The International Sustainable Finance Centre (ISFC) is an independent, impact-driven think tank based in Prague in the Czech Republic, whose aim is to carry out in-depth research and educate on sustainable finance topics.
Julian Toth is the Chief Operating Officer of ISFC. He has an MSc in Ecological Economics from the University of Edinburgh and he spent the last five years working at BlackRock in the United Kingdom.
Can you please briefly summarize what is the International Sustainable Finance Centre and what you are doing?
We are a think tank based in Prague, specialising in sustainable finance and its application in both the public and private sector. We operate as an independent, apolitical, and non-profit organisation, and predominantly focus our activities on the countries of V4 (Poland, Czech Republic, Hungary, Slovakia).
Our aim is to build local knowledge, networks and capacity on sustainable finance topics, such as responsible and environmental, social and governance (ESG) investing, just transition, Post-COVID-19 recovery, green bonds, and EU sustainable finance policy including the EU Green deal and taxonomy. We do this by carrying out original research, organising events and workshops with leading experts, and publishing papers and opinion pieces on the relevant subjects. Through our work and expertise, we try to provide practical impact-driven solutions to improve the efficiency of financing the transition to a low-carbon and inclusive economy in the region.
In other words, we research and analyse sustainable finance issues and policy, and then communicate it to the widest possible audience in an easy-to-understand format. In addition, we sometimes also offer advisory and consulting services.
What is the history of this think tank? Where did the idea come from to establish such an organisation and where do you see ISFC in 5 years?
The ISFC was founded by Linda Zeilina, the CEO of the centre. The idea to start this kind of organisation came up during her temporary visiting fellowship with another Prague based think tank back in 2019, where she focused her research on decarbonisation strategies for Central Europe. Linda, as a London-based consultant on sustainable finance, noticed that the CEE region was often lacking representation in international conferences on sustainable finance topics. During her work in the Central European region, she further recognised that the current debate on sustainable finance was lagging behind Western and Northern Europe. She saw this as an opportunity to leverage her expertise and networks to help the region to reach the goals in the EU agenda and Paris Agreement. I then joined her as the Chief Operating Officer (COO) in September 2020.
Five years is a long time and we definitely don’t want to get ahead of ourselves, but in 2026 we hope to be a well-established and credible regional advisor and key knowledge hub for sustainable finance. By then, we aim to have a strong track record of impactful projects enabling governments, public institutions and private sector organisations to take advantage of the transition process in a way that benefits both the people and the environment.
How big a challenge is the fragmentation (countries, languages etc.) of the CEE region for you?
Languages have been less of a problem than we expected. Vast majority of people we have met or talked to from different sectors, organisations or even generations, had a great level of English and there was no problem with communication whatsoever.
There are, of course, many differences among the CEE countries we encounter in our work, such as, for example, the economic situation, industry mix, or access to markets, which can make it more challenging for us to design impactful solutions for the region.
However, there also seem to be a lot of characteristics that we share. On the one hand there is still evident skepticism towards the green transition, the EU agenda or sustainability concepts in general, but on the other, we see more and more progressive and innovative businesses and initiatives aiming to have positive environmental and societal impact. We also see changes to how people live their lives, select and consume products, and how they think about the impact of their actions on future generations. Things are definitely changing and people are starting to get more curious and involved when it comes to these subjects.
Not only the region but also ISFC is really diverse. How does this diverse background of your colleagues and advisory bodies help your work?
That is correct, our team comes from a wide variety of backgrounds in terms of our work experience and education. We have people from the financial sector and investing, consulting, environmental organisations, academia, law, journalism and international development or relations. Each person brings expertise on a different topic and a valuable network from their sector.
Some of our backgrounds might even look eclectic at first. In fact, we tend to joke that a potential slogan for our organisation could be “Where BlackRock meets Greenpeace”, as I spent nearly six years at BlackRock and our colleague David Murphy was the Executive Director of Greenpeace Czech Republic for even longer. Our management and advisory board is also very international and diverse.
In general, we believe that diversity is key for our success, as it brings different experiences and cognitive approaches. These lead to different perspectives when people look at problems. A diverse team often means diverse ideas, and they are the foundation to creative solutions. And that is exactly what we try to do in our work: solve problems. Whether it is climate change, post-pandemic economic recovery or inequalities in society, we try to find the most efficient and impactful way of how to tackle these challenges.
Who is a typical business partner for you? Do you work more with public or private partners?
