CAMBRIDGE, Mass., March 19, 2019 /PRNewswire/ -- The MIT Sloan Sustainability Initiative today announced a $750,000 grant from the William and Flora Hewlett Foundation to help organizations align asset management with sustainability.
The grant will be used for a research project, which aims to create an online database assessing the carbon intensity of financial institutions. The database would be available to educate and inform businesses, foundations, universities, and the general public, possibly including consumers in the United States, on aligning their choice of banks, investment targets, and insurance companies with sustainability practices, including climate change mitigation.
The research project's ultimate goal is to drive the re-allocation of capital away from carbon-intensive activities to lower-carbon assets in order to significantly reduce emissions and adverse impacts on the environment and of climate change. "Climate-conscious customers control a dual leverage point to drive the re-allocation of capital," says Marilyn Waite, Program Officer at the William and Flora Hewlett Foundation. "If customers choose to place their money with financial institutions that invest in lower-carbon assets, those dollars are moving in a low carbon direction, and that will lead to positive environmental returns. If that decision is visible, customers may also influence other financial institutions to move assets in a low carbon direction in order to win and retain similar customers, and therefore contribute to reducing society's carbon emissions."
Currently, no standards, databases, or mechanisms exist to assess the full range of financial services firms' carbon intensity. The research project aims to help close the information gap.
"The challenge is data," says Roberto Rigobon, faculty co-director of the MIT Sloan Sustainability Initiative and Principal Investigator on the research project. "It may not be feasible to assemble this data, given the lack of transparency in capital flows. So the first phase of the project is a feasibility study – what can we really discover right now, and what would require greater transparency in the financial system."
An information resource may also prove ineffective if consumers do not use the information to guide their decisions. As a result, the feasibility study will also include primary research on customers' decision-making process around financial service procurement.
The shared vision of the William and Flora Hewlett Foundation and MIT Sloan Sustainability Initiative is to limit global warming emissions to keep global average temperature increase below 3.6° F (2° C) above pre-industrial levels, to protect the planet from climate change and promote human prosperity and health. The International Energy Agency (IEA) has calculated that to have an 80 percent chance of attaining this 3.6° F limit, an additional $36 trillion in clean energy investment would be needed between 2014 and 2050, or about $1 trillion more per year than is currently invested.
"Information is power," says Jason Jay, Senior Lecturer at MIT Sloan and Director of the MIT Sloan Sustainability Initiative. "The database could be an important resource for the capital markets and for consumers to find the lowest-carbon way of doing business."
The William and Flora Hewlett Foundation and MIT Sloan Sustainability Initiative will review progress and findings, and pivot as necessary to maximize feasibility and impact.
About the MIT Sloan Sustainability Initiative
The MIT Sloan Sustainability Initiative seeks to deliver the best education, connect academic rigor to real world practice, and empower leaders everywhere to take action, professionally and personally, so that humans and nature can thrive for generations to come. We engage hundreds of students at MIT every year and thousands around the world through our online tools. We seek to propel the growth of the sustainable business field and achievement of bold global goals, by ensuring that policy and action are built upon a foundation of rigor and discipline.
About the William and Flora Hewlett Foundation
The William and Flora Hewlett Foundation is a nonpartisan, private charitable foundation that advances ideas and supports institutions to promote a better world. For more than 50 years, we have supported efforts to advance education for all, preserve the environment, improve lives and livelihoods in developing countries, promote the health and economic well-being of women, support vibrant performing arts, strengthen Bay Area communities and make the philanthropy sector more effective. One of the largest philanthropic institutions in the United States, the Hewlett Foundation awarded roughly $400 million in grants in 2017 to organizations across the globe to help people build better lives. Established in 1966 through the personal generosity of the Hewlett family, the foundation is wholly independent of the Hewlett Packard Company and the Hewlett Packard Company Foundation.
SOURCE MIT Sloan School of Management