Standing on decades of leadership as a British politician and impact leader, The Right Honorable Nick Hurd’s next chapter could be his biggest lift. At last year’s G7 Summit, Hurd was named President of their Impact Task Force. He’s charged with helping reshape capital markets to promote impact-driven economies and societies worldwide. Hurd recruited some big names to the effort and instilled an urgency reflective of the crises we face. And he’s making real progress. Below, Hurd outlines some of the key initiatives and innovations he’s spearheading, including new international sustainability standards and a private-public capital approach.
Brendan Doherty: Nick, great to see you. Let’s jump right in. At the last G7 summit, something called the Impact Task Force was created. Help me level set for our readers – what is it and why now?
Nick Hurd: The Task Force was set up with the support of the British government, as the President of the G7, to look at what I’d consider a critical exam question: how do we accelerate the mobilization of private capital at-scale to have a positive impact on the social and environmental challenges in front of us? The context is the global crises. Namely environmental, but social as well, emerging from rising inequalities flowing out of the COVID crisis and recovery. The challenge is the gap between rhetoric and delivery.
Doherty: And unfortunately, that gap seems to grow almost daily. What’s the main focus of the Task Force?
Hurd: We’re only eight years away from 2030, which is our accountability for the SDGs, but also the pathway to net zero. Most countries have committed to reducing emissions by 30%, 40%, 50% by 2030. But yet, emissions are still rising. There are huge downsides if these commitments aren’t met – political, social, environmental, economic. An absolutely necessary condition is mobilization of private capital, because there’s never going to be enough public money. So, how do we actually mobilize this private capital? How do we make sure it flows where it’s most needed? That’s the focus of the Task Force. First, we’re looking at how we measure and account for impact. And second, the vehicles and policies needed to mobilize capital at-scale.
Doherty: Whose on the Task Force?
Hurd: We set it up as industry led. We put together voices from around 120 different institutions spanning 40 different countries. Folks like Doug Peterson, President & CEO of S&P Global, signing up to lead the critical working group looking at impact transparency; Dame Elizabeth Corley, Chairman designate of Schroder’s for the working group to mobilize capital at-scale; and Emmanuel Faber who is now going to run the International Sustainability Standards Board. A very credible group who were very highly engaged, and that sent a signal of the resonance on the issue.
Doherty: This first work stream on accounting and transparency, why such a big emphasis?
Hurd: We think impact transparency is a game changer in terms of judging behavior, changing the way investment decisions are made, and the ability to compare the impacts of companies. It’s a cliché, “what you don’t measure, you don’t manage,” but we know the power of transparency. Once people start making comparisons, whether it be directors in the boardroom, or external stakeholders, and they start looking across the world, the world starts to change. Competitive attention creeps out. You will want to be on the right side of the line. But we’ve got a journey in front of us to get to where we have the tools, data integrity, and the confidence to make this mandatory. But that’s the destination.
Doherty: Got it, the second work stream makes a ton of sense to me – how do we mobilize large sums of capital?
Hurd: The challenge of how to mobilize private capital for positive impact becomes even more acute when you look at a set of economies and sectors where the perceived risks are that much higher, and therefore the barriers to entry are much higher. They’re well documented, we set them out in all the reports. One thing that we felt was absolutely necessary was a radical call for change in how multilateral institutions and development finance institutions work. They’re effectively deploying public money, but there’s broad consensus that this money isn’t working hard enough to mobilize private capital. Next, you look at what governments can bring to the table. They can bring a huge amount. And it’s not enough just to talk about a “just transition,”we have to define what that means. We’ve made an active, practical, contribution in terms of what that might look like. And I’m rolling that out now with active conversations with investors and governments about implementing it in places like South Africa.
Doherty: Of the many Task Force recommendations, which was most crucial?
Hurd: There was a high-level recommendation to the G7, which was, “You’ve made all these commitments. There’s a huge amount at stake. But you’re not going to be able to deliver without private capital. This forum has an extraordinary opportunity to bring people together.” The private sector has never been more engaged on climate, both in risk and opportunity. There’s more than enough private capital, around $250 trillion of investable assets. Look at what digital technology is now enabling in terms of our ability to deliver impact and measure it. Still, don’t kid yourself that you can just leave this to the markets. This requires a new model of collaboration between government and the private sector. I’m a politician by background, and before then, I spent 14 years in the world of business as an investment manager. I know that these are two separate worlds. They very rarely connect or understand each other. The meta recommendation was we have got to find a mechanism of collaboration here.
Doherty: Any surprising outcomes?
