corporate responsibility and environmental track records. Corporations are responding by combining the two: tying executive compensation to the success or failure of company-wide sustainability initiatives. Just as energy and carbon are being treated like any other financial asset, companies are looking toward sustainability as a new way of measuring corporate success–and the financial motivations of their executives.

U.S. corporations are reacting swiftly. Investment in environmental products and services is skyrocketing–the global market for low-carbon and environmental goods and services (LCEGS, which includes alternative fuel vehicles and waste management) was worth over $5 trillion in 2009 -and companies are starting to look at their own internal operations for incentives to green their business.

The corporate justification for aligning executive compensation and sustainability goals shouldn’t be surprising. While the American conversation on the environment has focused on climate regulation, corporations have recognized for some time that change is coming. For them it has not been a question of if this change will occur, but when. The immediate corporate response was to establish a baseline and internal metrics around sustainability, spurring the Enterprise Carbon & Energy Management software market and a $9.6 billion market in sustainability consulting. Corporate culture is now following suit.

This trend isn’t isolated to countries where there are environmental markets; it is clear and pervasive across industries around the globe. In addition to Intel and Xcel Energy, companies such as ING, National Grid, Suncor Energy and others are making executive compensation decisions based on how well the company’s business units perform in relation to its sustainability goals.

What’s new here is the notion of performance in sustainability, and it has far-reaching implications for business. To reach this level of analysis on executive compensation, companies needed to walk before they could run. Even a few years ago, there were few technologies or consultants who could accurately calculate an organization’s sustainability footprint, at least at an executive level. Today there is a wide range of solutions available to help companies manage their entire sustainability portfolio, from energy to carbon, water, and waste. What was once a major corporate effort and expense can now be done online at minimal cost, providing companies with all of the information required to make strategic decisions around sustainability.

This fundamental shift in the availability of corporate sustainability information is a double-edged sword, making data more available to not only corporate leaders but also to those who hold them accountable, including shareholders and regulators. This is the key driver for a wide range of corporate developments in sustainability, including executive compensation, and it will continue to filter down into organizations and into organizational relationships including vendors, partners, and customers.

It is no longer enough for companies to simply address their sustainability goals with mere compliance; they are now held to a much higher standard to set reduction goals and accurately report on progress, managing the performance of their organization towards these goals. Their customers, shareholders, and even regulators are starting to demand it.

Originally published in the MIT Sloan Management Review, 05/18/2015

Michael Meehan

Don’t think of it as reporting — think of it as strategic risk management.

GRI is an international organization based in Amsterdam with offices around the world. It produces a set of standards used by organizations in over 90 countries and has become the global standard-setter for sustainability reporting. But as the organization’s Chief Executive, Michael Meehan, explains, sustainability reporting is not about writing a report; it’s the process by which organizations identify their risks related to important issues, like human rights, the environment, labor and other social issues. In a conversation with MIT SMR’s Nina Kruschwitz and David Kiron, he explains GRI’s purpose, how businesses can benefit from sustainability reporting, and what comes next.

Can you describe GRI’s thinking around sustainability reporting?

Let’s cover one thing first that will frame the rest of our discussion.

GRI has become synonymous with the sustainability report, and historically organizations have really only had one way of communicating what they do around, say, human rights, or the environment, or sustainability at large, namely a written report. But that’s no longer the case. It’s not about generating a 300-page report.

Sustainability reporting is important for companies because it’s a strategic exercise. It helps them understand where they’re at and what issues are important for them.

And the process of reporting is really about transparency. When Tim Cook got up at [Apple’s] annual general meeting [in February 2014], they had this activist shareholder group — well, you know what happened, and people said, “Wow, fantastic. Tim Cook is a real visionary for sustainability.” And maybe he is. But I see that more as a transparency issue.

Organizations know — and Apple especially knows — that the information around their supply chain, for example, or human rights will come up and affect company value. Maybe it’s not reflected in share price today, but it will be in the future. It becomes a question of: what’s your window? Are you thinking share price today, or are you thinking 10 years down the road?

That’s how I think of the GRI; it presents a constellation of all these issues that face your organization, and lots of different concerns which may not be relevant to your share price or company value today, but will be in the future. So the sustainability report becomes more like a map of future risk.

When I look at what Tim Cook did, I think it was a stroke of genius, because he knows with this information, transparency is key. Information will get out eventually, so it’s better to own it now and manage your future risk than to just react to it.

And so what’s GRI’s role?

You can think of the GRI like this table we’re sitting at. GRI exists to make sure that everybody — not just investors but advocates for human rights, labor issues, social issues — has a seat at that table. We’re the only organization that does so. That’s what we call a multi-stakeholder approach.

Without that, what business thinks is important in sustainability would then become the only thing that’s important in sustainability. And that’s not something anybody wants. So that’s why GRI’s here, and having that stakeholder engagement is really important.

