Inside Sustainable Finance; Interview with Ray Dhirani and Chris McHugh

The Finance Industry is one of the most powerful ones needed to move society towards a system change of a more sustainable and resilient planet. We wanted to know more about how the industry has changed in recent years and get an inside look at how professionals anticipate the future of Sustainable Finance. Two of the Student Ambassadors, Evelina and Vjorela, sat down via Zoom separately with Ray  Dhirani, Head of Sustainable Finance at WWF-UK, and Chris McHugh, Director of the  Centre for Sustainable Finance at LIBF, to talk about their perspectives, careers, and future outlooks on Sustainable Finance.

A Career in Sustainable Finance

The interview started with Evelina asking Ray about how he came to this place in his career, and how Sustainable Finance caught his attention

I used to work in traditional finance in the U.S. for almost a decade and I got to the point when I wanted to find something more fulfilling and something that made more of a difference to some of the bigger challenges we face. I came then to the U.K. to do a masters in Environment and Development, it was one of the few programs that combined those two fields, which I thought was important. I found this job at WWF, which wanted to engage the finance sector on conservation and climate, which seemed like a really good fit. I  still use my financial knowledge and you keep learning about the different aspects of it, but this way you use it to make a real difference for future generations. Now I have worked longer at WWF than I have in the private sector and that has been a good shift. In that time there has been an explosion in Sustainable Finance.”

It was sort of an accidental journey” that is how Chris McHugh answered Vjorela’s question on how he started off his career in this specific sector. 

For the first 25 years of his career, Chris McHugh worked as an investment banker in the quantitative end of finance. For various reasons, he left finance back in 2016 and took a job lecturing at the London Institute of Banking & Finance and still does some teaching at the Cambridge Judge Business School in Cambridge. He is also a Ph.D. student studying Development Finance and how to mobilize private capital in the pursuit of the Sustainable Development Goals. 

As a result of all these things, LIBS is quite an unusual institution, its part professional body, and part university. The institution itself decided to have a voice both in sustainable finance and in digital finance and because of his research and background he got asked to set up the Center for Sustainable Finance a project which he is in the process of doing and building out. 

Evelina asked Ray if he noticed any shift in the regular finance industry before leaving it

No, I didn’t, I mean I was not really looking for it and I had no knowledge about Sustainable  Finance at that time. Going back, it was probably small and niche. I left banking in 2010 and at that time it was around but very small, and I certainly had not heard about it within a very large global bank. There has been a huge shift. Of course, some institutions do more than others. Part of our role is to push the agenda to what aligns with what science is saying. The  conversation has certainly moved forward since the time I left.”

“Have you noticed any large changes in the area of Sustainable Finance during the past few years?” – asked Evelina

Yes. In my work, we started with policy work and climate change. Now we are continuing in those areas but also on ocean finance, food, deforestation, and biodiversity, on system change in finance and the wider economy. And now green recovery plans related to COVID.  It is blossoming into different related areas, getting much more mainstream and integrating into a lot of our programming at WWF. Big change externally and internally within the NGO sector in terms of the power in engaging on finance.” – responded Ray

An introduction to Sustainable Finance 

“So Ray – How would you define Sustainable Finance?” – was the next question from Evelina

“I think true Sustainable Finance is achieved when every investment has a positive impact on the planet and people. That is where we need to get to, but that is not where we are today. To me, I believe it is a higher bar than only ESG, Environmental, Social, and Governance. That is one lens and approach. What we talk about is a fundamental reform of the financial system that serves people and the planet. Eventually, we will need the large banks to put impact  alongside risk and return to make a difference while also generating enough sustainable profit as  well, but not at the expense of the whole system and everyone else.”

When Vjorela asked Chris about sustainable finance definitions, he didn’t even blink “I define  it as the Sustainable Development Goals plus the Paris  Agreement” “We could also talk about  ESG”- he added “but ESG is basically the flavor of the Sustainable Development Goals  (SDGs).” He continued by explaining how in his line of work definitions represent an important   part. When having a meeting with different financial institutions, it is the first thing they need to  understand; they need to know where they stand. 

 “If we define sustainable finance as the net-zero goals or the social goals and the institutional  goals from the SDGs it is partly a recognition that the financial system facilitates that corporate  activity and that is through that capital is allocated that we will make the change happen.” – he  said.

“We need to recognize that finance does have a duty to make the change  happen”  

                                                                               – Chris McHugh

“Speaking of risk,- asked Evelina- “do you see a risk connected to ecological and social investments? Do you see a specific risk in investing in  ethical initiatives?”

Ray: Well, it is a good question.  A lot of investment analysis is done by backward-looking data, but no one can predict the future. COVID is a great example, some people predicted something like it, but the timing, impact, and scale – no one could predict all of that.

Whether you invest in coal, oil, and gas or companies that invest in healthcare, afforestation,  and renewable energy, all investments will carry risk. A certain segment of that will make a  positive impact on society and a certain segment will not. Those different factors turn into risk over time as society is changing. We must think more long term. We need to build the society we want to see.

