The world’s finance and private sectors are now “front and centre” in terms of the climate crisis, according to incoming Conexus Financial CEO Fiona Reynolds.
“There’s much more understanding now that you’re not going to solve the climate crisis without private finance business and investment,’’ she told a panel discussion at Investment Magazine’s Fiduciary Investors Symposium.
“I worry a bit now that governments are going to push everything onto the private sector and it’s going to be our problem and we’re solving it and not them and they’re not going to create the roadmaps to help people,’’ she said.
Reynolds, who stepped down as Principles for Responsible Investment (PRI) chief in December after nine years, says UN Special Envoy for Climate Action and Finance, Mark Carney, has garnered an alliance for net zero commitments bridging together insurers, banks, institutional managers and owners and others.
“It ended up with 450 organisations, US$130 triliion in assets under management from 45 countries that have made net zero commitments by 2050 and within that there are a number of initiatives,’’ she said.
Alive but a weak pulse
The goal to limit global warming to 1.5 degrees is “alive but has a weak pulse” with the success of COP26 thanks to the finance sector’s input, she added.
The task now for institutional investors is to escalate pressure on net zero commitments from their holdings.
“We need to see, across the world, between US$100-150 trillion being pumped in to actually achieve net zero,’’ she said.
“I don’t see yet there’s a lot of that investment being made (and) there’s a lot of focus on the engagement side… there needs to be an understanding on escalation. If you’re engaging and you’re engaging and you’re engaging and nothing’s changing, what are you going to do to escalate.’’
She expects similar events to the US’s largest oil company ExxonMobil’s annual meeting where activist shareholder pension funds ousted directors for lack of action on climate strategies.
“That’s what we’re talking about in escalation. If you don’t want to divest then you get rid of the board and get people to bring change to the organisation and I expect we’ll see a lot more of that escalation happening over the next few years,’’ Reynolds said.
Not fast enough
Jen Peers, chief executive and chief investment officer of sustainable financier Mirova, said fossil fuel companies are not transitioning quickly enough towards a low carbon economy with a required carbon emission reduction of 55 per cent between now and 2030.
“That’s a huge amount and that’s something you can’t do without investing in solutions and to reforestation as well,’’ Peers told the panel discussion.
“We want to break it down to asset classes but really start with offering financing solutions. That goes from anything from the bond side, green and social bonds, and its a rapidly growing market.’’
He says financing infrastructure that prevents land degradation, encourages reforestation, sustainable agriculture, carbon sinks, sustainable forestry and oceans as well as more private equity focused on financing business models to solve emissions reduction, is required.
PRI incoming chief executive David Atkin, formerly CBUS chief executive from 2008 to 2020, says the superfund was one of the first to “put that stake in the ground” on zero emissions from its investments and would meet 2030 targets sooner than expected.
Fund members had an expectation that its investment team would ensure that their savings were being protected from climate risk, he said.
Atkins said the super sector has more work to do to communicate to members on climate change commitments.
“We’ve got talented people who are good at assessing risk and opportunity (but) we’ve got some work to do to translate what we do and how we create and protect value in language that our members understand,’’ he said.
“That translation piece is critical because if we’re going to retain people’s trust through periods of vulnerability we have to work harder on explaining what we do, how we do it and remaining accountable.
“The fight against climate change is roughly about one per cent global GDP and, in not doing anything, will probably cost about five per cent [of] GDP [so] your returns will be lower if you don’t do it.”