September 24, 2019 / In-depth

Climate Week 2019: Key themes for investors

By Joe McGrath, ESG Clarity

Governments, banks, fund groups, trading venues and pension funds have all announced initiatives at this year's event

Climate Week 2019: Key themes for investors

As environmental activist Greta Thunberg (pictured) took to the stage to admonish world leaders for their lack of progress on climate change, asset managers, pension funds and trading venues were keen to show they were making efforts.

As the first day of the UN’s Climate Week kicked off in New York, financial institutions stepped up to declare their commitments to solving the planet’s climate woes.

This year’s Climate Week has already seen UN Secretary-General António Guterres warning world leaders to come with ‘concrete, realistic plans’ to aid climate change mitigation.

The British contribution came from British Prime Minister Boris Johnson, who announced a £1bn fund to help scientists develop new technology to tackle climate change in developing countries. However, some climate activists were not impressed.

Greenpeace UK’s head of politics Rebecca Newsom described Johnson’s plans as a “flop”. “The collection of pet projects announced here falls desperately short of the radical action and bold vision demanded only last week by millions of kids and grownups in the largest climate protest in history,” she said in a statement.

In other announcements of the day, 24 development banks pledged over $1 trillion of climate finance by 2025 to fight climate change.

The banks, which are part of the International Development Finance Club and include the China Development Bank and Development Bank of Latin America, have launched a $10m facility to finance climate activities in developing countries at the end of 2019 as part of its initiative.

 

Projects worth billions

All in all, the first day of Climate Week saw banks, governments, pension funds and asset managers announce a host of environmental investment projects.

A significant announcement came from a collection of Danish pension funds who outlined plans to invest $50bn in clean energy projects by 2030. The coalition, led by pension fund PKA, has said the fight to prevent a climate catastrophe was “the greatest challenge” in media reports announcing the project.

While around 200 leaders have gathered at the UN’s Climate Summit in New York, Climate Week will also see over 40 events being held for investors, companies and stakeholders to discuss climate finance and investment.

Major themes being debated include the rise and status of sustainable, and ESG trends and developments across North America, Latin America, Europe, Asia, Africa and Australia.

The events will also explore how leading investors are assessing climate-related risks, whether carbon neutral programs can deliver a net zero global economy, the role of technology such as blockchain in supporting climate action, and how carbon pricing can drive innovation, entrepreneurship and greenhouse gas emissions reductions.

 

Themes to watch

In an announcement, Investec Asset Management outlined several significant themes that investors should watch for during the week.

“Expect more talk of the need to invest positively to address climate change, rather than focusing only on divestment and negative screening,” said Deirdre Cooper, portfolio manager at Investec Global Environment Strategy and Tom Nelson, the company’s head of natural resources.

“Expect discussion on how big data and new research techniques can be used to advance our understanding of climate risks and impacts. The work of the Carbon Disclosure Project has galvanised corporates, asset managers and asset owners to provide better data, measure climate impact and improve carbon reporting. In our view, this needs to accelerate,” they added.

Lord Barker of Battle, a former minister of state for energy and climate change and executive chairman of power and metal producer EN+, expects certain industries to take a thrashing from during the week – in particular the aluminium sector.

“The UN has identified seven of the largest ‘hard to abate’ industries where worldwide action is particularly crucial. In addition to the obvious sectors, such as aviation, chemicals and oil and gas, aluminium will also be under the spotlight.

“Much of global production, which is created using coal-fired electricity, can emit up to 22 tonnes of carbon while making just one tonne of aluminium,” Lord Barker said.

 

Corporate reporting pledges

As part of its contribution to Climate Week, En+ is calling on the London Metal Exchange (LME) to fully disclose the carbon content of every trade on the Exchange.

Meanwhile, the team behind Project Heather – a new trading venue based in Scotland – chose Climate Week to launch its eagerly anticipated consultation on what an ideal issuer on its stock exchange should look like and what they should be reporting.

The Scottish-based exchange is set to be the world’s first recognised ‘impact’ investment exchange and will require issuers to measure and publish their positive social and environmental impact before listing.

“Project Heather integrates the routes most likely to move capital at the greatest speed and scale, to the kinds of projects that most urgently address risks to stakeholders captured in the UN’s Sustainable Development Goals,” Tomás Carruthers, chief executive officer and founder of Project Heather, said.

“We have spent considerable time working on what a potential issuer on our proposed new Scottish stock exchange might look like, but now it is time to call on the global impact community to help. We invite them to join our consultation and hold us to account. This is a call to act now – we don’t have much time left to achieve the SDGs,” he added.

 

Policy concerns flagged

The UN’s Climate Week also acted as a launchpad for a new report that warns of significant gaps in environmental policy. The Science Advisory Group’s ‘United in Science’ report, unveiled on Monday (23 September), highlights the glaring – and growing – disparity between agreed targets to tackle global warming and the actual reality.

The report reveals the average global temperature for 2015 to 2019 is on track to be the warmest period on record – estimated to be 1.1°Celsius above pre-industrial times.

Carbon dioxide emissions also grew 2% and reached a record high of 37 billion tonnes of CO2 in 2018, while current economic and energy trends suggest emissions will be at least as high in 2019.

According to the report, commitments to cut greenhouse gas emissions would need to be tripled at the very least to meet the 2015 Paris Climate Agreement.

“Global GDP is expected to grow at 3.2% in 2019, and if the global economy decarbonised at the same rate as in the last 10 years, that would still lead to an increase in global emissions,” the report ominously states.

With the UN Secretary-General issuing a stark warning today that we “jeopardise like itself” if global warming is not halted – all eyes are on the political, financial and investment sectors to see how they respond during this crucial week.