Investors call for corporate action ahead of US climate summit
More than five years on from the adoption of the Paris Agreement, the US is attempting to reassume leadership of the fight against climate change. By bringing together 40 world leaders for a virtual climate summit on 22 April, President Joe Biden is hoping to galvanise countries into action ahead of November’s UN Climate Change Conference in Glasgow.
While net-zero targets have proliferated following a pandemic-induced awakening to the urgency of climate risks, there has not been the same level of concerted action at the corporate level. As the risks of climate change rise with each minute of inaction, investors are urging the private sector to do more. See below for views from our spokespeople on how the custodians of capital can incite corporations to change, while benefiting from the opportunities of a cleaner climate.
Taimur Hyat, Chief Operating Officer at PGIM, says: “In a major study of more than 100 large global institutional CIOs, each managing in excess of USD3 billion, we found 42 per cent are not incorporating climate change considerations into investment processes. This number rises to 53 per cent in the US, which is currently far less ESG cognisant than Europe. More worryingly, 40 per cent currently believe climate change is ‘not significant’ in asset allocation decisions. To reverse these behaviours and mindsets, it is imperative investors build an opportunity-driven agenda for tackling climate change centred around three key investment themes.”
Natasha Landell-Mills, Head of Stewardship at Sarasin & Partners, adds: “Sarasin will be more focused than ever on the investment opportunities and risks the accelerating energy transition brings. Our company engagements with BP, Shell and Total have provided a platform to send a clear message to all companies, auditors and regulators. Above all, in the run up to the next international negotiations on climate change in November, we will further amplify the centrality of Paris-aligned accounting and audit.”
Eric Pedersen, Head of Responsible Investments at Nordea Asset Management, comments: “During 2020, Nordea Asset Management became a founding member of the Net Zero Asset Managers initiative, a global coalition of asset managers working for the achievement of net-zero greenhouse gas emissions by 2050, and adopted a historic set of climate targets to support this ambition. We also co-developed a Net Zero Investment Framework together with other members of the Institutional Investor Group on Climate Change.”
Esmé van Herwijnen, Senior Responsible Investment Analyst at EdenTree Investment Management, says: “Net-zero targets are welcome as they send a strong signal, and we are seeing many companies making such commitments. However, this is not enough. Net-zero targets need to be followed by short-term, medium-term and long-term targets to reduce emissions. At EdenTree, we start with the data and we have been very transparent about this since 2015. We now have a five-year track record of portfolio emissions and we closely monitor the progress and targets set by companies in our portfolios. What we want to see is an increase in the number of companies setting science-based targets, as we know this will incrementally lead to portfolio decarbonisation in line with the Paris Agreement. We will continue to monitor this and engage with companies in all sectors to encourage higher ambitions.”
Jonathan Bailey, head of ESG investing at Neuberger Berman, adds: “At Neuberger Berman, climate risk is never out of focus. We believe it affects business in two major ways: through direct physical impact and the transition to a low-carbon economy. Extreme weather events, wildfires, floods and higher sea levels are likely to disrupt supply chains and threaten the viability of some capital assets. Carbon taxes, regulation, green fiscal spending, energy transitions and changing purchasing behaviour are likely to create new winners and losers. This is why we developed a comprehensive Climate-related Corporate Strategy three years ago, to reflect the growing climate risks in our operations and investments. Since then, we have made substantial investments in data-driven climate risk analytical capabilities – efforts that saw us named in the United Nations-supported Principles for Responsible Investment Leaders’ Group for 2020, on the theme of climate reporting.”
Michael Ackerman, CEO at EcoForests Asset Management, comments: “The carbon capture and improvements to biodiversity timber investments can generate are unmatched. Costa Rica is a great example of how a well-structure collaboration between the governments, landowners and investors doubled the country’s forest area in just 30 years, helping the country on its path to net-zero emissions.”
Liam Thomas, CEO of US Solar Fund, says: “USF is particularly set to benefit from Biden’s infrastructure and renewables spending. It is the only investment trust with pure-play access to the US renewables boom. USF acquires, constructs, owns and operates solar power assets with an expected asset life of at least 30 years. Currently, USF boasts 42 operational solar plants across four US states, generating 374GWh last year. This is equivalent to displacing over 618,000 tonnes of CO2, powering over 74,000 US homes, or removing over 134,000 US cars from the road every year.”