Global ESG Summit: Technology will make net zero achievable

Investment specialists believe through cutting-edge technologies, cooperation and commitment the world can meet climate goals

Technology is the key to unlock potential and help our societies reduce carbon emissions and improve energy efficiency, panellists told the ESG Clarity Global ESG Summit last week.

Alex Monk, portfolio manager at Schroders, highlighted two technologies people are already using today: wind turbines and solar panels. These are technologies that have been around for a very long time, but over the last couple of years have reached a point where they become cost effective.

“Whether we want green hydrogen or electric vehicles or all the other technologies that we want to decarbonise our energy system and our climate, it all relies on cheap, clean electricity at the heart of it. It’s the workhorse of this energy transition,” Monk said. However, we  cannot just build more wind turbines and solar panels without better energy storage and enhancing the grid.

On the other hand, one or two new technologies may not be the answer for the net-zero target, Janet Shumsustainable investing specialist of Apac at Citi Private Bank, told the panel discussion.

“What I want to see is more cross-sector collaboration and partnership. Because none of the technologies alone can help to achieve the net zero goal. Technology has its own limitation,” Shum said.

“People need to look at the whole picture,” she added. For example, they can’t just focus on supplying renewable energy, they also need to look at what are the climate actions people can take on the demand side as well, including electrification or enhancing energy efficiency, she explained.

“The technology existing now is not sufficient to counter climate change. The technology needed to meet the net zero target either doesn’t exist or is  too expensive for the world to afford. We need to have a global view and more private and public collaboration. We need to have the right technology, financial partners and policies to drive the transition,” Shun said.

Incentivise fossil fuel producers

Meanwhile, some industry experts remain sceptical about people’s commitment to decarbonisation. For instance, despite the emergence of new technologies and their investment in them, traditional oil and gas companies are not about to “give up” fossil fuels, while they are still profitable.

“I am a practical guy and a bit of a sceptic. And so far as the oil and gas companies are concerned, the demand is still there. There’s a huge amount of demand for oil and gas as we saw with the recent oil price spike. I am not confident that ExxonMobil or any of these big oil companies are going to reduce production,” John Ng, head of funds selection and advisory at DBS, said.

But Ng admitted that at the same time, he is aware that a lot of oil and gas companies are investing more in new technologies and conducting research and development on carbon capture. For instance, ExxonMobil claims that it is the biggest spender on R&D that aims to find more carbon capture solutions.

Frédéric Samama, chief responsible investment officer at CPR Asset Management (part of the Amundi Group), told the panel discussion that in pushing forward the mission of decarbonisation, we cannot rely solely on companies; investors also have a big role to play.

Samama said he fully agreed with Ng, adding that question now becomes: how can we create the conditions for these traditional oil and gas giants to accelerate that transition towards the net-zero objective?

He said there are two pathways. The first is these companies need long-term investors. “Over the short term, it’s more profitable to sell oil and gas. But how do they transfer themselves? They need time. And for that, they need long-term investors,” said Samama.

The average holding period of a stocks in the 1960s was eight or nine years. In 1980, even before high frequency trading and computer programmes, it was only 18 months, he noted.

“If your investors are around for only a few months, it’s very complicated to walk for the future. All these companies should think about how to increase the weight of long-term investors. And one of the solutions is to offer some incentives to long term investors like loyalty shares,” he argued.

The second point is that investors should send signals to these companies is that if they are not shifting their strategy, then they could be excluded from portfolios, Samama concluded.