UCC Climate Symposium – Panel 1: Policy Development & Investor Actions

UCC Climate Symposium – Panel 1: Policy Development & Investor Actions

so at this point i would like to turn it over to lon to introduce the net next pat the next panel and panelists i think you’ll have a a great time with this one again this is about the current context for investments situating to work within regulatory policy and investor action frameworks and pledges salon over to you thank you dave and it’s my privilege here to introduce chris from lombardia and then kristen from sirius i think that you all read both uh of their bio and then i would look forward a great discussion between two of them uh one probably provides some industry perspectives uh and on the market force and then consumer demand for climate solutions and how lombardi is investing uh with the commission for the solution providers and largely kind of leverage on chris’s background not only in the practitioner world but also at oecd on the policy stance and then he can certainly share a lot of the regulatory development as well as the market force and consumer demand and christian sirius is a phenomenal phenomenal organization um and i’m sure that many of you have already uh read the case studies by series and the uh with a lot of investor activities and actions that we take have meaningful impact towards investment industry so uh without further ado welcome uh uh christian and chris so well it’s wonderful to see you all again and thanks so much for uh for having having us back today uh we already started this conversation uh some time ago and i thought it might be useful just to give you a little bit of an update on uh our view and our framework for sustainable investing just to set the context a little bit for the discussion that will come later and and walk you through some of these uh powerful forces and what’s happened since we last had the opportunity to uh speak together so perhaps if we can go to the next slide we can just start by reminding about our approach you know if we very macro approach um to understand sustainable investing and esg and it starts at the level of the economy as a whole and we have this framework which we call the transition from wild to click it’s an economic assessment and we think that our prevailing economic model is wild it’s wasteful it’s idle it’s lopsided and dirty this is what we say when people ask us okay um you’re you you are building up capabilities and the team you have a team of 20 people focused on sustainable investing and you’re trying to mainstream sustainable investing across all of your assets and asset classes what do you mean by sustainability but we mean that our prevailing economy is wild and it’s become unsustainable and there are these two self-destructive issues with it if you like the first one has to do with climate change and the failure to put a price on carbon and all of the damage the climate damage that we’re sadly observing already today around the world and the second major issue which people aren’t really talking about as much as climate change but we think are going to be talking about a lot in the future is the ignorance of natural capital nature biodiversity loss um the fundamental underpinnings for our economic model uh which are really uh in decline so this is sort of the consequence if you like at a higher level of this wild economy if you go to the next slide that can become quite depressing quite quickly um and there’s been plenty of discussion about this and you just need to open um you know uh the the news to see what’s happening in the wild economy what the consequences are the good news is that we’re convinced uh that and this is an empirical conviction it’s an investment conviction that this is changing the economy is in the midst of a major transition it’s in it’s in the first inning uh maybe not even all the way through the first inning of this transition but it’s a enormous one and it’s towards this economy that we call the click economy which is the opposite of the wild economy it stands for circular lean inclusive and clean and we think that it’s being driven towards this uh better more sustainable version of an economy globally because of four powerful forces and we can have a look at those on the next slide because we thought that it might be useful as a framing device for for the discussion today so what are these four forces and why do we think that the economy is transitioning this is what we talk about this is what we spend most of our time studying uh we think that all of them are highly relevant for investment dynamics for risk in return of course policy and regulation is uh you know at the front of everybody’s mind at the moment i mean just today there was an executive order in the u.s uh from the white house with industry behind it that by 2030 half of uh cars would be uh zero carbon um and and actually the us is pretty late for the game on that regulatory development you know there are bans on the internal combustion engine all over europe and in many cities you know that that has already occurred or uh they’re they’re being phased out it’s the same for coal and other types of uh polluting electricity the price of carbon is on the march in um the eu uh we’re we’re close to eighty dollars uh that’s a almost a doubling in the price of carbon so so the compliance costs of of of a climate uh polluting economy and a damaging economy are increasing and we’re seeing a lot of government uh support in the recovery from this virus crisis the eu green deal is putting 500 billion euros behind a green transition a transition to a net zero economy and uh that includes things like border carbon adjustments so with countries that are not putting a price on carbon carbon uh there are now proposals to tax goods