Blog: An Interview with Wajahat Azmi, PhD


By Humphrey Olugbue

This transcript is part of a series of Top Voice interviews brought to you by IBR Group International on the topic of sustainability. To learn more about our Top Voices in Sustainability interviews or to discover how you can contribute, please contact us directly.

Q1: Since around March of last year, the UK has been in a state of perennial lockdown. How have you been keeping during the lockdown period, what have you been up to over the last 12 months or so? Tell us about any interesting projects you have worked on during the interim period or any personal activities you have engaged in that have been successful.


Its been a challenging year and looking at the trends, I think it will take another year or so for things to get normalized. Nevertheless, the period has also brought opportunities to learn new things. For the past several months, I am engaged with two startups. One is in the energy space and the other one is in the digital banking space. My role is to formulate strategies to penetrate different regions. Additionally, I am also helping them raise funds. In particular, the digital banking project is very exciting and we have already minted coins. We are in the process of getting these coins listed and also approaching Bank of England for the license. Besides I am also working on a Waqf project focusing on OIC (Organization of Islamic Cooperation) countries.

Q2: Would you care to share with our audience a little bit about yourself, your background, and your trajectory towards a high-impact career. What brought you to this specific sector. Where do you draw your inspiration as a professional from?


I belong to one of the northern states of India and obtained my first degree in business administration from one of the public universities. I graduated in 2009 and I bet everyone remember those Global Financial Crisis (GFC) days. While reading a news about the impact of GFC, I incidentally came across an article on Islamic finance. Though I come from a practicing Muslim family and myself a practicing Muslim, I had no clue of Islamic finance. I wont go into the details of that article but the thing that remains with me was that Islamic finance proved to be resilient and somehow managed to save itself from the storm. I then moved to Malaysia and pursued my degree in specializing in Islamic finance and was also introduced to the concept of Sustainability/ESG during various seminars and the lectures. As I saw a lot of similarities between the two, I chose to write my thesis on the behavioral aspects of Islamic and the Sustainable investors. Since then, I always advocated the adoption of Sustainability principles into operational activities, investing, so on so forth. Post PhD, we did lot of research and consulting work related to Islamic and the sustainable finance. I always maintained that integrating both the principles is more rewarding for the investors especially in term of risk as it brings price stability. Moreover, combining these two strategies also bring more people to tackle climate change. I believe with more awareness about Islamic finance, we will see more use of ESG/Sustainability linked Sukuk as well as the green Sukuk.

Q3: In the US, the Acting Chair of the Securities & Exchange Commission, Allison Lee, recently noted in a letter published in March that the SEC are integrating climate and ESG considerations into the agency's broader regulatory framework. Meanwhile, in the UK, the Chancellor of the Exchequer, Rishi Sunak MP, announced that the UK will be the first country in the world to make disclosures that are aligned with the Task Force on Climate-related Financial Disclosures (TCFD) fully mandatory be 2025, going beyond the "comply or explain" approach adopted under the SFDR. As an ESG professional, could you explain what kind of regulatory environment firms which operate in the ESG space operate under?


The approach to addressing ESG issues differs considerably between US and the UK. For instance, in US, there are hardly any disclosure which is mandatory. In fact, with the exception of few, the US regime is largely comply or explain. For instance, if a corporate does not have a financial expert in the audit committee for a justified reason, it can explain to the regulators.

The regulations in US requires the public firms to disclose all information material to investors and this also includes ESG related risks. Last year, SEC stated that companies should focus on the key and relevant variables that are crucial for the understanding and the valuation of the businesses. Without any specific reference to ESG, the SEC has included several key ESG parameters, such as employee benefits, energy consumption etc., to be included in the disclosures. Some of the corporates also go that extra mile and use the guidance provided by GRI, SASB, TCFD etc. to make the disclosures to communicate more effectively to the stakeholders. However, in the last 2 years, five disclosures bills related to ESG, climate, human rights, tax payment and the shareholder protection are presented before the Congress. Although they are yet to get the green signal but they shows the growing interests in building up a regulatory framework around ESG metrics.

On the other hand, UK regime is also not very different from US n the sense that there are not any direct mandatory ESG disclosure requirements. However, the UK government has stated that they want to bring green industrial revolution. This would be done by implementing recommendations of TCFD and making climate related disclosures mandatory. The plan is to put the substantial portion of these climate related disclosures in place by 2023 and cover the full economy by 2025.

