Can the seemingly insatiable appetite for anything Facebook guide the pension industry on how to create the same demand, and market, for climate change?
Whatever the view of the application to your own needs, there is no denying that Facebook is a phenomenon – 500 million users attest to that.
Facebook is entertaining; it’s sometimes, or potentially, sexy; often pointless; and has an incredible reach.
It has also now eclipsed Amazon, Walmart, Netflix, and even Google as the foremost brand name in web searches from US users, according to research from Hitwise, which measures data and statistics covering internet usage.
It has a brand that people want to be a part of. And that’s just its users.
Now it’s also part of a new secondary trading tier in unlisted private markets, where an entire market is evolving. And again, for Facebook, the desire seems voracious.
A recent article published by EDHEC-Risk Institute’s research associate and editor of Investment Management Review, Arjuna Sittampalam, explores this new market where the public is showing interest in investing in unquoted shares, including Facebook but also Twitter and LinkedIn.
While investing in private firms is not new for institutions, Sittampalam argues the difference this time is the sellers are employees who have been allocated shares and are looking to sell them early, and not the companies themselves.
Investors can buy these unquoted shares through an online secondary exchange, as well as through company-specific funds (such as that set up by EB Exchange Funds in San Francisco which has created a new fund specifically for holding Facebook shares).
Climate change, and more specifically carbon, on the other hand has had a much more difficult time creating a financial market.
There have been some inroads such as the World Bank green bonds, and large institutional investors such as the Dutch ATP with its €1 billion-in-waiting, looking at infrastructure and direct investments in climate-related investments. The hold-up is largely structural and political.
The argument for the formation of financial markets is they can help reduce overall economic costs and share risks efficiently. And DB Research argues that a climate-related investment market helps lower the cost of debt and equity financing for climate protection and adjustment technology.
The University of Berkeley’s Barry Eichengreen, argues the advantages of financial markets with regard to climate change are particularly compelling, as they can offer instruments which insure against extreme outcomes like flood or drought that may result from climate change.
But for the most part, while the academic and even practical evidence points to good reason for a financial market in climate change, it’s been slow.
While there are many flaws to the comparison between an entire industry and one company – including the often seemingly insurmountable political and regulatory hurdles – Facebook may be able to teach a thing or two about market creation. And it’s all in the brand.
Brand is the identity of a product, service or company, but for its users it’s also the experience, psychologically and physically; and perhaps more immeasurably the expectation of that experience.
For the financial market “users” of climate change, life has been difficult. The market is complex, politically-driven, expensive and shallow. Not attributes typically associated with a good brand.
The frustrating part is the creation of a financial market for climate change should be associated with influence, change, impact, the future and efficiency.
So is the creation of a market for climate change simply a matter of brand, of awareness, of interest? If so, there is a big account out there for an agency wishing to spend the time and money on the enormous task of rebranding climate change.
Editor’s note: Be careful of your grammatical choices in referencing Facebook … Point seven in the Facebook brand resource and permissions centre says: “Do not use Facebook, or any other of our trademarks, as a verb. And don’t pluralise them either.”
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