to put a tax on goods to equalize and level the playing field uh with jurisdictions that are putting a price on carbon so there’s no doubt um that you know policy is on the march if you go to the next slide you can see this uh interesting statistic here if we had been having this conversation one year ago um about 20 of the world’s gdp would have been covered by a net zero goal in other words a government saying we are going to achieve net zero emissions at the sovereign level by 2050. but in the last year we’ve seen this enormous acceleration and now eighty percent of uh world gdp is covered by a net zero goal which includes the u.s it includes china and uh japan and now the focus is uh on those remainder countries the india’s brazil’s russia’s of this world that have not yet set that but in any case a target is you know great anybody can have a goal or a target of course what really matters is the policy and the regulation that comes behind governmental ambition and that’s what we’re starting to see march uh across um uh the global economy and on the next slide you can see that um you know it’s not just governments but it’s also companies of course this really picked up um in 2016 when the u.s made the decision to leave the paris agreement we saw a lot of companies come forward and say fair okay fine but we’re still in the paris agreement as a company because we think it’s good for business it’s good for attracting talent it’s uh it’s it will make more money in the future um and and so on as the right thing to do so we’ve seen uh this exponential increase in companies also setting net zero goals uh so-called science-based targets but again it’s a goal right many people can set a goal it’s not hard to set a goal what what really matters is what comes behind it’s the action it’s the implementation behind the goal which we’re starting to see and at the end of this year we’re going to see a major climate change conference in glasgow cop26 where again the focus will be on governments increasing their ambition companies investors increasing their ambition in this so-called race to net zero and so i think that’s actually uh driving quite a bit of this momentum um but what may be driving it even more is on the next slide which is what we really get excited about i mean policy can come and it can go right we understand that um in this case we think it’s it’s here to stay but still you know another administration can change the rules of the game and so on but what really doesn’t uh cannot be retroactively changed is the progress in that technology makes uh it’s it’s innovation it’s engineers being smart it’s the cost just coming down uh constantly coming down these power curves you know you see these learning rates in all of these important technologies for the click economy from offshore wind which is now close to competitiveness with or or even out competing fossil energy i didn’t even um solar or onshore wind on here because they passed that competitiveness years ago you know there are the cheapest source of electricity on the planet is now solar in some countries and you’re seeing it in other sort of frontier technologies that are very important um alternative proteins that same very aggressive downward sloping cost curve and upwards exponentially you know trending production curve and it’s simple sort of kind of boring uh economics you know microeconomics uh more production more scale the costs come down leads to greater adoption leads to more governmental support or governments moving the bar uh higher right so this is what we’ve seen in the electricity industry and in the automotive industry as things happen in the real economy faster than people expect consumers on the next slide start to really uh buy the thing that becomes cheaper and if we go to the next slide you’ll see you know that um what we’re up we’re already on the climate transition side which is fine so maybe we can just go back to the the four uh powerful forces slide and i just want to say a word about consumers because as the costs come down of these technologies and as policy and bans and and influences happen from the regulatory side we see consumers really start to um uh just go for the cleaner um healthier more circular option and of course that drives the powerful forces again and then the last piece of the puzzle uh or possibly the first piece of the puzzle are investors and are they redeploying capital well we we really do think that they are um investors are redeploying capital we are redefining capital and we’re doing it because we see this this uh feedback loop of forces churning away and we’re going to hear a lot about that from our our uh colleague at series here so let me just end with uh refreshing you on what our own approach to investing in the climate transition does um climate transition investment universe so how do we approach this from an investment perspective well our strategy looks to go and find investment opportunities across the entire economy to really go for the entire opportunity set so this is our approach to investing in climate transition so clearly there are solution providers here are some examples of companies in our investment universe not necessarily in the portfolio um but solution providers are key here right this is the cleantech universe all of those companies benefiting from selling technologies that are creating solutions to the click economy take us away from the wild economy that’s a huge growth area and it’s an important bucket for us to invest in then we also on the right hand side we have adaptation opportunities and adaptation opportunities are really the focus of a lot of people’s mind at the moment it’s our hedge bucket if you like because even if we are not successful in decarbonizing the economy you know for not