Under the current regime (since 2018), only certain public companies are required to disclose material non-financial information, however with the new initiatives, the TCFD guidelines would cover significant number of other companies. UK has also showed interest in developing their own green taxonomy.

In essence, both US and the UK up to now has made only few regulations mandatory and that too for certain companies only. However, both the countries have showed intentions to bring substantial regulations in order for the firm to disclose non-financial information focusing on climate and the ESG/Sustainability related risks.

Q4: As I am sure you may be aware, as far back as 2015, a number of prominent French financial institutions (BNP Paribas, Credit Agricole and Societe Generale) openly refused to participate in a project called the Adani project in Australia. However, as recently as a few months ago, a $600m "green" loan provided to State Bank of India by Amundi (The prominent French investment manager) invested in a project called Carmichael, which is a thermal coal mine under construction in the Galilee Basin in Central Queensland. This has created a somewhat ethical dilemma. Can you explain a bit about the concept of environmental, social and governance investing in practice? Particularly, the concept of negative/exclusionary screening and positive/best-in-class screening. What are the major similarities and differences between the two approaches?


Sustainability investing has grown rapidly over the years and the pandemic has just made the growth exponential. The increasing interest from not only the institutional investors but the individual investors have forced the fund managers and now the banks to integrate ESG principles in the investment. While the term ESG has gain popularity, the terminologies associated with this kind of approach in investing vary considerably. The most commonly used terms are Sustainable investing, ESG investing, Socially Responsible (SRI) investing etc. One of the reasons for these terminologies can be attributed to the evolving nature of ESG investing. For instance, it mainly started as religious based investing mainly applying negative/exclusionary screening to positive/best-in-class screening. The negative/exclusionary screening mainly focused on screening out industries that are considered unethical such as weapon industry, arms and ammunition industry, pornography etc. On the other hand, positive/best-in-class screening goes takes a one-step further and screen firms that shows leadership, for instance, in energy space, human rights etc.

The approach to negative screening is straightforward whereas positive screening requires more in-depth analysis as the firms need to be assessed based on their emission, safety measures at the work place etc.

Religious investing from Islamic perspective also gained traction over the past decade and the Islamic finance industry now estimated to be close $3 trillion. In 1996, Dow Jones, under the expert supervision of Islamic scholars, came up with the screening criteria guided by the Islamic principles. There are lot of similarities between negative screening of sustainability approach and the Islamic screening criteria. The criteria of screening the businesses are more or less same as both avoid the unethical industries. However, the Islamic criteria goes one-step further and screens the firm based on leverage, interest income and the liquidity. One of the other major differences between the two is that Islamic criteria avoid financial institutions that deal based on the interest. For instance, Islamic criteria excludes conventional banks, insurance firms, conventional asset management firms etc.

However, recently, Dow Jones have also came up with the index that combines the sustainability and the Islamic criteria making it one of the most sought-after investment ideas as it satisfies the expectations of Islamic as well as the sustainability investors. It also helps in price stability as it has the larger investor base as compared to Islamic investing and the sustainability investing.

Q5: In terms of hydrogen, there have been a number of firms who have sought capital to fund their respective projects, one of which is Storegga - an, independently operated, low-carbon project delivery business at the forefront of the global Net Zero strategy. Through its wholly owned subsidiary, Pale Blue Dot, Storegga is the lead developer of the Acorn Carbon Capture and Storage ("CCS") and Hydrogen project, providing essential infrastructure to help the UK meet its net zero targets. As an impact-focused investment professional in the industry, what would you say are the key factors influencing the success of private equity in the clean tech sector?


The recent years has witnessed a growing enthusiasm in the clean energy, especially due to private equity. This is due to the increased awareness about the global warming. However, the success of it largely depends on the several factors.

I believe, individual drive to become ESG compliant is very essential to the overall strategy of sustainability. It not only allows the firm to look beyond profit but also put that extra efforts to contribute to community development through various initiatives. It also saves us from greenwashing and other deceptive green initiatives at the firm level. In essence, individual's seriousness and honest commitment is a critical success factor.

Historically, the clean tech sector has had some stellar innovations and made it big with the help of VCs and the PE. However, majority of the clean techs failed as a result, the new ones find it difficult to raise funds. In fact, B. Gaddy, V. Sivaram, and F. O. Sullivan (2016) in MIT Energy Initiative Working Paper argued that despite being more risky, clean techs provided lower returns as compared to the firms with same risk profile.