And that’s the value that I see in all the sustainability exercises that are going on. It’s definitely increasing, which is good.

Do you see that increase as ramping up dramatically in recent years? Or is this a slow rise?

About 93% of the Global 250 are doing sustainability reporting. And it is ramping up pretty rapidly. Almost all of that is GRI; we’re almost solely responsible for this. GRI was the only game in town for a really, really long time. But GRI’s mission is to make sustainability reporting standard practice for all organizations. It’s not quite mission accomplished, but when it comes to the world’s large organizations, it’s pretty darn close.

So the question is: well, now what? What can I do with this information? And a whole market is emerging in which companies are trying to dissect all these sustainability reports to make them relevant to different groups. Give that sustainability report to an investor, and he’ll say, “Hmm. Well, that’s a big report. What can I do with that?” Give it to your board member. “Hmm, that’s a really big report. How can you get information out of that report?” So we’ve kind of gone a little too far. We need to take two steps back and say, “Well, there’s a lot more value in here than just the report itself.”

So even though sustainability reporting is mainstream now, which is great, I think we actually have a bigger challenge in how we can make that useful to a wider range of stakeholders.

There are a lot of different ways of reporting on sustainability for different constituencies. How does your organization in its reporting approach fit in with these other approaches to reporting?

Nobody reports to the GRI. We offer a standard now, not just a framework, but a full standard on how this information gets collected, and how that process goes through — the information that you need to create a sustainability report. And we even offer guidance and actually help create the report itself. It is very far-reaching.

You can think of this as sort of the constellation of all these things that your organization needs to be concerned about for human rights, social issues, the environment … and then you have very specific things, maybe even demand-led things.

For example, the SEC requirements are one piece of the puzzle. A requirement for integrated reporting could be another.

Maybe you might start with just a few indicators that you need to report to the SEC. But what we want is for you to be thinking of all these other things around human rights and these other issues that may not be going into an SEC report.

So how do we interact with those? Well, it’s all complementary — there are very few truly competitive frameworks in this marketplace. Only GRI has a multi-stakeholder approach, which brings all stakeholder groups to the table. The other frameworks are very specific approaches to reporting. Today, there are maybe half a dozen. Tomorrow, there’ll probably be a dozen. In the future, there could be hundreds.

When I came into this market, I thought, if you don’t get this collaboration stuff right at this stage, you could be in for a very fragmented market, because these frameworks don’t talk to one another.

We want people to use our standards and use them for very specific things. That’s the whole idea. We exist to enable other organizations to succeed, by providing a platform of standards by which they can pick and choose, to be able to advance the sustainability agenda.

I’m from the technology space, and standards in technology are all open like this. In the sustainability world, they’re not. You’ve got organizations that say, “Oh, we’re a standard.” “Oh, how’d you come up with those indicators?” “Hmm, well, we don’t talk about that.” So how can you be a standard when your process is a black box? It doesn’t make sense to me. In the tech space, you’d never see that, but in this space, you see it all the time.

That’s not what we are. We’re completely open. Anybody can see the standard, they can see the entire process by which it was created, and they can even provide input to the standard directly. That’s important.

So if somebody takes these standards and then thinks, “Oh, maybe we should fiddle with this a little bit and add a few more,” just say they evolved and improved, does that get brought back into the GRI?

 

That’s the challenge we have right now, because that’s exactly what’s happening. G4, which is the current and last version of the framework — now it has become a standard, so there is no more versioning, right? But we reference more than — 70 international conventions and declarations and 19 other reporting frameworks, I think. And with most of those, we have linkage documents to say, “Oh, well, this came out of GRI, and there’s a bunch more things that they’ve added. This is how to translate that into what you’ve already done with GRI.”

The whole idea is that you write once, and report everywhere — which would sound very familiar to technology people. Can you actually do that? Not really, but you can definitely write once and, with minimal work, be able to report everywhere. And that’s the whole idea.

So what is the value that companies get out of reporting their sustainability activities?

There are a couple ways of answering that question. Instead of thinking about materiality, think of relevance. Why is this relevant to you? Why are you reporting this in the first place? What’s relevant to the organization, and what’s relevant to all the various stakeholders in the organization?

By going through this process, companies get a better understanding of what their relevant issues are. Sometimes it’s about future risk. Once they understand the constellation of issues they have, then they can step back and say, “Holy smokes, in two or three years we’re going to have a real environmental issue on our hands,” or, you know, “We’ve got a lot of risk in…” say, social issues or supply chain or whatever. So it’s a mapping exercise of what’s important to your organization.

