Lucas Marsden of FTI Consulting Warns Companies Must Build Diligence & Accountability Into Global ESG Efforts

Companies doing business in Latin America – or anywhere, must manage operational risk. FTI Consulting was present at CGS 2024 in Medellín, also known as the Colombia Gold Summit, where consultant Lucas Marsden gave a talk on the pitfalls that companies face as they attempt to be forward facing and progressive on the environment, but may fail to have a positive impact, or in some cases cause more harm than good.  It is important, Marsden explains, for companies to have advisors with local knowledge and expertise – “boots on the ground,” as they say, to provide the best, most timely and relevant guidance. After his presentation, Marsden spent a few moments with Loren Moss, executive editor of Finance Colombia.

Finance Colombia: So, you gave a really interesting talk today. We’re at the CGS 2024 Colombia Gold Summit, put on every year by Paul Harris and his team. Now, FTI, you guys are known as one of the most important consultants across, I think, the globe, but I know certainly across the Americas. Now, you talked today about the politics of energy transition, and that’s an interesting thing because we go back and forth. There’s like a tug of war between the right and the left everywhere, even down here in Latin America, and specifically in Colombia.

At this mining event, there is a lot of consternation, and I’ve seen the same thing at petroleum events that I’ve attended, and there’s a lot of uncertainty regarding governmental policy and that kind of thing. So, tell me about, when you talk about the politics of energy transition, especially down here in Latin America, what tend to be some of the major obstacles that your corporate clients might come across?

Lucas Marsden: Sure. Well, I mean, it’s a topical time to be talking about this because we’re not just having Colombia Gold Symposium here; we have got COP16 happening in Cali, and we have roadblocks, we’ve had roadblocks across the country from the mining sector, and farmers that are protesting changes that are being made by the government, environmentally related. Some risks exist on all levels, right? From your macro political to your operational. And what I feel like our clients are currently worried about are being able to comply reputationally and legally with all the new encouraging sort of biodiversity carbon targets that are coming out, that are coming out this week, that came out yesterday on biodiversity credits.

How they can do well by that? Because these things can be made into, you know, black and white, simple concepts, but the actual reality of investing in Colombia and investing in a couple of projects in Colombia or biodiversity is incredibly complicated and involves the social element of getting communities inside, it involves local government, anti-bribery and making sure that you’re getting that political stability and getting things to stay.

Finance Colombia: You know, one of the things that you talked about that I think is very important is a lot of companies will do things…I look at heavy manufacturing, for example, and they’ll go, “Look, we’re 100% carbon neutral” or “We’re green,” and they’ll go and do things like purchase carbon credits, which, conceptually, may be a good idea, but there are some dangers there. We find that a lot of those programs are…not only are they not regulated, but not necessarily monitored. So maybe you could touch on that because you gave some interesting case examples of that today.

“So a lot of what we do in FTI is help companies. It’s not just about the investment.” – Lucas Marsden

Lucas Marsden: Yeah, definitely. I mean, first off, just on that point of claims of net zero and nature-positive, which is the kind of biodiversity equivalent, our team in the UK and Europe were advising companies to be very careful about how they’re using these terms, because a general consumer will think, “Oh, net zero, it doesn’t have an impact on the environment.”

No. You know, you’re impacting the environment, but you’re also doing things to benefit it. So, that term “nature-positive”, there have been talks at COP16 to try to change that, to try to change it to “net positive” and more nuanced terms, because no company can be nature-positive, right? So, I think first, there’s that terminology issue and the reputational thing. But you’d like me to talk a bit more about the actual projects that we’re seeing and tracing and investments that-

Finance Colombia: Absolutely. I mean, obviously, don’t give away any client secrets, but we’d really love to hear about some of the ways that companies engage with FTI to kind of navigate this landscape.

Lucas Marsden: Yeah, I mean, the great news is that Latin America is the main receiver of climate-related funds, and there’s a huge amount of money, and this week with COP16 even more money being pumped into some incredible projects in, say, for example in Colombia, in Antioquia, in Vichada, around the Amazon. Some really incredible things are being done. I actually had a talk with one of the ministers of Indigenous Relations in Chile, who was telling me, “Look, all this money is pumping in, but what’s actually happening on the ground? Like, we’re not seeing this on the ground. We’re already protecting the environment.”

