Climate change will return as the number one topic for individuals considering environmental, societal and governance factors in 2021, David Macri CIO of Australian Ethical reckons.

“It has been a big focus but I’d say the pandemic perhaps has diverted a bit of attention away from it in the last year,” Macri says.

Australian Ethical, the fund that has pitched itself to superannuants seeking to make a positive impact on the planet has been the fastest growing fund during the past five years excluding growth via fund mergers.

While other topics including corporate culture and societal impacts of technology and ethical considerations of healthcare innovation and accessibility might have crowded the agenda in the last 12 months, Macri says the stage is set for a greater focus on climate this year, particularly in light of the election of US President Joe Biden and the control of the US Senate falling with the Democratic party.

US Democrats have flagged support for cutting greenhouse-gas emissions in half by 2030 towards a net zero emissions target in 2050, a contrast to the stalled climate initiatives under the Trump administration.

Further, last year’s landmark settlement by REST Super with a member who brought a case against the super fund for failing to address climate change risks is expected to progress the approach super funds take to investing as fund agreements with investment firms are revisited.

Macri also notes the 2020 bushfires remain front of mind for many Australians as a reminder of the importance of climate change.

“A lot of the companies that are exposed to positive solutions to climate change, be it renewable energy, energy storage, electric vehicles they’re all benefiting from change in sentiment which is being brought about because of the expected focus on the Biden government and the expectation that business will be easier to do,” Macri says.

“Europe has already been on that [zero net emissions path], to get the US pivoting towards that would be a massive step in the right direction.”

The investment community will play an important role in the escalation of climate factoring into valuation of companies and assets, Macri says, pointing to Blackrock CEO and chairman Larry Fink’s annual letter to shareholders last year highlighting climate change a defining factor in companies’ long-term prospects. In the letter the head of the $US7 trillion investment firm said he expects companies to get better at disclosing a plan for transitioning to a lower carbon economy.

“There’s a lot more talk about next emissions targets, not only by countries but companies too… it’s just a matter of time before the big corporates that haven’t turned their attention to this will be,” Macri says.

Smith is head of content and managing editor of Professional Planner and Investment Magazine.
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