The profit margin and the early success are the key factors that drive the success of PE investors. The early success is very critical as it provides a sort of validation by the consumers/market players. In essence, it provides a sense of security to the PE investors that the technology is acceptable by the market players.

It's a case of "Doing Well While Doing Good"

Other critical success factors are the incentive structures provided by the regulatory authorities. The incentives in place should be both for consumers and the corporates. These incentives could be in form of subsidies, entry barriers, tax rebates etc.

Other important factor is the IP protection. IP protection is critical as it gives exclusivity to the patents (pending patents as well), copyrights, trademarks and other relevant rights.

To conclude, better profit-margins, capital efficiency, sufficient IP protection and the ease of doing business are the key factors influencing the success of PE investors.

Q6: In terms of the future of sustainable finance, there happens to be quite a lot of pragmatism in place regarding the ambition of blockchain technology. Speaking on the virtues of blockchain technology as a mechanism for conducting and managing financial transactions, how much of an evolution is the idea of digital finance from infra-PPP frameworks (i.e. hybrid capital)?


One of the main issues in the infra-PPP settings is the lack of transparency and trust. This obviously leads to disputes and hence delay in the project delivery.

PPP projects are complex as there are continuous information flow from one party to the other through the project. For instance, everyone prepares and maintain their own ledger and that leads to multiple reporting and at times discrepancies in the reports. The other issue with regards to PPP projects is the dispute with regards to the scope of work. Everyone in the system maintains their independent ledger and reporting which leads to origination of multiple and sometimes contradictory reports. Additionally, the information is subject to manipulation at various stages of project.

To summarize, what we need is a structured data system that is resilient to any unauthorized manipulation not only from the perspective of shared data but also from the clarity of the deliverables. In other words, we require a system that is robust to data manipulation and bring clarity in deliverables - hence avoiding any disputes. This is where the blockchain technology can play a crucial role. The technology itself has many aspects and uses but constructing "Smart Contracts" is most the relevant in overcoming the issues mentioned.

In my view, blockchain is much more that just the bitcoin and have various uses. I think, the use of blockchain to write "Smart Contracts" is one of greatest innovation, especially from the PPP and the social finance perspective.

Q7: Earlier, you mentioned the regulatory environment which firms in the US and UK operate under respectively. What are some of your thoughts on the emergence of green/sustainability standards and taxonomies which have been developed to support the growth of renewables in developed markets such as the European Union? How do these frameworks encourage firms to comply with a move away from alleged greenwashing?


The EU in past couple of years has passed two important ESG related regulations - SFDR in 2019 and the Taxonomy in 2020. I believe the introduction of sustainability standards and the taxonomies are great ways to further regulate the ESG related disclosures. Besides SFDR and the taxonomy, other standards such as GRI, TCFD etc., the firms have started to integrate the ESG metrics in their operational activities. The common focus of these standards, beside others, is to encourage firms to disclose climate risks and opportunities. As a result of this, many big corporates have pledged net zero commitment (Microsoft by 2030, Amazon by 2040 and the Apple by 2030). This obviously opens a lot of growth opportunities for renewable sector. With the emergence of innovative battery technologies, renewables have gained more popularity as the excess energy can also be traded.

Moving from just recommendations to regulating and establishing standards make the greenwashers more wary of the consequences of getting caught. As in case of presence of regulations, greenwashing can result in penalties and in worst case closing of business.

Q8: Of the 17 UN Sustainable Development Goals, would you agree that Goal 7 - the provision of clean and affordable energy is at the forefront of society's challenge amidst COVID-19? If so, what will the next few years hold in store for the progress of SDG7 as we bounce back from the economic shock of a global pandemic?


Absolutely, SDG 7 along with SDG 13 is the most important among the 17 SDGs. There are countries incentivizing adoption of clean energy through production-based incentives, investment-based incentives and the robust regulatory framework. For instance, many countries provide minimum feed-in tariff where the producers are guaranteed minimum price per kWh for pre-agreed period. Similarly, many agencies provide interest free loans for the purchase of equipment. There are tax (direct and indirect) rebates as well in most of the countries.

The next stage is promoting and incentivizing the production of battery technologies. This can be game changer as the batteries are essential to realize the full potential of clean energy. With more research and development efforts, we can also tackle the issue of carbon footprints of ships. The battery manufacturing market is already a billion-dollar market but I think more policy initiatives are required to scale the efforts, especially in emerging market.


E.A.S.I. Consult LLC