Asked by Vjorela about the presence of risks, Chris admitted that they are present, many and influenced by many factors. The factors themselves are unpredictable. He gave a very tangible example to make his case. 

“In the United Kingdom,”-he said-” not too far down in the future, the point will come when you will be unable to buy a fossil-fueled car, everything will be electric. If you do that, every single car dealer, every single car manufacturer has to start thinking: how am I going to change my production line? What is all my staff gonna do, how am I going to train everybody?  So in this big transition, companies have to start committing. Simultaneously, you suddenly  have created an incentive for investment in battery technology, and fuel efficiency, opening up  charging stations; all of this happens because of policy.”

So where does the risk lie in all of this? Well, there is no guarantee that parameters as they  are now will remain the same. What if a new voted government thinks that this goal is too  difficult, and wants to push the date years further. What if they stop subsidizing electric cars? 

Chris also raises another very interesting point : “The problem with risk managing as it is today,  to some extent is that you look at the past. So you build all your models and distributions on  past events, and almost by definition where we are heading is tail risk. We have very little idea  what it is going to look like.”  

“I think a lot of the statistical models that the financial industry is built upon won’t work,  we need to have new ways of looking at risk”  

                                                                              – Chris McHugh

Chris talked more about the big picture as well, about the communities that are heavily invested  in fossil fuel, what happens to those people, what happens to that city? “These are serious  social issues that need to be managed along the way”

“So, is it easier today to speak about both prioritize sustainable development and revenue?”- asked Evelina 

Ray: Yes, exactly. Sustainable investing does not have to come at the detriment of financial return – that is a myth. You can make a good long-term return while investing sustainably and therefore the whole market should shift in that direction. There are various studies that show this positive connection, one is the Mercer paper from 2015, which writes about asset allocation and climate change. The fact is that the younger generation is demanding the industry to include sustainable investments, or else you won’t have access to their money. There will be around $30 trillion transferred to the younger generation over the next three decades. That is a seismic shift.

Asked by Evelina if he believed that there are other benefits in going green in the finance industry, Ray responded: “Yes, there are the societal benefits and obvious environmental benefits. It will also enable you to attract talent to your organization, so people will genuinely want to work for you. And then the rising customer base who is demanding those types of products. There are a lot of checkmarks there, that is why a lot of institutions are adopting this because they see the business case of it. Ideally, they see environmental and social benefits as well. If we continue as we do today, we are eroding the very fabric of our society, the fabric that creates our economy. What we know today is that business, as usual, will cease to exist. Not to be overly dramatic but I think we only have some time and this next decade is quite important to turn the tide. If we set the right level of ambition. We can’t just be waiting around; we must  change mainstream business and finance.”

When Vjorela asked Chris about the positive sides of these risks, he brought her on a mental journey of success. Thinking about what the world would look like if we managed to achieve the Development Goals and the Paris Agreement. We then would have managed to switch and found our economy from a consumer economy into more of a cyclical, potentially we have sorted out gender equality, hunger, poverty, good work opportunities.

“How does it feel if we succeed in all of these? It is going to feel pretty good! It is going to be  fair and sustainable for the environment and for people as well!”  

Evelina: Is it becoming “common sense” that we must invest in a more green system  within the finance industry?

Ray: Yes, I think so, it is a mix of common sense and also policies and regulations are pointing in that direction. There are different paces and issues in different countries, but the direction is one way, and that is why we have to start to align there. You see the common sense of it. You don’t want your loan book penalized because it is too brown. Over time, that could lead to real capital charges. You don’t want your business to be positioned with stranded assets if policies continue to shift. That is the other big angle and I think Europe is probably leading in terms of the sustainable finance agenda on regulation. China is doing interesting things. The US is lagging in this aspect, but things are moving in only one direction – toward sustainable finance.

Policies today and tomorrow

Evelina: In the finance industry, are there a lot of policies and restrictions, sustainability wise? Do you have a track you have to stay in?

Ray: Some of the tracks are still developing, the climate track is most aware. Still, there are loads of issues around metrics, data, alignment to the Paris agreement, etc., and other issues like the broader environment, nature. We need to work on it with regulators the industry and civil society. I think there is still a lot of that to be done. It’s not just about issuing a sustainable product, it’s about aligning the business to sustainability in the time we have. I would rather have a harder conversation, with the right actors, to get the right results. Rather than doing little bits here and there; they’re not going to be enough to take us to where we need to be.

Vjorela: How big of a role do government policies play in Sustainable Finance?

Ray: Yes, a very big role. They set the enabling framework, within which the finance and business sectors operate. So, they are quite cognizant of this agenda, particularly in some countries, and they have a big role to play. But some are avoiding doing things that are more difficult, some are avoiding challenging the industry too much, or to put additional regulation in. But the EU sustainable finance action plan is a good example.

