Finance teaching not fit for purpose

Finance needs to be based on “real world economics” not the unrealistic and rational assumptions of traditional finance argue co-editors Herman Bril, Georg Kell and Andreas Rasche in their book Sustainable Investing: A path to a New Horizon.

“The world is becoming increasingly volatile, uncertain, complex and ambiguous and that is having a profound impact on business and the world,” says Bril who has been head of investments at the United Nations Joint Staff Pension Fund since 2016. “In this book we challenge the traditional theories of economics based on neoclassicism. We need to move into real world economics, from efficient markets theory to adaptive markets.”

The book, which Bril worked on in his personal capacity, is also being promoted to universities as a teaching aid that gives a unique and different perspective to “traditional learning which is not fit for purpose”.

“This is quite striking, my son is studying politics, philosophy and economics and the books he is learning from for economics is the same stuff as I had in the 1980s. It’s not related to reality and we need to move on. We need to face reality as it is. Models are helpful and useful but economics being represented only by mathematical models is not reality,” he says.

Instead the co-editors argue that finance needs to be more connected with Darwinian thinking and evolutionary economics which identifies robustness, resilience, cooperation and coping strategies as the winning attributes in a radically uncertain world.

Breaking down silos, this investment book takes contributions from thought leaders in the corporate, finance, academic and not-for-profit worlds, and takes a holistic view to sustainable investing across 18 chapters with contributions from 35 authors.

It covers four main themes: the changing context of sustainable investing; rethinking sustainable finance and leadership; sustainable investing technology and data; and accelerating transformational change.

By taking a broader approach and looking from different perspectives Bril says three key lessons emerged from the writings, which included contributions from Paul Polman, Keith Ambachtsheer, John Ruggie, Ashby Monk, and Karen Karniol-Tambour to name a few.

  • There is a shared understanding that what frames the conditions for market success has been changing at an accelerating pace and this impacts businesses and their investors
  • There is emerging consensus that technology and digitalisation are key drivers shaping the future of sustainable investing, for example AI and machine learning shape how ESG is practiced
  • Sustainable investing promotes business resilience but in itself is a resilient strategy; and the COVID-19 pandemic validates that.

But while change is necessary Bril, who has had a diverse career in finance over 25 years, acknowledges that change is also difficult.

“It’s really hard to let go of the old world and start thinking of new things. We are working with something that is comfortable and known and have to let go and do something else, it’s not easy. But we have to be open minded, take a step back and let go of our mental models,” he says. “This is a pivotal moment.”

He points to the momentum around sustainability from consumers, regulators and governments with more concern for planetary boundaries, plastic, water and climate change, as well as more acknowledgement of the inter-connectedness of the world.

“We believe we are in a paradigm shift, that has been accelerated by the COVID crisis. We can’t say these are externalities, what does that mean? Externalities are not a free lunch, you can’t create private profits and create a lot of public harm, price signals need to change.”

The book warns that the models and processes used in the past are no longer sufficient to navigate the future, and while this may sound like an enormous disruption, it also points out that history shows that nothing is more consistent than the “the adoption by successful rebels of the methods they were accustomed to condemn in the forces they deposed”.

In the final paragraphs of the book the authors call for action from asset owners and other finance players.

“Social evolution is preceded mostly by economic, political, intellectual, and moral innovation. New situations require novel responses; development requires experiment and innovation… Non-equilibrium is the natural state of the economy, and therefore it is always open to change.”


The ESG journey at UNJSPF

The UNJSPF has changed significantly with regard to sustainability in the past five years under Herman Bril’s investment leadership (Bril has announced his resignation and will step down in March 2021.)

Before 2016, when he joined the fund, there were a number of ESG activities the fund participated in – such as the World Bank issuance of green bonds, a founding signatory of PRI, and the launch of low carbon ETFs – but there was no coherent strategy, ESG was not embedded in the investment policy statement, and it wasn’t part of the investment conversation.

Within a year the team developed an ESG strategy and started implementing it, which Bril describes as complex and difficult and “it’s really a journey” (and is outlined in his chapter in the book).

The fund, which manages 85 per cent of assets internally, has created many partnerships with climate specialists and alternative data providers to supplement its internal resources and build ESG technology.

“You need a culture of innovation in a pension fund to build this. If something fails it is part of learning, so fail quickly and move on,” he says. “Most pension funds don’t have a strong focus on technology and data and don’t have a culture of innovation as they are not competing and have resource constraints. Culture and change management is critical, but it is not easy, it is hard work.”

The fund developed sustainability technology and dashboards have been built internally, with a lot of time and energy spent to build a workable platform which is based more around tools for portfolio managers rather than rules.

“We needed to have it all in-house because we manage so much money inhouse and using active management, which has much more complexity than just choosing external managers.”

The fund’s 2019 sustainable investing report shows a big change in the past five years and Bril says: “We are getting closer to being a global leader in sustainable investing and have made significant improvement.”

More recently the fund has become a member of the Net Zero Asset Owner Alliance, led by the UN,; and aims to be TCFD compliant in 2021.






    Thanks for the contribution to Herman and co-authors. However, I would like to point out, as a Professor of Finance dedicated to Sustainable Finance for more than two decades, that the future may be less grim regarding Finance en Economics education at business schools. Globally, have a look at the Impact and Sustainable Finance Faculty Consortium ( and UN’s own PMRE ( in which scholars from across the globe collaboratively develop new education curricula in economics, finance and management education. Also have a look at GRASFI ( in which PhD (the future scholars) education in this field is being developed in a consortium of prestigious universities worldwide, and in which top research is being introduced in an early stage which will also eventually trickle down into economics and finance curricula. Finally, to see a concrete example, have a look at the Master of Sustainable Finance of my business school, Maastricht University School of Business and Economics: In this Master hard-core finance theory and empirics is combined with insights in the Sustainable Finance field in many dimensions. The solution? Send your sons and daughters to universities involved in these programs and press current conservative universities to change curricula that deal with the challenges of the 21st century.

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