'If
you're not attentive to climate risks, the sustainability of your
business is in question.'
President
Trump, speaking before the UN General Assembly Tuesday, vowed globalism is
dead. A day later a roomful of suits representing some of the largest pension,
mutual and hedge funds in the world offered a very different take.
The
globe, they agreed, is moving toward a low-carbon, sustainable economy. Those
who haven't factored that shift into their investment strategy are at risk.
Some
300 investors and regulators gathered during Climate Week in New York to talk
trends and gain insight about markets at the annual Sustainable Investment
Forum. The warning was clear: Mother Nature and the markets are moving forward,
even as the Trump Administration retreats and global climate talks appear
stalled.
"If you're not attentive to the climate change risks, … the sustainability of your business is in question," said Erik Gosule, managing director at Italy's Amundi Pioneer, Europe's largest asset manager, with $1.7 trillion under management.
Investors
are baking a number of "sustainability factors" into their
decision-making, financial experts noted repeatedly throughout the day: Fund
managers are asking companies about everything from their carbon footprint and
exposure to coal to energy transition and whether the company's goals align
with the United Nations' goal of keeping global temperature rise below 2ยบ
Celsius.
One
example: S&P Global, which maintains various Dow Jones indices such as the
S&P 500, this week launched a new index that assesses companies' exposure
to various climate risks—heatwaves, flooding, sea-level rise—in addition to
carbon price and fossil-fuel emissions.
"We
are, as a global community, moving to a low-carbon future," said New York
State Comptroller Thomas DiNapoli, the chief fiscal officer charged with
ensuring that state and local governments use taxpayer money effectively.
"It goes to our fiduciary responsibility: We're making decisions for the
man or woman who starts work today and is going to be retiring in 25 to 30
years."
And
as with so many aspects of climate policy, as the Trump Administration
abdicates the country's leadership role, markets and states are stepping in.
California is the largest insurance market in the nation, and the fourth or
fifth biggest in the world. And the state is using that leverage, said
California Insurance Commissioner Ricardo Lara.
The
state is reviewing policies to ensure that, if private and commercial property
is lost to a flood or wildfire, it gets rebuilt in a sustainable way, Lara
said. And it's working with 10 other states to create a climate risk index.
"The
responsibility and pressure being put on the insurance industry isn't just
regulators," Lara added. "They're getting it from Main Street.
They're getting it from industry. They're getting it on all sides."
That
change is happening fast. The cavernous room Wednesday was full of men and
women in suits—a sea of black and dark gray—prompting Berit
Lindholdt-Lauridsen, director of market practice and regulatory policy for the
Swiss-based International Capital Market Assoc., to comment, "I don't
think there would've been quite so many suits at this discussion four or five
years ago."
There
was also an air of inevitability. The general gist: Get ready now, because
change, when it happens, is going to happen fast and be ugly for the
unprepared.
"It's
a very complex and evolving landscape," said Elliott Harris, Assistant
Secretary-General for Economic Development and Chief Economist at the United
Nations, who predicted that by 2025, regulatory and market shifts will be
"forceful, abrupt and disruptive" in response to climate change.