Hurd: Under the work stream led by Doug Peterson, CEO of S&P Global, which also included the big four accounting firms, they actually landed on terms more radical than I could have imagined two years ago. There’s the need for mandatory accounting for impact, which is a radical, a radical destination, but the starting point is the creation of the International Sustainability Standards Board (ISSB) led by Emmanuel Faber, a very active member of the task force. But what the board sets in terms of harmonized standards for climate disclosure, it’s got to be seen as the baseline. And we’ve got to move from that to a future underpinned by harmonized standards, and interoperable data infrastructure, whereby companies are required through mandates to account for their environmental and social impact. Now, I would say two or three years ago, there wouldn’t have been a conversation around that, at that level, with that kind of sincerity and conservative of institutions represented, but there was a very active discussion around that.
Doherty: You’ve mentioned this shift in conversation several times. What’s behind it?
Hurd: There are big societal pressures, some stemming from the shift to younger generations that have a big transfer of wealth and a shift of attitudes, values, and priorities. It’s very clear that big institutions that manage our money are feeling intense pressure to change from their end customer, their employees, and the talent that they hope to attract. For example, in African countries, the technology in terms of helping African countries allows us to leapfrog old infrastructure or technology into the new and the modern – and it is extraordinary. A lot of the companies that would have ambitions to be impact unicorns, as it were, they’re driven by a digital business model.
Doherty: On that note, over 10 years ago developed countries committed to 100 billion a year in climate financing, through 2020, to aid developing countries. We clearly failed at that. So putting on your hat of both political expert, and understanding the capital markets piece of the puzzle, how do we rebalance resources?
Hurd: I’d been the UK climate change minister at a previous COP trying to explain to the global South why we weren’t on track to meet the $100 billion, and what we were going to do about it. It was a very uncomfortable conversation, quite rightly. There’s been a failure of governments to step up to meet their commitments. But, one of the biggest failures has been the failure to mobilize private capital because it was always imagined that the $100 billion would include some mobilization of private capital. And it comes back to the point: how can governments be more effective in using what they’ve got, through policy regulation, technical assistance, and concessional capital? We need those public balance sheets through multilateral institutions to be used in a smarter way to mobilize private capital.
Doherty: Knowing that risk aversion is common in governments and large institutions, is there a culture barrier there? Meaning, asking a government, in the interest of the public, to shore up this “higher risk” side and provide catalytic capital to unlock 10x or 20x of private dollars, that seems like a tall order of change for an institution.
Hurd: I think there is a cultural challenge, which is why we haven’t had the success that we want in terms of this mobilization. That’s why we’ve targeted our message at the shareholders. Because obviously, if you need cultural change, it has to come from leadership, and that leadership needs to be empowered by the shareholders. If I think about the DFI communities, organizations like CDC in the UK, which are more progressive than most, they’ve actually been told in the past not to lose money. The mission was to demonstrate that you can do good and get your money back. But over time, the British government has adjusted the risk parameters for CDC to operate in, and now they’ve got more flexibility than they’ve had in the past, and it’s exactly the right direction.
Doherty: That’s great. You spent the better part of nearly two decades in public service, how’s it feel being back in the private sector?
Hurd: It was an active choice. I thought I’d be in politics for the rest of my working life. But I was 14 years a member of parliament, and nine years as a government minister – somehow managing to survive three different Prime Ministers. It is a lot of very interesting work. But over time, I was starting to feel increasingly uncomfortable. I was being pulled away from what felt most important to me, which was the climate agenda and the environmental crisis that we face. I feel we’re in an age now where it’s more and more about the private sector. How the private sector engages with the public sector to drive systemic change. I have an unusual ability to speak both languages. I’ve never known a situation where the incentives and the agendas were more aligned; the business people need the politicians and politicians need business. So I’ve really enjoyed that nexus between the private sector and the political.
Doherty: And I imagine having six children also brings it home?
Hurd: That’s a really interesting point. When I started we talked about 2050 and that felt far away. But my youngest child in 2050 will be the age that I went off to Brazil to set up an investment banking business, and that feels like yesterday. We’ve been funding this for a while now but there’s a different sense of urgency today.
Doherty: What do your kids tease you about? And what do you think they’re most proud of you for?
Hurd: I get teased the whole time. And to be honest, I did it with my dad. My dad, grandfather and my great grandfather were all politicians. Families play an essential role for all politicians because, and I’m not betraying any secrets here, politicians tend to gravitate towards the self-important. And there’s nothing like family to puncture balloons of self-importance. I think they see it as part of their mission to tease me. I think my children also know that my work has always been very, very important to me. I hope that they’re proud of what I’ve achieved, but reserve the right to tease me, remorselessly. Luckily, my world has changed completely now. I’m not really important or self-important, so they’ll probably need to find new ammunition.
Doherty: They keep you rooted and keep you working to make the world a better place for them. Thanks for our time together.
World News || Latest News || U.S. News