This varies from project to project, but in general we work with nearly all types of organisations. This could be other think tanks or NGOs, universities, government, but also private sector companies such as banks, investment funds or consulting firms. We tend to closely collaborate with relevant experts from areas we work on. For example, during the research for our recent publication on just transition process in the Czech Republic, we convened a task force consisting of people involved in this topic, such as academics, civil society, or municipalities and government representatives, to get the most up-to-date information and insights for our study.
Unlike some other think tanks, we also focus on engaging with the private sector, mainly when it comes to sustainable investing and ESG practices at regional financial companies. We strongly believe that mobilising the capital from private companies is essential for the success of the transition to low carbon economy and post-COVID-19 recovery, and so we work with banks and investment managers to help them allocate their funds for maximum impact or in line with the EU sustainable finance policy. While sustainability is still a new concept for many companies in the region, we start to see increased activity and interest from some of the leaders in the financial sectors.
What are the typical challenges for banks and investors in the region in terms of ESG?
We may not have been around long enough to see the full picture, however, some of the most frequent challenges we identified have been these:
1) Level of understanding:
ESG and sustainable investing are fairly new themes in the financial sector, and even more so for the financial sector in CEE. Therefore, the level of understanding has generally been low, with many concepts being misunderstood or ignored completely based on wrong assumptions or insufficient information. There is strong scepticism against some aspects of sustainability in finance, which is often seen as a forced green agenda from “the west” or the EU. This then leads to some financial companies neglecting investing money and time in understanding these topics.
This is a problem, because sustainability is a mega trend that is here to stay. Sustainable investing encompasses not only environmental aspects, but also social or socio-economic ones such as growing inequality. The trends in sustainable finance show that the sooner companies adapt, the sooner they will get a competitive advantage and save money in the long term. In fact, it is now more crucial than ever to embrace the change, given the strong focus of the EU policy (EU Green deal, EU Taxonomy) on sustainability, and positive environmental and social impact.
2) Disclosure and lack of government signals:
Another challenge, which is still an issue in other regions too, is disclosure of information from companies. In order for investors to assess ESG properly, they require data. This data is based on the non-financial information companies disclose in their reporting or other forms of communication. In general, even when the data is provided, it is often not sufficiently consistent, comprehensive or comparable, and so it is difficult to analyse. The recent policies such as the EU taxonomy, non-financial reporting directive (NFRD), or Task Force on Climate-related Financial Disclosures (TCFD), which require companies to publish data on the impact of their operations, are paving the way to disclosure standardisation, which should ensure more adequate quality of data and more efficient process for data collection. Because of the reluctance of the CEE governments to opt for ambitious implementation of these policies and reporting requirements, it makes it very difficult for investors to assess ESG risks associated with the companies in the region.
3) Financial literacy and client demand:
In comparison with some other countries, investors in the region are less experienced with new sustainable financial products and impact-driven strategies. This is the case especially when it comes to retail investors. As sustainability concepts are not yet widely integrated in people’s lifestyle, education or governments’ agendas, the overall knowledge of ESG investing is poor and thus customer demand has been very low. This then often leads to companies lacking the incentive to promote ESG investment opportunities, making it difficult for more conscious investors to allocate their capital to responsible companies. New legislation mentioned before will likely increase the offering in ESG funds, however, more engaged approach from clients on how their money is invested can definitely contribute to positive change in the financial sectors.
Let us close with a more personal question: you lived and worked in the UK and came back to CEE after several years. How satisfied are you with your decision so far?
This is a good question, and it’s something I have been asking myself during the long days of recent lockdowns. After many years of living, studying and working in Edinburgh, I moved to Prague in September 2020. I went from one beautiful city to another, which definitely made my transition much easier. In addition, most of my close friends live in Prague and so it very much felt like coming back home, therefore I have no regrets whatsoever. Also, I am now closer to my family based in my hometown of Kosice in Slovakia, although travelling back home has not been easy during the pandemic.
I moved here specifically for my current role at the ISFC. After completing my masters degree, I started looking for a job in sustainable finance. I hoped to find a job in the Central European region, however, this topic is fairly underdeveloped here and so there were limited opportunities. It was a pleasant coincidence that the centre was starting exactly during my job hunt. My background was in a large financial firm and so moving to a small new organisation was definitely a new experience to me, but certainly very rewarding. It enables me to leverage my experience in a creative and hands-on way, while working with great people at the forefront of sustainable finance in the region. So, all in all, pretty happy so far!