Sandra Guzmán is an international specialist in low carbon development and climate finance. She is former General Director of Climate Change Policies at the Ministry of Environment and Natural Resources of Mexico. She is Founder and Coordinator of International Alliances at the Climate Finance Group for Latin America and the Caribbean. She holds a PhD in Politics from the University of York in the United Kingdom, a master’s degree on Environment Policy and Regulation at the London School of Economics and Political Sciences, a Diploma on Sustainable Finance at the University of Oxford and a Degree on International Relations by the National University of Mexico.
She is the first Mexican of the Homeward Bound Project visiting Antarctica. She was awarded as the intellectual of the year in 2018 by the Marie Claire Magazine; and she was selected as one of the 34 global changemakers by the Chevening scholarship of the UK Government. She has been a consistent leading voice on climate-related finance and issues of policy design, access and inclusion, in the UNFCCC process.
Below, we share a condensed summary of the discussion, mostly paraphrased. Please listen to the full podcast for more detail and direct quotes.
Don Shelby: Welcome, Dr. Guzmán. You’re dedicated to realignment of the financial world as it takes on climate change. Can you explain realignment?
Dr. Guzmán: Until now, the financial system has been heavily carbon intensive. We need to transition to low-carbon practices. How can we get there? The Paris Agreement requires decarbonization. The question is how finance can align not with the past but with that future clean economy.
Don: Joe, is this what we mean by climate-smart finance?
Joe Robertson: “Climate-smart finance is not only about reducing emissions and building resilience to climate shocks. It’s also about supporting in the way the everyday economy works the pattern of sustainable development that’s going to make people’s lives better across the board.”
Joe: Does sustainable development also require we achieve sustainable operations across all that we do?
Dr. Guzmán: “It’s important to go back to the definition of sustainable development… what is proposed is the connection between environmental protection, social development, and economic growth. What sustainable development is proposing is that you can have all three of these things working together.”
“It’s key what you just mentioned—not only to think about the reduction in emissions or any type of pollutant… we also have to think about human rights, about equity. Sometimes, we miss that part of the conversation, and we think sustainable development will create jobs immediately; we still need to deal with poverty and other problems that exist in society.”
Don: Is there a conversation about sustainability as a concern for the financial sector itself? That if it does not adapt, it won’t be able to stay in business?
Dr. Guzmán: Yes, this is a very important point. Nowadays, climate change has been recognized by the financial system as one of the major threats… there is always this discussion about how deep the financial system is mainstreaming climate change… what the sector is trying to do now is measure these type of impacts, to rethink what type of products, investments, they need to have to ensure the survival of different industries, and to ensure the financial system will be sustainable in the future.
Joe: The Sustainable Finance Index report indicates there is a difference in how countries are moving forward. What kind of metrics do you use to get to a fair, common standard?
Dr. Guzmán: We have been listening to a lot of countries around the world. The key question is not only about how much money are countries investing in sustainable activities, but also in carbon-intensive activities. How much are they depending on carbon intensive energy to generate revenues?
Why are some countries not moving faster toward low-carbon development? We found it is the case that some countries are still heavily dependent on revenues from fossil fuels. Not only do we need to change the narrative; we need to change the incentives and economic system in developing countries.
Not only do we need new industries, but we need new revenue sources. We need to develop strategies to decarbonize the public finance sector. Some countries are actually increasing their investment in fossil fuels, in order to generate the revenues they need to deal with major challenges.
International investment and cooperation can help, but countries are not accessing this international finance in the same way. Some of the bigger economies that capture more of that green international finance are also bigger oil exporters.
Joe: Can we move from a shareholder perspective to a stakeholder perspective, with a focus on broader interests of society and Nature? Would that give us not only a more inclusive model of development, but also a smarter model that’s more efficient and effective?
Dr. Guzmán: Yes, absolutely. A key question is how we are going to redefine the conception of development, bring in Nature to the development of local communities. Indigenous societies raise the question of whether we should bring communities’ rights into the design of financial mechanisms. For some this is obvious, and for others it isn’t.
We have to think carefully about how we invest today, because whatever you invest today is going to have effects tomorrow. If we replicate old models of investment today, we are not going to achieve the new model of financing an development we need to achieve climate justice and climate resilience.
It’s time to start closing this discussion where financial discussions are only for financial institutions, and we have to bring these stakeholders to the table. If we don’t have that input, financial decisions are more likely to lead to violations of human rights.