successfully decarbonizing the economy we’re going to have a lot of climate damage but even today we’re having uh climate damage and it’s going to get worse and these are companies that are helping to improve the resilience of businesses of society of governments to detect and monitor and manage climate-related risk so that’s another bucket and then in the middle we have the key transitioning candidates and this is where our strategy um innovates uh perhaps more so than than some others it’s we actually go and look at those higher carbon companies but the ones that are on the right transition pathway the ones that are decarbonizing and we think are going to gain market share and are having large climate related impact so we don’t shy away from cement and steel companies and you know long distance transportation because that’s where a lot of this you know transition most of the transition needs to happen so we look to identify the companies that are really credibly transitioning that have set goals that are credible and that are making progress towards them because we think that that’s good uh for climate change outcome but it’s also very good from a business perspective these are companies that will gain market share and they will um prosper in the future and that’s it for me just to give you a little bit of an overview of the state and trends of what’s going on out there what we’re paying attention to i’m very happy to turn it back over to lan now and take any questions or have a discussion after thank you um thank you chris and then i think at this moment we’d like to have uh kristen to talk about the activities that she leads uh in particular she leads the uh serious investor network and there’s a lot of investor initiatives so let’s uh go with kristen right and just thank you so much christopher um your overview really reflects what we’re hearing from other members of our network for those of you who aren’t familiar with series we’re a non-profit organization primarily funded by foundations and individual giving we have three networks we have an investor network of which your funds are our members we have a company network a small group of companies who are working on deep sustainability initiatives and we have a policy network which is companies and investors who are engaged with policy makers uh really focused on the changes that are necessary to create a more sustainable and just world so i’m going to talk to you today about investor climate action plans and really this is building on the landscape that christopher named for you that we are seeing that uh the real economy is in process of decarbonizing and the questions for us are whether they a real economy is going to decarbonize fast enough uh whether we’re going to be able to uh really shift the direction of global warming and uh what it is our investments are going to face as uh we move into that lower carbon economy so the speed matters um the trajectory of temperature matters but we recognize that everything in the portfolio will be affected so um the work that i’ve been doing with the investor agenda which is a global coalition of investor partners series is the north american partner but we’re with an asian group a european group an australian group unep fi and uh the principals for responsible investing unpri so those groups and the and sorry the carbon disclosure project so seven groups came together to begin to address the challenges of climate risk and the opportunities of investing in the lower carbon economy together we’ve come up with a framework that we believe reflects where investors are going and um we’re presenting it to investors around the world at this point this is these investor climate action plans are designed to address four categories of activity the investment activity the corporate engagement how it is investors engage with the companies in their portfolios the policy advocacy piece how they engage with policy makers at a global national and even sub-national level and then investor disclosures these pieces fit together and that’s what you see in this diagram if investors act on all four the portfolio will begin to decline and we believe the investors will begin to address the systemic risk of climate change it used to be that when i started at series i would talk to investors about material risk and we’d look at a few sectors we’d talk about risk in specific companies but i think today we’re in a very different conversation we recognize that climate is systemic it’s going to affect every industry it’s going to affect every asset class and the only way to address that risk is by engaging in a comprehensive way collectively it’s not something one investor can do alone so the idea of climate action plans is that they begin to help the investors move together at the right speed and in the in the same direction so the expectations ladder acknowledges that investors are at different points in this journey and i know from working with with your uh leaders that you have done many of these pieces um already you may not have called them your climate action plan but you have already worked on your governance structures you’ve worked on your proxy voting guidelines you have made specific investments really focused on those climate opportunities on the transition opportunities that christopher named for you so this ladder is designed to help you assess where you are in terms of progress and um what more it is you can do with the other investors around the globe so this is not the full ladder but just to give you a sampling of the kinds of activities where we’re hearing about and highlighting in climate action plans some investors begin by investing a small part of their portfolio in two degree aligned products so we’re seeing that especially in passive uh assets