Evelina: If we think about this movement as stepwise, where do you see the finance industry going in the next step, what is the next step, or what you hope is the next step?

Ray: We are launching a finance film ( in September, that will help to answer that question. It is kind of a bit of everything, in the sense that you need leadership within the institution.

Certainly, you need commitments, in terms of lending policies, or investment policies followed through, and discussions amongst all the actors to know that this is going in the right direction scientifically. Of course, the policy and regulatory framework needs to be supportive of businesses that are actually moving. It is rarely that policy moves way ahead of  business, and we are seeing some leaders emerge that convince policy makers that they can  move and it can ratchet up things, I think that’s what I’m hoping we’ll see. We are seeing a bit  of that already, but we need to see more.

The hardships of Sustainable Finance career          

Vjorela asked Chris about the difficulties and the challenges he had faced in his career, He  talked about some very down to earth moments. Communicating, and communicating your  message clearly. Also, audience, the importance of trying to get your message through to  someone who might not think the same way you do. Those were some of the biggest  challenges he has faced. And when you think about it it actually makes complete sense. “If  you are talking to people that already agree with you,” -he explained, “how does that advance  things. So going out and talking to the people who have different views is a big part of my work.  That is why having a clear message is so important, a clear message that you can justify, in  order to change people’s minds”  

He thought for a moment, and then added: 

“I’ll give you a clear mission for what we are trying to do: whatever we produce, whatever we  are writing about, whatever we discuss, or help people with, we are very keen to make sure  that there is a practical use to the people that actually perform sustainable finance”  

“We want to talk to the people that make the money flow, whatever we do, needs to be  of practical use to those people”

                                                                         –  Chris McHugh 

Then got deeper into how these implementations come about and the challenges that arise.  He explained how it is true that if you look up a large financial institution, and look at their  annual report, you can just go to their website where you will see a very wonderful statement  of their sustainable finance  definition and an explanation of all their activity. 

“But when you run a bank with 100,000 people in it, how do you make that relevant to all the  staff in the organization so they understand what it means to do their job in that context; It  needs to be propagated and be meaningful to the people what work for you”

“There is a challenge,” he continued, “how do you create products and explain to all your staff  the importance of that. Now I have my own views, you do it through the pricing of products,  you make it better for customers, if you have sustainable products that are economically more  attractive, people will change their behavior; it might be slightly cynical but i think it is true.”

“You are always going to have some people who think it’s box-ticking, however in finance the way we deal with that is by having tight processes and good oversight. I mean, it is unfortunate,  but it is truth, somebody doesn’t believe it but they will do it anyway, you can have a discussion around the philosophy of ethics and things like that but..”- he finished the sentence with a slight smile.

“You want people to believe, but if they can’t believe, the next best thing is to get them to do it  anyway.”

Sustainable Finance and COVID-19

According to a publication by UNEP inquiry and FC4S (Financial Centres for Sustainability) the COVID-19 pandemic has had the largest impact on the financial sector than anything else in recent decades. After the challenge of the large health crisis we have to start thinking of how to rebuild the economy. This could be seen as an opportunity to build a resilient and low-carbon society.

Evelina: How do you want the world to shift after the COVID pandemic? And how  do you think it will change?

First and foremost, it has been really horrible and a health emergency affecting so many people.”- said Ray

As governments are putting in millions into the economy [at the moment], and as institutions start to rebuild there is an opportunity to ask ourselves what type of system we want. It is a  time to think about fairness, social and ecological sustainability, climate change and resilience. Future shocks could be worse. After the financial crisis, we didn’t really rebuild the financial system as we could have. I hope after this the right decisions are made to make the system more resilient and aligned to sustainable development.

And do you think this crisis leading us to become more digital will affect sustainability thinking within the business?

Hopefully,”- said Ray- “enough people will know the impact of going somewhere and learned that you need to think about if you really need to physically go somewhere, what is the impact environmentally. I think face-to-face interaction is important, but the amount of business travel was becoming too much. In WWF we actually have a carbon budget for our staff, in terms of work travel and we need to keep within that budget and sometimes it means you can’t go here or there or within Europe, you need to take the train. That’s the direction we  collectively need to be moving toward.”

Cautiously hopeful

Evelina: Well, with everything said, are you hopeful that society and finance are moving in the right direction?

Ray: I think so, generally. That depends on which day you ask me and what is going on. Generally, yes, the momentum is there, and it needs to accelerate and do so in the right way.  So, I am hopeful, on most days. It is a worthwhile battle because we do need this thriving planet, in order for us to thrive as a species. I am hopeful and also nervous about the direction that we are all in and that things are moving too slowly.

Grateful and hopeful 

“I actually feel immensely privileged to have a position where I have the ability to project  a view”

                                                                           – Chris McHugh

“I believe through my work that I can make a difference”- he said chuckling a bit, probably at  how poetic that sounded.


McDaniels, Jeremy (2020). Implications of the COVID-19 Pandemic for Sustainable Finance,  UNEP Inquiry and FC4S.