Other times, it’s driven by policy. You don’t see that a lot here in the U.S., but you definitely do see that in other areas. GRI’s referenced in 25 national or regional policies. And in some of those countries you actually comply with environmental regulations if you use GRI. Which is actually pretty cool, when you think about it. So sometimes it’s regulatory, but we don’t tie ourselves to that.

There are a million reasons that organizations find value in sustainability. Our role isn’t to help them to find the value; our role is to provide a standard by which they can do that easily, and make it comparable across years, and across organizations, so they can compare themselves to others. There needs to be some credible standard in the marketplace that does this. And that’s what we are.

Thousands and thousands of companies use this. Governments use it. Stock exchanges use it. We have more than 19,000 people around the world, trained on the GRI platform. We train thousands of people a year for this. So it’s a real juggernaut, when you think of what’s out there.

In Europe, we don’t usually get the question, “What’s in it for business?” because they do it. Whereas here, there’s a value-for-money question. That isn’t always so clear.

It’s an efficiency in itself for companies — is that a fair summation?

I think that’s totally true. And I don’t think that that’s the way a lot of organizations think of it, to be honest with you.

Sometimes reporting is a means to an end, not the end itself. A lot of organizations create the sustainability report, because they think “Oh, we’ve got to make that report.” But that’s not the value of the piece, right?

Say you’re a multinational, and your subsidiary in the U.S. reports to the SEC. Well, great. You should take your GRI data, do the mapping exercise, and have SASB take care of your SEC requirement. That’s the way it should be. Or I’ve got all this information, and I want to do integrated reporting for my South African contingent. Sure, go ahead. Use our data, start there, and use it for other things, so you don’t have to keep reinventing the wheel.

Now organizations, or companies, are looking at this going, “Hmm, well, all these reporting frameworks. Which one do I choose? Do I do an integrated report, or do I do a sustainability report?” It’s actually a false question. You can’t do one without the other. You have to have a sustainability report to do integrated reporting.

So one of the values that companies get from going through the reporting process, the mapping process, is that it’s an opportunity to discover things about themselves. Like, what’s material? What’s really important to them?

Absolutely. That is definitely part of this.

This reporting isn’t something to do just because you care about the environment. This is something to do because you care about your business. It’s definitely a strategic exercise. It’s the mapping by which you need to plan out the next X number of years in your business. In fact, I struggle to see how successful businesses could do it without this.

They do the report, and then they look at it and say, “Oh, you know what, we could use this for all kinds of strategic planning…” We enable their decision-making, right? That’s the whole point behind this.

Now, in the early days of GRI, the whole idea was, “Well, let’s get behind the sustainability report, because that gives everybody a common goal to work towards.” Even though the value is in the process, you had to pick one thing that everybody would rally behind.

Well, great. Job well done. We all did really well at that. Now we’ve got 22,000 reports sitting here, we have thousands and thousands of organizations putting this data in … you’ve got a ton of data, and you’ve got a lot of different interests on how that information is relevant to the business. Now what? And that sort of sets the stage for what’s next.

All right, let’s get into that. What is next?

Historically, the GRI’s done two things, and done them extremely well: one is influencing policy on an international level, and the other one is creating more reporters and better-quality reporting.

But now that sustainability reporting has really become pretty mainstream — almost all major corporations do it — what’s next? Is there another pillar for the organization, which is really beyond reports? What about small-to-medium-size enterprise? What about having the sustainability standard as cornerstone to investment in the developing world? That’s not about reports, right? That’s really about: how can you use this data to do new things with these guys? How can you take that and turn that into something actionable?” And there’s that whole middle ground there, that there are a lot of interesting things going on.

And to be honest, I think that’s our role. That’s not the role of other reporting frameworks that are specifically focused on investors, or insurance, or boards, or the SEC. That’s not their job. And they wouldn’t say it’s their job. It is only GRI’s job to figure that out.

So now that sustainability reports are there, now that we’ve amassed an incredible quantity of data, it’s time to make that information relevant to the different stakeholders on what they can do, not necessarily for the sustainability report itself.

And then there’s the fourth area, which is a little more future-thinking. GRI has launched new frameworks, it’s launched new standards, it’s launched thousands and thousands of sustainability reports, career startups, you name it, just by being in the middle of this market, just by being the standard for sustainability. And it hasn’t really seized that. It’s never really seen itself as sort of an incubator, or a launch pad for innovation. And I really think it should be.

So how do other organizations innovate using GRI? Because we’re not here to enhance the GRI; we’re here to make sure sustainability is cornerstone to all decisions made in business and government and so on. So can we be a launch pad for innovation.

We actually have been, in spite of ourselves. So can we capture that in some way, and build on that? I think the answer is yes. There’s a whole world out there once you stop focusing on the report itself, and focusing on the standard, and how that can ensure that these sustainability metrics and the sustainability information gets embedded in so many different areas of business. And that’s where things are going to get exciting.