Investors have different thoughts on the short-term future of responsible investment, as Donald Trump’s return to the White House not only brought doubts around the future of clean energy in the world’s largest economy but also threatens to change the course of net zero movements around the world.
Speaking at the Investment Magazine Chair Forum this month, Colonial First State Super chair Greg Cooper predicted that the next decade will be “a difficult period” for climate conscious investors for several reasons.
“The pullback in the US and the regulatory changes does alter the return profiles, and when you’re trying to act in members best financial interest, particularly over the time horizons that many of us are measured over, that actually creates a bit of a conundrum,” he told trustee and investment committee chairs attending the forum.
“I think we have a huge challenge against us in that respect, and we’ve got to continue to try and do what we can.
“But we’re not operating in a closed system – there are plenty of other actors out there. So we can do what we can do, but we’ve got to recognise that there is going to be a difficult environment [for responsible investors] to operate in.”
The sustainable investment sector has been in flux as evidenced by the suspension of activities from one of the most prominent climate investor coalitions, Net-Zero Asset Managers, this year. It came days after world’s largest investor BlackRock pulled out of the initiative in January.
Global head of sustainability at BNP Paribas Asset Management Jane Ambachtsheer acknowledged that global investors’ ability to collaborate around climate is “being challenged”, but this is not to say that investors are not making ground individually.
“I think there is still a lot of optimism around the clear direction of travel around the energy transition,” Ambachtsheer said.
“For every dollar spent globally developing fossil fuels, we’ve got $1.8 spent around clean energy; and we have many individual countries and states that have ambitious agendas to accelerate the energy transition.”
The incentive for fiduciary investors to collaborate on climate in the first place is because, as universal owners exposed to sectors and regions across the global economy, they cannot diversify away from that risk, Ambachtsheer said. The pushback can be seen as an indication that the collective demand for better climate policy from the government and climate governance from companies is being noticed.
“As long-term investors, we are committed to delivering sustainable returns to our clients. To do this, we are driven to help mitigate the worst impacts of climate,” she said.
The Conexus Institute* chair Jeremy Cooper said as much as net zero is a climate challenge, it is also a retirement challenge. Every fund has a young member who still has decades ahead in their life when Trump leaves the White House in four years, he said.
“There’s a big intergenerational story here going on. The funds that are long in fossil fuel companies, they’re making profits for the current day members,” he said. “But at the potential expense of the Emily’s of this world – the 25-year-old member is still going to be alive in 2080.”
“Of course, the other challenge we’ve got in this country… is we’ve got to decarbonise our intensely fossil fuel rich economy.
“I’m talking about iron ore. I’m talking about both types of coal. I’m talking about the LNG exports that are going on. Super has got to help big time in dealing with that.”
With a looming federal government election in Australia, both major political candidates have made different promises on how they will secure the nation’s energy future. While the incumbent Labor government is betting big on renewable power, enlisting the help of super funds in the process, the Coalition is firmly invested in a nuclear future.
Rest Super chair James Merlino said Australia, and many other countries, is at a point where cost-of-living issues takes prominence over climate change in the political debates.
“Focusing on the long-term economic benefits [of renewable energy], in terms of return to members and the impact on the national economy is where the debate needs to be,” he said.
“Because at the moment, people aren’t voting on climate. They’re not voting on the environment.
“The reality is that cost-of-living pressures are such an economic and political issue for families across the world.”
*The Conexus Institute is a not-for-profit think-tank philanthropically funded by Conexus Financial, publisher of Investment Magazine.