we’re beginning to see on the high end some who are really focused on a 1.5 degree trajectory and they’re looking for products and companies as christopher said you know there are best-in-class companies investment opportunities that are really driving in this direction on the corporate engagement side generally our our members are starting by amending their proxy voting guidelines but then many are moving to the level of filing and co-filing specific climate resolutions designed to move those heaviest emitting companies and in a way that will will begin to address the climate change challenges policy advocacy we offer to our members every season a set of letters that you can sign on to are articulating the investor perspective on why a price on carbon why methane regulation why good disclosure around climate from companies is important at the sec so signing on to joint letters is definitely a piece that every investor can can take on but then we also have um investors engaging with their own industry associations and working with government affairs departments to begin to really mobilize policy makers to align with the investment opportunity i was with a global group this morning that was talking about this policy messaging as we go into the conference on the parties this big global treaty negotiation on climate and they were saying you know it used to be that it was investors calling on policy makers to do the right thing the messaging is now changed investors are saying to policymakers join us we are doing the right thing we are moving our money in the right direction it’s time for you policymakers to support our work investors have become the heroes in this story um because it is of course the power of your capital that will make real changes in the economy just a couple other sample areas disclosure i think is critical we have for a long time been demanding of companies that they disclose climate risk in really robust ways we want to see it in the financial disclosures not buried in a marketing report or something that’s a sustainability report that no analyst can find we’ve been saying use the task force on climate-related financial disclosures the tcfb framework that’s a framework that was developed that really helps us see what are the financial implications of climate change i think now the the focus is turned on investors themselves we want our asset managers and our asset owners together to use that same disclosure framework for our own um publicly available outcomes it is again designed to help enhance the collaboration recognizing that no investor can do this work alone and finally governance and i’ve got to say that coming to you today is is exactly what we hope will happen in every fund that at the top level of the asset owners and at the managers there will be these hard discussions about what are your practices that will help support the movement towards a lower carbon economy so um just by virtue of having us here you’ve done the right thing in terms of governance we recognize that it’s not an area that many boards and directors have as deep expertise but the willingness to engage to oversee these programs to get educated about the science and to really make decisions about um these risks as central to the risk management and investment opportunity of the fund is the key so um this ladder that’s shared on the screens is a as i said just a snapshot um but we can put the link in for the broader document there’s a lot of guidance out there and we stand ready to help you navigate there are many different initiatives um but your team has has already gone a long way in terms of uh finding the right strategies for your fund and we’re we’re happy to help support that work so uh i’m happy to take questions or or christopher and i can chat with one another there’s so much overlap in our work well your presentations are very complementary to the first part of our discussion because like in our breakout group we talked about you know it’s fine to take the moral ground against climate change and the idea of divesting is fine and we learned about how how what the process was in the techniques to be used inside outside all very helpful but of course we sit on bodies that have to have a fiduciary responsibility to create a return so you’ve sort of filled in the blanks i mean one of the people in our a breakout group made the point that the um the companies that are contributing to climate change are really an investment risk so but then the next question is well what do we do with those assets we’re switching and and the two of you did a nice job of laying that out for us it’s very helpful yeah i would say just um you know to comment on on that point we get a lot of members who start from a position of we’ve just got to get these dirty assets out of our portfolios and i guess most of the largest asset owners and managers who i work with say well actually i can’t divest away from this problem that if i get them out of my portfolio everything else that i own is still at risk from climate change so you know whether it’s the health care sector or the insurance sector all of those sectors will be impacted by climate change and so actually while divestment can give you some leverage with those companies it is really important that you engage with them that you work with the policy frameworks you know because the companies live within that that you push on their disclosures all of those kind of wrap around strategies support the real kind of change that’s going to address the risk one of the things you you said to us in in reading your materials and working with you over the last uh the last couple of years is that you advocate meeting the investor where they are in terms of the of the steps and when uh lon menuthi and uh and i i were