Saying, you know, “We’ve invested 20 million, might be great for a sort of top-level headline.” But, when you’re thinking about it actually being implemented, these communities are already doing this; they’re already protecting the oceans, they’re already protecting the landscape. So a lot of what we do in FTI is help companies. It’s not just about the investment, it’s about how do you get in a room with these communities, how do you find out what they’re doing, how do you increase those efforts so we’re not starting from zero and we’re not going in there and making a mess of things, which, unfortunately, has happened.

Finance Colombia: You know, you kind of almost answered my next question for you, and you’ve been generous with your time, and that was: You see a lot of these initiatives that are launched at a global level, or these guys go over there, Davos, Switzerland, and come up with this initiative, and they come on the ground and it’s like, “We’re going to do this or that,” but they don’t have input at the conceptual level or the decision-making level, with the local communities on the ground. You know, I’ve talked to friends in the Wayuu community, for example, here in Colombia. And on one hand, with some companies, they have great relationships because the companies have been very…I guess not presumptuous, or, you know, like, “Look, let’s come and listen to you first before we go and do anything,” or say, “What do you need?”

In other cases, they’ve been in more contentious relationships where some company comes in with some initiative that doesn’t take into account the actual needs on the ground, or not just the needs, but the beliefs and the wishes of those local communities. So, what can companies do and what have you seen that has been successful when companies try to engage, and so not just be environmentally responsible, but also socially responsible, and treat those local communities as equal stakeholders and partners, versus looking at them as, like, little children or something like that?

Lucas Marsden: Yeah, definitely. And I think that is the key to what this COP has been about. It’s called the COP of the people. It’s this idea that you can’t remove the environment from the social aspect and that there are communities that are living there that are making their income, their livings, from living in this kind of highly biodiverse place. So, that’s why there’s been so much encouraging indigenous participation at COP16. The first thing you need to do is actually understand who you’re talking to.

The other side of the business that we have is FCPA investigations, Department of Justice investigations, corruption; when things go wrong, we have an investigative team that goes and finds out what’s happened. A lot of the times what has happened is that you’re speaking to the leader of the community, you think that they represent the wider community, and they say, “Right, there’ll be no problem. We’ll sign all the papers; just help me with the roof of my house over here, and it’ll be okay.” Right? So, make sure that you’re not falling into those traps, that you’re not just saying- It’s not as simple as saying, “Okay, this is the leader of the community.” Unfortunately. You’ve got to have a wider thing and find those good actors, find the ones that are really benefits in the community and make sure you identify that. So, a big part of what we do is stakeholder mapping identification to make sure that that panorama is clear.

Finance Colombia: We have two audiences at Finance Colombia. Basically, either multinational executives that have current or potential operations in Colombia, and then, of course, institutional investors. Now, for those executives, when is the ideal time to engage with FTI Consulting? When should they reach out? When should they look at the services that you offer, like you just mentioned? What kind of due diligence, and that kind of thing. What’s the ideal circumstance and, maybe, the ideal client profile?

Lucas Marsden: Well, we embed ourselves and exist on top of the current situation, right? I mean, you get some consultancies that will come in and just start things from scratch. These companies, they know what they’re doing, they have very good risk profiles, they’ve got good boots on the ground. And that’s the real key part: having boots on the ground. So, I’ve been talking to some investors from some banks that said they wouldn’t invest in climate initiatives unless they have a presence in that country, an office. Not necessarily a risk office, but an office, so at least they understand the culture of it, right? And when it’s getting to that point…I mean, what I said about FTI is as early as possible. Anytime that you need that help with the identification, with understanding the culture. If you’ve got a team on the ground, if you’ve got a risk team, brilliant. If you don’t, we can help from scratch. If you do, then we can sit on top of what already exists, do some kind of external and second opinion, right? And yeah, that’s what we said.

Finance Colombia: It’s like when a large company is going to have in-house counsel, but they also have the law firms that they partner with. They may have risk experts, but it’s leveraging your expertise, and especially global expertise, when you’re going into new markets, maybe where they haven’t operated. Well, Lucas, thanks. You’ve been great with your time and, even more importantly, great with your knowledge here at CGS, and I hope to see you again.

Lucas Marsden: Great. Thank you very much.