Climate change - divestment or engagement?
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June 2 2015
John Hewson (AODP)
Julian Poulter (AODP)
Meryam Omi (Legal & General Investment Management)
Ben Caldecott (Smith School of Enterprise and the Environment)
Professor Mike Hulme (King's College London)
- Webpage - Global Climate 500 Index (Asset Owners Disclosure Project)
Companies have long had to think about their impact on the environment, from emissions to energy usage. And if they are in the mining, drilling or transport sectors, they have to comply with a pile of regulation to mitigate their impact. But what about the investors that provide them with capital? Are they thinking ahead to the cost of further regulation, or to the redundancy of the fossil fuels at the core of their businesses? Do they even know what the risks are?
These risks should at least be actively managed, according to the Asset Owners Disclosure Project, a not-for-profit organisation that collects information about investors’ activity – or lack of it. The AODP compiles an index of the world’s 500 largest institutional investors, ranked according to the effort they make to deal with climate change risk.
One response is to sell shares in “contaminated” companies. The “fossil free campaign” – an international federation of environmental crusaders – calls for just that in a move reminiscent of long-running protests against tobacco companies. It targets 200 companies with the most potential carbon emissions stored in coal or oil reserves.
More subtle is to engage with companies to ensure they are managing the risks, effectively wielding their influence as investors. The AODP recognises a range of action in its index criteria, but those that take no account of the financial risks (not just moral ones) are regarded as “laggards” that are failing in their duty to the fund’s underlying owners.
But how subtle is a climate change narrative that ignores the developing world’s need for fuel and has a narrow approach to dealing with changes in global temperature? Our discussion will, as ever, cover different sides of the argument, starting with:
John Hewson, chairman of the AODP. Many of you will remember John as the former leader of the Liberal Party of Australia. Before entering politics, he worked as an economist for the Australian Treasury, the Reserve Bank and the IMF. He has been a director of Macquarie Bank and chairman of ABN AMRO in Australia.
Julian Poulter, founder and chief executive of the AODP. Julian is also a stakeholder council member of the Global Reporting Initiative and chairman of the GRI Investor Working Group.
However, they will not get things all their own way. Kicking off the response will be:
Meryam Omi, head of sustainability at Legal & General Investment Management, where she has been leading the project to integrate ESG aspects across various asset classes;
Ben Caldecott, director of the Standed Assets Programme at the Smith School of Enterprise and the Environment (Univ. of Oxford). He is also an adviser to The Prince of Wales’ International Sustainability Unit, an academic visitor at the Bank of England, and a Visiting Fellow at the University of Sydney; and
Mike Hulme, professor of climate and culture at King’s College London. He is the author of numerous books on climate change, and has argued publicly about the limitations of fossil fuel divestment.