thinking about this we wanted to also make this fairly practical and usable and digestible and not intimidating it’s one thing to say that we’ve done a lot a lot of things in the collective organizations but uh what are the kind of the practical steps that that investors like us we’ve got almost four billion dollar pension plan and our billion dollar you know endowment normally normally take uh in terms of moving things forward from a governance perspective yeah so um we built the icaps expectations around these four key areas the investment strategy the engagement strategy the policy strategy and the disclosure strategy so i would suggest that that most of our investors sort of create those four buckets and then they ask what what’s the next thing for us in each one of those buckets in terms of the investment piece we’re often seeing things like what christopher recommended which is take a look at where there are transition opportunities so look for the investments that’ll help transition um begin to look at climate solutions and make some investments in those areas and we see them across every asset class so you may see you know green real estate you might see green bonds you can take a look at some of the esg passive indexes if you have those holdings i know that your fund has significant private equity and there are real opportunities there um to look for those investment opportunities on the engagement side as i said take a look at your proxy voting policies and then begin to to ask well how can i now use those policies to advance um our engagement activities you don’t most of our investors are not saying we’re going to engage with everything we own choosing one or two sectors where you think with others you can make a real difference so that seems to be a next step there in the disclosure uh i would say most of our investors have done some level of disclosure reporting annual reports or um other uh sort of pieces on the sustainability programs and some investors are dedicating now a special section on climate others are doing integrated reports where they’re showing both what they’re doing on a broad range of esg issues and a focus on climate um so those are those are important pieces um yeah and i think i’ve talked a little bit about the the policy ladder there there are different levels of activity there i i would say you know many of our much of the media that i’m hearing about investor action is focused on net zero commitments and that’s an important piece but it’s not a starting place and i in my network i’m seeing a real mix some who start by making net zero commitments and then figure it out after they’ve made the commitment you know what are we going to do next and others that are really moving the other way starting with a whole set of of actions that make sense for the fund and then saying we’re moving towards a net zero commitment as we get get our arms around what’s in the portfolio and how we can make progress dave i have a question uh both to kristen and chris um on disclosure of companies for their progress in this trip this voyage are you hopeful that the sec and gary gensler will be more demanding in terms of disclosure than we’ve had in the last decade we are very excited about the rulemaking that’s underway now um i think many of our members issued responses to the rule-making comment period we’re expecting to see the draft rule in october and our internal conversations with gensler and other members of the commission suggest that we’re going to be that we’re going to see significant change whether it’ll go far enough i can’t tell um but um yeah we’re we’re watching it very closely and are hopeful thank you oh i i think that’s a really interesting question it’s it’s not just the sec i would also suggest that the cftc is a significant player here and i had the uh the privilege of actually sitting alongside um the the commissioner of the cftc um to who has produced an extraordinary report uh on climate-related risk and how it could affect financial markets it really is a an epic report very very good i recommend it to you and we we discussed it together uh for some of our investors in in a session a while back and what i took away from that was basically uh very consistent with what you’ve just heard from kirsten um and and our our approach and the way european regulators are looking at this and central banks more generally are looking at this and it’s the fact that climate change is core to fiduciary responsibility because it can manifest in financial markets through the risk and the return side of the equation and it comes in the form of physical risk actual damage from climate physical events to property plants and and equipment as we’ve seen you know frighteningly so just over the last weeks here and there are companies now that have basically gone bankrupt because of climate-related release risk or liability and litigation related risk which is linked to physical risk and we’ve seen different forms of lawsuits make their way through various stages and and as we know it just takes precedent um before an avalanche of lawsuits can come crashing down on on the actors that may be held liable and accountable for the damage uh that they have caused in the past or for having misled investors or other um issues and then the final aspect is transition risk from our perspective it’s very clear and and i hope you know you could take that away from my presentation that the economy is in transition this is happening it’s happening now it isn’t happening as fast as um it needs to in order to reach a 1.5 degree outcome but it’s happening plenty fast enough to create and destroy value across pretty much every sector of the economy and so that really does focus attention on do investors have the right information in public markets