It Changed the Course of My Career

Despite having had a degree, a few years of experience, and three semesters of grad school under my belt, at the beginning of this semester, I was well-versed in the theoretical but lacked the technical skills to utilize the theory. In a field like ESG, this is commonplace. As with any fledgling field, there appear to be as many people who don't know what they're doing in ESG as there are that do. The product of this is greenwashing, unsubstantiated commitments and claims, and inefficient or ineffective approaches to an end goal that few can articulate. I understood the intention beyond ESG and Nature Based Solutions (NBS) investing and sustainable finance. However, I was still curious about how companies made decisions based on these ideas and new standards.

In NBS finance, this wonder was as present as ever. But NBS investing is unique from ESG investing in that the mechanics behind NBS finance rely on natural solutions and data-based research. You cannot "theory" your way into adding biodiversity into an area by investing in land that focuses on regenerative agriculture—either you did or did not. Knowing our client took this approach very seriously, I was a bit apprehensive that we could deliver something of quality at the end of the term for several reasons, each of which we thankfully overcame.

Firstly, NBS finance is such a young field that there are fewer examples, resources and models that exist to build on, and those that do exist are primarily proprietary. While one can find hundreds if not thousands of DCF models and videos online, understanding how to discount the value of a forest stand or the terminal value of a company that sells carbon offsets through land restoration is more arcane. Thankfully, our project focused less on the investment side of NBS financing and more on the policy side. While our clients still demanded quantitative approaches to the recommendations we were proposing, we were working in our background when it came to understanding policy analysis.

Second, when determining what risks/opportunities lie in the marketplace, one must identify what constitutes a risk and what contributes to opportunistic environments. Again, this is so standardized in the investment and traditional finance world that countless models exist to identify, quantify and mitigate such risks. This wasn't the case for our project, so to compensate, we immediately set out to understand what was relevant to the investors we worked with and the stakeholders with whom they collaborated. For example, to understand the implications of different state policy funding levels, we first had to understand the impetus of each policy and the efficacy of the instruments it provided. We looked beyond theoretical marketplace economics and sought research on how people on the ground reacted to different stimuli and why. This approach was critical for directing our focus and ensuring that we targeted the right policies, metrics and impact themes and that the client could clearly disseminate the logic behind each to shareholders.

Lastly, we recognized when we strayed away from the client's original objectives. At our midterm meeting, we presented our preliminary research and suggested focus areas for the months ahead, as was expected at that project stage. However, we found that we were focusing on the areas we biased, as well as the methodology for selecting them. Returning to the original project thesis, we began gathering data on the policy-relevant areas we had identified and constructed a model that aided the client in identifying opportunities, understanding state-level nuances, and efficiently visualizing thousands of data points in a few clicks.

In the last semester, I've applied the theory and skills I've gleaned over the years to numerous ESG and sustainability-focused projects; the work between SIRI and our NBS client was by far my favorite. This type of work requires an understanding of the real decision-making processes of market actors, grants you the benefit of feeling the on-the-ground implications (hopefully, good ones) and demands high technical and research skills to do the job well. I dare say, it has changed the course of my career, and I couldn't be more grateful.