Traditional finance is not ready to undergo a profound change.

This December is shaping up to be the month of "green" finance. This theme will be at the heart of Building Bridges in Geneva, a major event that every year brings together speakers from around the globe. The 2024 edition promises to be particularly complex, because green finance is not very much in vogue these days. Behind the fine words, actions sometimes appear less glorious.

After a decline in sustainable investments observed in the United States earlier this year, Switzerland is facing a similar slowdown. A finance research institute based in Zug found that the growth of financial flows in favor of investment funds adhering to environmental, social and governance (ESG) criteria was currently no longer sufficient to catch up with that of traditional funds. During the autumn, the specialized platform Hazeltree also revealed that the world's largest hedge funds preferred to bet against "green" technologies and sustainable development, while investing in the long term in fossil fuels.

Given the context, we thought it appropriate to question the players—small and large—in finance about their relationship to sustainable investment. The answers of Camille Lipani,  an independent advisor specializing in sustainable investments.

What is your approach to so‑called green finance?

It is direct and useful as I like to say; with my clients we can invest in the stock market but above all we invest in forest groups, agricultural property companies, impact start-ups or in renewables through crowdfunding. My goal is to be transparent and to avoid greenwashing by not relying on labels but on the real usefulness of the investment. Because my feeling is that people try to put a green filter on traditional investments based on brown practices, that is, a capitalism that destroys our planet.

What is your reaction when you hear that a large majority of hedge funds prefer to short their positions on renewable energies in favor of fossil fuels?

There is nothing surprising about that. Since its creation, traditional finance has sheltered behind its fiduciary responsibility and its pursuit of profitability. As long as regulation does not change, these institutions will not deviate from their path. They will be content to seek labels and certifications empty of meaning, as they do now.

It is important to note that as long as society as a whole continues to use polluting energies and does not embark on a real transition, there will always be opportunists to profit from quick but unethical gains.

How should one adapt their investments in such an ambiguous reality?

Personally, I do not invest in these funds and I advise my clients against doing so if they are sensitive to these issues. These funds reflect exactly what is found in the financial markets: deplorable transparency, products too complex to have a real impact, greenwashing through false statements, meaningless labels, and a search for profitability that takes precedence over the preservation of the planet. When the ESG aspect is highlighted, it is above all an attempt to attract additional profits, because this term is fashionable today.

This news raises a fundamental question: is the financial sector truly ready to sacrifice part of its profitability for the good of the planet?

We must broaden the reflection beyond the financial sector alone. Is our world really ready to sacrifice a share of profitability for the good of the planet? We live in a capitalist system where profitability is the main measure of success. In this context, can we really envisage a model where we prioritize the planet while maintaining such an economic functioning? As far as finance is concerned, the situation is clear: traditional finance is not ready to undergo a profound change. The actors in this sector, whether large banks or pension funds, hide behind their fiduciary responsibility, whose main objective remains profitability, and not support for the planet.

We live in a capitalist system where profitability is the main measure of success. In this context, can we really envisage a model where we prioritize the planet while maintaining such an economic functioning?

However, new promising financial initiatives are emerging. More and more direct investments are being created by eco‑responsible entrepreneurs, which I often call the "green financiers" of finance! The difference with traditional finance is striking: the impact is real, the transparency total, the fees reasonable, and the necessary resources are well taken into account. In my view, the best model is that of fully transparent investment, where capital is invested directly, the usefulness is obvious, fees are clear and not excessive.

Take the example of an agricultural property company: the objective is to help farmers set up by buying land and leasing it to them, because without this support the setup costs are often too high. With only 3% entry fees, one can meet the established farmers and observe the direct impact of the investment. It is truly useful, because without food, the very survival of humanity is at stake. Who can contest that?

ESG criteria are increasingly struggling to convince, should new standards urgently be established?

The lack of trust has become a major problem, and it is not limited to finance. Labels and standards are multiplying, but they are not always effective. One can of course create new labels, but what is the point if we do not ensure their validity and follow‑up afterwards? The current regulation is too lax, and for changes to have a real impact, real sanctions should be introduced in case of violations of the principles. Without that, any initiative will remain ineffective.

I also think it would be relevant to review fiduciary responsibility, which, in my opinion, represents one of the main limits to the adoption of green finance. It would then be necessary to put in place regular checks as soon as an investment claims to be "green", to ensure that it really respects the criteria and principles of sustainability.

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