Posted on: November 23rd, 2012
Climate change is very much on the agenda again. This week saw the publication of an open letter from major investors to heads of state. The letter, timed to coincide with the United Nations COP 18 climate change negotiations, which start in Doha on 26th November, made it clear that climate change is an area investors are concerned about. Closer to home there was also a meeting of All Party Parliamentary Group on Climate Change (APPGCC) members and UKSIF at the House of Commons earlier this week.
The purpose of the all party parliamentary group is ‘to raise awareness of the threat of climate change and to promote policies which counter that threat’. The meeting focused on the future of green infrastructure investment. Presenters included CISCO, WWF, the UK Green Investment Bank and The United Nations Environment Program Finance Initiative.
The packed meeting room heard contributors calling for clearer policy signals from government, with criticisms of the lack of action from a government which had promised to be the ‘greenest ever’.
Alongside the disappointment however were the seeds of hope. We heard of a ‘wall of capital’ waiting to be unleashed into areas such as green energy. The biggest challenge therefore seems not to be a lack of capital (businesses will invest if there is money to be made) – but a need for reassurance that Britain is – and will remain – open for “green business”. Contributors made it clear that against the current backdrop investment will be directed away from the UK, at the expense of UK jobs.
Yet the tardiness of the UK is not unique. The open letter to governments of the world’s largest economies from representatives of the world’s largest investors was also a clear call for international action.
Not renowned for alarmism, major investors are highlighting a need for ‘a new dialogue on climate change policy in order to avert dangerous climate change and its resulting economic impacts’.
The letter calls for;
The investors groups also referenced newer information, ‘according to the 2012 International Energy Agency World Energy Outlook, announced last week, current policies and recent trends will lead to long-term average global temperature increase of 3.6°C, a level which scientists have suggested could cause catastrophic and irreversible changes to the global ecosystem.’
So what does this mean for financial advisers? With challenges come investment opportunities. It may currently be unclear exactly which companies are most likely to prosper and when, but we do have a good idea which funds and investment companies are best placed.
If you are advising clients who are interest in climate change you should probably take a look at the work carried out by funds in the Sustainability Themed, Clean Technology and Responsible Engagement areas of the Fund EcoMarket adviser database first.
The managers of these ‘SRI Styles’ are likely to be fully integrating climate change analysis into their investment processes. In particular (respectively) they are most likely to; be skilled in areas such as integrating climate change adaptation and mitigation research with regular financial analysis, invest in cutting edge solution based technologies – and be lobbying for positive business responses to climate change related risks.
You may also like to suggest your clients look at the online ‘SRI StyleFinder’ client microsite which explains the various SRI Styles and helps clients identify which are best suited to their personal views.
http://www.ceres.org/files/investor-files/2012-global-policy-letter – Investor letter
Example investors represented by the letter:
http://uksif.org/ – UKSIF, joint organisers of the APPGCC event
http://insights.wri.org/news/2012/11/issues-watch-doha-climate-negotiations-cop-18 – further information on COP 18
http://fundecomarket.co.uk – Adviser SRI fund database tool