Investors will not “save the world” from climate change without action from policymakers, finds CAMRADATA white paper

Earth from space

Climate-related investing has not been side-lined as the coronavirus pandemic tears through economies, with a new white paper by CAMRADATA finding that the fear of not having a “planet worth living on” has led to investors making it an embedded theme within investment strategies.

The data company hosted a virtual roundtable CAMRADATA in July, attended by Amundi Asset Management, Eaton Vance Investment Management, Cambridge Associates, Dalriada, National Grid UK Pension Scheme – Trustee Executive and Save the Children.

The last time the developed world found itself in such a perilous financial situation was during the banking crisis of 2008-2009, and climate change was taken off the agenda in international negotiations, according to Jean-Jacques Barbéris, head of institutional client coverage and ESG at Amundi.

“That’s why COP-15 at Copenhagen was a failure,” he said. “Today in the context of the pandemic crisis, climate change is not being pushed off the table.”

Barbéris added that policymakers bear the greatest responsibility because they hold a mandate from the people, pointing to current proposals in the US to de-emphasise ESG considerations for pension fund fiduciaries as a cause for concern.

Policymakers may need to enact further lockdowns in order to restrict climate change, in a similar vein to those that paralysed economies during the height of the coronavirus pandemic.

The white paper notes a study from Carbon Brief showing that global carbon emissions are expected to shrink 5.5 per cent this year because of the coronavirus pandemic and its associated lockdowns. However, to meet targets for restricting planetary warming, the economy needs to shrink by 7.6 per cent every year for the next 10 years.

“That is equivalent to 1.4x lockdowns in 2020, 2.8x lockdowns in 2021 and so on,” said Chris Varco, head of ESG at Cambridge Associates, a global investment firm.

Another roundtable attendee, Laura De Ornelas, investment strategist at the National Grid UK Pension Scheme, said the reason is that climate change poses an existential threat. 

“We all have to share the costs. Even pension scheme members, because not doing so might mean unpredictable levels of cost and disruption in the future,” she said, adding: “The risks are existential: we might not have a planet worth living on.”

The white paper notes that while pressure has crystallised in recent legislation that demands that UK pension trustees consider ESG, integration of ESG is still a work in progress for most investors.