Annebeth Roor-Wubs: Not the average, but the deviant

Annebeth Roor-Wubs: Not the average, but the deviant

Annebeth Roor-Wubs (foto archief EY)

This column was originally written in Dutch. This is an English translation.

There was a time in our lives when we asked this question about everything: why? Why this? Why that? Unfortunately, that time is long ago.

By Annebeth Roor-Wubs, Sustainable Finance Senior Consultant at EY and part-time PhD student at Rotterdam School of Management

As far as I am concerned, more questions should be asked within the financial sector, so that not the average, but the deviant, receives more attention. Both in conversations and in models. That takes courage. Courage to ask these questions yourself, but also to encourage each other to do this.

Three anecdotes about questions that are not asked enough

Number 1. My first lecture for the Bachelor's degree in Economics. The teacher explains which assumptions we use in the models: a person acts rationally (that is, maximally in his or her own self-interest) and all information is available on the market.

At the end of the lecture I ask her: 'If we know that people do not act rationally, why do the models assume that?' The answer: 'Because we need that assumption for this model.' End of conversation.

Why were we as students not challenged to come up with new models and included in the challenges? A Behavioral Economics paper followed in the last week of classes, but my legitimate question only appeared in the margins of the course.

Number 2. Over the past few years I have had several conversations. They go something like this: sustainable investing is very important. We have drawn up a policy for this. Much could not be executed due to our risk-return requirements, sector spread, risk appetite, required liquidity. So we've set up the policy to continue to meet those requirements. End of conversation.

The questions behind it are asked much less: what does this sector spread bring us? And to what extent? Which risks do we mitigate and how do sustainability choices influence this? What is liquidity needed for and to what extent?

Number 3. The NGFS scenarios are often taken as a starting point for the practice of climate policy, because they use peers and are drawn up by central banks. Current models show that there is a small risk for many financial institutions. We are surprised by the results and note that, contrary to our expectations, climate poses a limited risk. End of conversation.

Are the scenarios we choose realistic? Do we include the relevant effects of climate change in our models? What if more extreme events occur than the models' averages predict?[1]

The average as a problem

Of course, education is developing. Anecdotes only show part of what happens. But they do make me think. Why are these questions asked less? Is it because people don't think about it or because they don't understand it?

I think neither. There are now plenty of experts, also in the field of sustainability. I rather think the problem lies in the average. The average of the peers, which is the benchmark, which a reliable authority has published. The average as the logical and safe option, with which – if things go wrong – you are not alone. Well justified, we think.

However, anecdotes show that this leads to a suboptimal outcome. Our students are usually not challenged to come up with the models of tomorrow. Our assumptions are not adjusted based on evolving insights into risks and returns. Our climate scenarios are not drawn up on the basis of the actual effects that are expected.

The deviant as an alternative

How do we ensure that these questions are asked more often? It is a combination of factors, but let me stand up for the deviant.

Firstly, there must be room for the deviant in our thinking. How great it would be if critical questions were asked more often and were better appreciated. Not as doubting an honest intention or a good plan, but as a contribution to the conversation, as an improvement of the plan. When I want to continue quickly and someone cracks a critical note, I recognize that I have to switch gears and make space. Because a critical note from good motivation almost always leads to better results.

The deviation can also be expressed in background and generation. The average pension fund board is not representative of the generations for which they make choices. You can invite the future generation to the table even more explicitly in various ways. Furthermore, in addition to economists and business scientists, a biologist, an engineer or an ethicist in the team can provide valuable additional perspectives.

The deviation can also be reflected in our models. For example, by updating models based on insights from science and practice. Or by using scenarios to better look ahead, instead of relying on historical data. Not because you know exactly when an extreme situation will occur (war, economic crisis, hailstorms), but so that you know what to do in that situation and what the possible impact is.

It is important that uncertainty is not seen as an accepted limitation of the models, but as an ingredient of the considerations. Various alternatives are already used within risk management. Insights from behavioral risk management and behavioral economics, among others, can be used for this.

I realize that questions are easier asked than answered. But questions not asked will get us even less far. If we ask them, we can continue on our journey together. It reminds me of our tagline: 'The better the question. The better the answer. The better the world works.' But how do we ensure that the deviant comes to the fore?


That takes courage[2]. The courage to do difficult or exciting things. An inner attitude that gives strength to be deviant. The Latin word for courage, fortitudo, has forte in it, which means strength.

Acting powerfully does not mean acting without fear. It means that you do not settle for the average, with the suboptimal outcome, but want to look further. Not recklessly or unconsciously, but from a motivation for good. Explicitly bringing a broader perspective to the table takes courage, especially in situations where there seems to be limited room for consideration.

The challenges of our time can lead to fatalism, but they can also provide the motivation to rise with courage. The difference often lies in whether you think you can change something yourself. The financial sector has been sufficiently called upon to take up its role in these challenges. So loosely translated, I would say that everyone who works in the financial sector can contribute to this. That courage grows when we talk about it, so here it is. That also gives the investor courage.


[2] The following publication was used for the definition of courage ‘Tien deugden voor politiek en overheid’.