Written by Eivind Lorgen
Leadership and bravery are often seen as distinct qualities, but today’s emerging leaders must possess both to succeed in a rapidly evolving, sustainability-driven market economy focused on financial materiality.
Bold leaders will guide their companies through the transition from a carbon-based society to one that embraces renewable energy and lower carbon emissions. At the same time, they must navigate a complex and shifting political climate at both the federal and state levels.
Nowhere is this leadership more essential than in industries that contribute significantly to global greenhouse gas emissions—such as oil and gas, real estate, transportation, industrials, agriculture, and the financial institutions that fund these sectors.
Understanding how leadership functions in a sustainable economy is essential as companies, investors, and regulators work to build a more resilient financial system.
In addition to cutting carbon emissions, today’s leaders must prioritize cultivating high-performing corporate cultures that drive financial performance.
Emerging leaders must focus on developing corporate cultures that foster innovation, inclusion, and profitability—creating opportunities that are not only fair, but also sustainable.
As a former Division 1 varsity soccer player, I understand the importance of having a well-rounded team. Even with the best offensive players, you will never win a championship without diversity in skill sets and leadership on the field.
The same principle applies to corporate leadership. A diverse executive team—comprised of individuals with varying backgrounds and experiences—will challenge each other, strengthen decision-making, and ultimately drive performance.
It can be tempting, especially in today’s political climate, to substitute genuine cultural development with policies that foster “groupthink” and organizational stagnation.
Strong leadership teams do the opposite. They encourage debate, embrace diverse perspectives, and challenge the status quo in pursuit of better results.
By investing in human capital—the most valuable financial asset—organizations can strengthen decision-making and build a more resilient foundation for a shared and sustainable economy.
Several leading U.S. companies have set an important example of sustainable leadership.
These organizations have integrated material sustainability accounting metrics into their operations, improving risk management, financial performance, and sustainability outcomes. In doing so, they are linking traditional financial ratios with financially material sustainability metrics.
A growing trend among leading firms is the move away from superficial ESG marketing statements toward robust, transparent sustainability accounting, reporting, and disclosure.
This shift represents a meaningful step forward. As sustainability metrics become increasingly relevant for investors and regulators, more U.S. companies will follow suit in order to remain competitive in the global marketplace.
We have reached a critical point where investors and regulators can no longer rely solely on voluntary sustainability reporting.
As seen in Europe, consistent and comparable sustainability accounting is essential for transparency—especially when evaluating financially material sustainability matters.
I strongly encourage the U.S. Securities and Exchange Commission and state regulators to expand corporate climate reporting. These frameworks should include other material sustainability disclosures where relevant.
Expanding federal and state regulatory frameworks will drive progress on financially material sustainability issues across industries.
Investors and analysts—often affectionately called “financial data nerds”—are eager to incorporate sustainability data into company performance analysis. Access to reliable information helps improve valuation, price discovery, and long-term capital allocation.
Excluding material sustainability data for political reasons undermines the free market and limits companies’ ability to attract long-term investment capital.
It took nearly a century to establish the financial accounting and reporting standards that investors rely on today to compare company performance.
The encouraging news is that we will not need another hundred years to develop robust sustainability accounting standards.
The International Sustainability Standards Board (ISSB) is working to consolidate existing frameworks and establish a global baseline for sustainability accounting and disclosure.
These new disclosure standards focus on financial materiality and aim to provide investors with clear, comparable information.
At the same time, the renewed Sustainability Accounting Standards Board (SASB) standards continue to improve our understanding of how corporate sustainability practices influence long-term enterprise value creation—or destruction.
My hope is that within the next four years, leaders will have fully integrated financial and sustainability metrics into a unified and audited accounting framework.
Such a framework would allow investors, shareholders, regulators, analysts, and other financial stakeholders to make more informed investment decisions.
Capital will increasingly flow toward profitable, long-term, sustainable business models.
High-performing companies will prioritize designing products and services that do not harm society or the environment.
This evolution may eventually lead to the development of “impact accounting” metrics, often referred to as double materiality. These frameworks consider not only how sustainability affects financial performance, but also how corporate activities affect society and the environment.
For example, the societal costs of excessive sugar consumption contributing to Type 2 diabetes—or the environmental cost of plastic waste—could eventually be reflected in corporate balance sheets, much like the financial consequences of tobacco products were addressed in the late 1990s.
Teaching sustainable finance to emerging leaders gives me hope. Many students are deeply committed to developing solutions for a more sustainable future. While some states are moving in the right direction, there is still significant work to be done if the United States hopes to remain competitive globally.
To accelerate progress, more executive teams and boardrooms must embrace bold leadership. This means advancing decarbonization and climate-resilience strategies while increasing investments in climate technology.
During the transition toward a cleaner economy, societies will likely need to balance multiple energy solutions simultaneously. Take Texas as an example. Texas is the fourth-largest oil producer in the world, yet it is also the leading U.S. state for wind energy, large-scale solar generation, and battery storage. A state that experienced significant energy challenges only a few years ago has since increased grid capacity through a combination of renewable and non-renewable energy sources to ensure affordable and reliable power.
At the same time, organizations must continue strengthening human capital strategies and building corporate cultures that encourage innovation, accountability, and long-term performance.
Despite today’s political challenges, investors are increasingly focused on long-term sustainability. The market leaders of tomorrow will be those who successfully balance two priorities:
Our emerging leaders must be brave enough to pursue both.
Eivind Lorgen is a lecturer at IENYC and teaches the course Money as a Force for Social Good. He is a founding member of the Investor Advisory Group for the SASB Standards and serves as Chair Emeritus. Previously, he was CEO and President, North America, for Nordea Asset Management. He also serves on the Reiman School of Finance Advisory Board at the Daniels College of Business at the University of Denver.
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