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This session looked at the the importance of net zero 2050 and the opportunity for a turning point post COVID-19. It examined net zero investor tools, the role of engagement, and gave examples of how investors are aligning their portfolios with the goal of the Paris Agreement.[vc_quotes layout=”accordion” 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title=”Moderator” el_class=””][vc_empty_space height=”10px”]
There will be different net zero pathways for different sectors and regions.
Developing carbon footprinting capabilities is not without its challenges, for example it is backward looking and it doesn’t give you the whole story. You need to go beyond that with forward looking tools.
It is important to consider how resilient a portfolio is to different climate scenarios and potential policy developments.
It is still a challenge for some to articulate how targets are being put into action.
We must continually ask ourselves – what is our impact on the real economy? Reporting on real world impact of decarbonisation is a work in progress.
Investors need to assess whether they are comfortable with the risks related to physical and regulatory factors.
We often talk about climate risks, but investors can take advantage of the many companies that will benefit from the transition to a green economy.
Anne
Greenhouse gases do not have a passport, so we need a global strategy.
We cannot exclude anyone. We cannot exclude emerging markets. We are all in the same boat amidst the same storm. We are seeing the first results in India of major companies committing to net zero.
There must be dialogue with regulators and government agencies. We only make progress through partnerships. Money does talk, but we need the level playing field of rules and governance.
Success for Climate Action 100+ is to:
Have boards take responsibility for transition strategy to net zero by 2050
Have each company set targets to achieve net zero by 2050
Create a reporting framework, preferably a mandatory reporting requirement within an audit
We have outlined the carbon footprint of 90 per cent of our entire fund.
We have developed a physical risk mapping tool to understand zip code risk.
We look up to a century ahead as we have an intergenerational investment responsibility.
We have found that taking a sustainability lens to risk and return has made us more intelligent investors. Risk in not to be avoided, but to be understood for benefit.
CalPERS thinks about managing 3 types of capital – financial, environmental and human. This means that ESG is not an add-on, but a critical part of investment DNA and fiduciary duty.
One of the most important, upcoming challenges at CalSTRS is how the fund should evaluate Chinese investments from a human capital and environmental standpoint, says Chris Ailman, chief investment officer at the giant pension fund.
Stewardship and engagement will become an integral part of investment in the future, and asset owners need to write stewardship and non-financial objectives into their mandates with managers, according to Saker Nusseibeh, chief executive international of Federated Hermes.
Climate Action 100+ illustrates asset owners’ ability to come together to solve the tragedy of the commons, said Anne Simpson, managing investment director, board governance and sustainability at US pension giant CalPERS. She said once investors realise that risk and return comes from managing financial, human and natural capital then ESG became a fundamental part of investing.
Shardul Agrawala, head, environment and economy integration division at the OECD laid out the challenges and opportunities for governments to build back better. He highlighted the industries and that may undergo transformation and the underlying market failures that need fixing.
There is moment driven by the COVID-19 crisis to invest in line with the Sustainable Development Goals, according to chief executive of Robeco, Gilbert van Hassel. But investing in companies of the future, and avoiding risks of the past, requires real expertise and changing mindsets about investment poses one of the biggest challenge for investors.
Nigel Topping, Champion of COP26, says institutional investors should put their fund managers on notice to provide more net zero products. He was speaking at the Top1000funds.com Sustainability conference in a session detailing how asset owners can move towards net zero.
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