and in private markets to assess where that risk is uh contained and is it priced and if it isn’t when might it be priced where is it hidden and what might be the impacts of that repricing when it does occur and we’ve started to see some repricing already mostly on the growth solution providers side here’s matthew and and director of responsible investing at ufc um we we hear of companies making net zero commitments can can you talk a little bit more about what does it mean for an asset owner um or a portfolio to make a net zero commitment yeah so um we have um we’re we’re working through a global coalition the paris aligned investment initiative and um you have been participating in our working group so you you’ve been there but i’m happy to share it with the group um many of our members are are thinking about how to make a commitment to net zero made real by the climate action plan i mean i think there’s a danger that we see commitments that aren’t backed by action that aren’t implemented or implementable so it’s important that net zero by 2050 that’s a long-term target we’ve got to set really clear internal and intermediate targets so 2030 even 2025 we’re beginning to see targets most of the investors are are setting those interim targets they make the net zero commitment then they take some time and do the hard work of analyzing the portfolio and trying to figure out how a net a um an interim target really makes sense across the portfolio so those interim targets i would just caution do take some time it’s not a a small undertaking but once we’ve got those targets in place then it’s a matter of aligning the investment strategy the engagement strategy the policy work so that you can really achieve them and i think we’re learning more and more this is a rapidly changing space the data is getting better and better because of the push on disclosure and um we’re seeing lots of commitments i think now where we’re looking forward to seeing the real interim targets and uh and knowing how that progress is going to be made real safer i think this is a question for for you um a couple of us could probably take it but uh somebody as somebody’s friend asked whether whether they thought that shorting wild companies was a viable investment strategy you operate in in the public markets and i don’t know if you do too much uh shorting uh but maybe just talk about maybe maybe maybe talk a little bit more about the risks for companies who are who are not moving to the new economy uh well so i’ll just say a few words and then it sound i think other people have have lots of views on this topic too but it made me chuckle um but honestly no it’s a very it’s a very serious issue right of course uh you know if you look at it from the perspective of an investor and the economy in transformation there will be winners and losers and shorting you know we can have a discussion about what is shorting’s role in a liquid market providing price discovery regulating you know actors uh that that may be misbehaving uh and so on but the reality is that absolutely value is going to be destroyed by this transition there are we’ve seen it happen already and um it’s it’s going to happen um in a probably non-linear fashion uh because i don’t believe that there are all that many uh investors or regulators these days who think that this transition will be a gradual orderly transition that doesn’t really um we can’t we don’t see much evidence from history that transitions are orderly they’re usually disorderly um and uh and they are non-linear um and there are often minsky moments in markets right it’s that moment where all of a sudden there’s a crystallization of the new um uh state of affairs and and uh and that can lead to dramatic uh repricings when it occurs so you know there are strategies that are um going long click uh short wild we have a strategy that does that um in our alternatives business um but you know it’s um it it also depends a lot on timing i’m awesome i think we’re in a little bit of a rapid fire lana i think you’re going the same place that i was just going to reference uh john’s uh question can you talk about which international economies or markets at the center of best practice for either net zero investment or infrastructure and then connie had a question right christopher do you want to take that which market sure i i would refer you to the network for greening the financial system which is this network of central banks and regulators it’s now close to 90 including the fed uh joined recently and they’ve done a a lot of work on trying to set standards for best practice in both risk management of the net zero transition net zero investing and also green investment so i think from from the scope of the question that’s a good place to go um and then the next one is uh yeah we’re not seeing enough uh companies setting all scope targets that’s a really good question uh it’s essential that companies and investors i have to say um you know disclose all their supply chain emissions because um that’s where a lot of the uh carbon risk is buried in certain sectors in particular i mean if you’re in the oil and gas sector in the automotive sector and you’re going out there and just doing something and disclosing about scope one and two you can just say i can tell you right now that’s nonsense it won’t tell you anything most of their emissions and most of the risk is in scope three i do want to just make one one final comment especially on the emerging markets question uh which which places do we think about this we have to be very careful and i’m sure you’re all thinking about how we in the in the global north don’t want to be telling the global south that they should change really it is critically important that we invest in developing economies and those are