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In this interview, Arshad Rab, CEO, European Organisation for Sustainable Development (EOSD), and Chairman, International Sustainability Council, shares sustainability perspectives on the war in Ukraine. He was interviewed by Jide Akintunde, Managing Editor, Financial Nigeria.

Jide Akintunde (JA): It is surprising that with Covid-19 yet to be fully brought under control, after the disease had killed approximately six million people in just over two years and destabilised the global economy, there has been an appetite for the war in Ukraine by Russian President Vladimir Putin and supported by his allies. Has the world become too accustomed to instability?

Arshad Rab (AR): I am not sure that the world has become accustomed to instability, but allow me to take this opportunity to emphasize the importance for every business to prepare itself for an uncertain environment. If you look at just the last 15 to 20 years, we have experienced global financial crisis, European sovereign debt crisis, refugee crisis in Europe, wars in the Middle East and Afghanistan, Darfur Conflict, and Boko Haram ordeal, among others. And we are still not really out of the Covid-19 crisis. The history teaches us not to get surprised or shocked by high volatility but urgently prepare our organizations to operate in a highly unstable environment.

JA: Social sustainability is surely at risk, given its vulnerability to recurring political, economic, and environmental perils and outbreak of infectious diseases. What are the essentials for breaking the endless cycle of instability in order to pivot towards a sustainable social order?

AR: I am afraid we will not be able to break the cycle of instability or influence its intensity. This is up to the global forces. But I think that you will agree with me that the world has never been a very stable place. But yes, one could argue that the 21st century has been unique because it is outperforming all the other time periods in terms of instability, uncertainty, and unpredictability of what is next for us. So, the more we prepare ourselves for the unknowns, the better we will be able to deal with them. On this note, allow me to emphasize that instability is here to stay for a very long time.

So, instead of focusing on breaking the cycle of instability, which is not in our power, let us get ready for frequent and large-scale disruptions. Therefore, we have standardized the entire Crisis Management System under the latest version of our Sustainability Standards so that the Sustainability Certified Financial Institutions can deal with uncertainties and disruptions emerging from political, economic, environmental, geostrategic or large-scale health crisis in a highly professional manner.

JA: Through sanctions targeting Russia’s central bank and cutting off the country’s commercial banks from SWIFT, amongst others, financial markets have been ‘conscripted’ into the war in Ukraine. Do you think this is unhealthy and could be considered a defining, long-term role of banking and finance with certain untoward implications?

AR: First of all, we now know in no unclear terms that the international financial system can directly become part of a war, which also means it is no longer apolitical. Obviously, this is a defining moment, and it will have strong implications for the entire system.

This situation could promote alternatives to legacy instruments like SWIFT and even accelerate the proliferation of other payment methods, such as the Cryptocurrency Payment Gateway. And the impact will be felt far beyond the payment system and financial services. For example, China has not endorsed the sanctions and is likely to find ways to deal with Russia and other countries. Only time will tell whether using financing system to sanction Russia is a beginning of making yuan one of the key global reserve currencies or not, but we can see that major changes could well be on the way and in 10 years from now we may have a completely different global financial system.

JA: The universe of risk for banks may or may not have changed in terms of scope. But the risks are crystalising in bigger ways - considering the scale of financial market turmoil since 2008, the pandemic, and climate change. How can financial institutions better understand these sustainability risks and take adequate actions?

AR: The conventional risks for banks, such as credit risk or sovereign risk, are there and will continue to be an important part of the risk universe, but new risk types need not only to be understood, but it is also necessary to devise and implement an actionable, forward-looking, and sustainability-driven risk policy.

Nonetheless, let me hasten to add that developing and implementing such a policy is easier said than done. It requires deep insights of sustainability-related risks, and in-depth understanding of how to integrate them across the risk landscape. In fact, this is one of the reasons we decided to standardize the process of sustainability integration of risks so that the Sustainability Certified Financial Institutions deploy a cutting-edge risk management system.

FN: The Sustainability Standards and Certification Initiative (SSCI) and other initiatives of the EOSD seek to equip banks with a holistic sustainability approach. Are these tools more relevant now, and are they being recalibrated to deal with emergent political economy or geopolitical risks?

AR: They were relevant since the inception, but now you can say that Sustainability Standards are the business imperative for any financial institution that is striving to survive and thrive in this new world which is characterized by frequent shocks and high uncertainties. They were designed from day one to be ever evolving so they can always deliver solutions to the Sustainability Certified Financial Institutions throughout the changing and increasingly challenging times. For example, the latest version of the Sustainability Standards delivers a comprehensive framework to deal with crises and adopt – as I earlier mentioned – a cutting edge risk management system to fully integrate sustainability risks and turn them into profitable business opportunities for the financial institutions.

AU: Let’s hope that the war in Ukraine will not be long drawn out, although analysis of a miscalculation on a swift success by Russia is now rife in Western commentaries. Rebuilding Ukraine will deepen environmental sustainability challenges from the standpoint of utilization of natural resources. While this may be inevitable, how does the world achieve environmental sustainability by 2030, given the tendency for taking some steps forward and some others backward on the subject?

AR: You may at times feel that the issue of environmental sustainability and climate change now has to take a backseat. In other words, one can argue that given the Ukraine crisis, which no one today knows how it will ultimately unfold, let’s put every good thing on hold and apply ‘wait and see’ policy. But let me be frank and say that such an approach is equivalent to a declaration of bankruptcy – both in moral and material terms.

From the moral perspective, you can’t hold the future of our planet and its entire inhabitants, especially of the next generation, responsible for Ukraine crisis and risk the dire consequences. We must intensify our efforts to stop the earth from overheating, and it is equally important that we deal more sensibly with the natural resources, be they minerals or others. Period!

Secondly, it goes without saying that the survival of businesses is linked with the survival of human beings and our lives depend on a healthy environment, a not-overheated planet and on natural resources which are finite. So, there is a strong business case and any business that is attempting to be relevant in this ever more complex world, needs to be a sustainable business. And here is where the role of financial institutions, more so of any responsible financial institution, comes in. Since they have the power of steering the businesses they fund for a sustainable future and thereby secure their own profitability, the role of today’s financial intermediaries is decisive in achieving environmental sustainability and tackling climate change.

JA: More broadly, what do you think is still achievable with the global Agenda 2030, and how can banks help accelerate progress in this regard?

AR: First of all, the banks need to embrace sustainability, which will put them in the position to turn the current and emerging challenges into historic and long-term success. By adapting, what one could say, the most comprehensive sustainability framework in the world, because our Sustainability Standards cover all the aspects of running a bank in a sustainable manner, the Certified Financial Institutions cannot only play but also lead the Agenda 2030 in their constituencies. In addition, the qualified institutions will be able to be part of a subsequent program, which deals with the mobilization of capital at scale, both domestic and international, to fund the Sustainable Development Goals, the Agenda 2030.