Last week at a gathering of Europeans for Divest Invest[i], of which my own foundation is a member, Christiana Figueres gave two clear messages1. The first was a positive one – don’t listen to the naysayers, there is a lot of progress being made, even if a global carbon price is not going to be achieved. The second was bleaker – we have 5 to 10 years to take the kind of forceful action that is needed, and we need a sharp pivot from “Business as Usual” to “Business as Urgent”.
Despite the backing of the European oil companies and others, it seems as though the setting of a global carbon price isn’t going to be the magic bullet that saves the day, as another speaker, Lord Adair Turner, explained. When Segolene Royal, France’s energy minister, spoke yesterday about a carbon price of $100 by 2100, I felt, not for the first time, as though there’s a parallel universe amongst current decision-makers. If we still need a carbon price in 2100 we’re in big trouble.
So if a carbon price isn’t the answer, what is? The conversation in the room was of the irresistible force, meeting the immoveable object. Engagement with companies was seen as the next step beyond Divest-Invest, and Portfolio Decarbonisation, yet we had a clear message from Helena Morrissey, CEO of Newton and Chair of the Investment Association, that climate change doesn’t even make it into the top ten concerns of investment managers when they talk to companies, a point reinforced by other investment professionals who were all, and very creditably, being unusually honest.
Forceful stewardship seeks to change the dynamic by putting the onus on the long horizon and well diversified asset owners themselves who have a fiduciary duty to safeguard value across their portfolios for the benefit of future members. As climate change threatens to destroy value across their portfolios, they have a professional, not a moral duty, to act to prevent this from happening. The forceful stewardship guidelines seek to work with the grain, by encouraging asset owners, through their investment managers, to vote for companies to publish their business plans for how they will help make the transition to a world where warming is capped at 2 degrees.
We are asking asset owners and large investment managers (and index managers were rightly mentioned several times) to be conscious of long term risk, rather than just focusing on the immediate environment. The process has already begun, with BHP Billiton’s presentation of its climate strategy. We need to use that to move swiftly to the tipping point, where not to have a 2 degree transition plan is an indication of poor management.
This is what we will be working towards at Preventable Surprises.
Carolyn Hayman OBE
Chair, Preventable Surprises
[i] http://divestinvest.org/europe/home/events/managing-value-at-risk-for-portfolios-from-climate-change-what-are-the-financial-implications-of-cop21/