places where frankly there is incredible investment opportunity the uh sustainable investments in those places will make a difference and they’ll be good for the portfolios um i think as we think about a more just equitable and sustainable planet uh we really do have to think about all of the ways in which we invest not only to address temperature rise but also to impact those communities and countries and people who most need these solutions and are most impacted by climate change i think that early on rick has a question regarding clean chilean uh is still is this a still active program with sirius and eun and if so in what kind of status question you know we’re not using the term anymore although the principle is still definitely part of our thinking so clean trillium was the idea that that was the number of investments we needed to help move the economy i think you heard in christopher’s presentation there’s incredible opportunity in the solutions to climate change there’s incredible opportunity in transition investments and that’s now more the way we talk about it but the principle is definitely there many of our members are setting targets they’re saying we’re going to invest x billion or x percentage of the portfolio in solutions as as part of their climate action plan thank you kristin and i think that there is a request for either one of you to explain uh what is a scope one two and three a mission particular christopher mentioned that a lot of it is uh in the scope 3. sure uh should i take that uh go right ahead i’m sure we have the same definition these are these are just uh technical terms for where do emissions occur in the business and life cycle of a given company so for an oil and gas company scope one emissions refer to the emissions that come from the the buildings that um the you know exxon’s headquarters and and the cars that are driven around by employees scope 2 refers to the emissions that come from the power that is used in the refineries and in the offshore uh platforms and so on so that those two scope one and two are emissions that are uh encapsulated in the business itself its business practice and how it goes about doing its business scope three is its supply chain so it is basically um for for exxon it would be the people who are burning on the oil and gas um and the emissions caused by the burning of the oil and gas the products of the company that would be calculated in the scope 3 emissions and of course that’s relevant from a financial perspective um because you know if there are higher carbon prices or if the demand for oil is has the rug pulled out from under it by electric vehicles and renewable energy um that will affect the the supply chain that will affect the supply um the carbon pricing will affect the demand uh for the product so you need to look at the full picture the the emissions from a company itself and from its upstream supply chain the materials that are used that go into the construction of whatever its product is and the downstream usage of of the uh products themselves just one more quick question on something that is uh on my mind in terms of the transition to electric vehicles what is the um use of energy and pollution from the generation of electricity versus um you know internal combustion engines is it a ten to one or two to one or what what what is the relationship i’m not an expert on the actual numbers but certainly i know when when investors are counting um the emissions they are looking both at the energy used to power the electric vehicle they’re looking at the energy used to manufacture the electric vehicle and then scope through the energy that’s burned when the when the vehicle is driven but christopher maybe you know more about that sector and the and the ratios uh i would uh that’s the correct answer certainly i would just add the temporal dimension to that which is really important here because it is true that today uh the manufacture of batteries for instance can use uh you know minerals that come from places that are problematic cobalt and so on it’s carbon intensive to manufacture batteries in the cars themselves the steel the aluminum the aluminum in the car that’s all carbon intensive um and the um the grid itself that is used to charge the batteries might have a lot of coal in it right but that is at a point in time today and we’re very as i said i think we’re just in the first inning here and uh you know electric vehicle um sales are going through the roof right now um we’re talking about gigafactories from tesla all of the innovation and and all of that is ahead of us um we’re talking about you know 50 of uh vehicle sales being electric in the next 10 years up from something like two percent today so what we’re what we’ve seen just in the last two years is a huge amount of innovation in the circular economy around electric vehicles and and companies like tesla are leading in this to find ways to capture batteries to bring them back to recycle them to reuse the materials there to extend their life in other industries um and then of course the grid itself is in the process of transitioning and decarbonizing so um you know oftentimes you know investors need to think about the fact that a transition occurs over a period of time technology and innovation is ahead of us and but yes there are legitimate issues today and as investors we need to focus attention on them and and and help companies through stewardship move in the right direction and this is one of those areas where the policy climate is changing rapidly so here in california we already have uh restrictions on both uh passenger vehicles and let light and heavy-duty vehicles in terms of their mission so that policy change will drive um the ev acceleration um and now seven other states i think are following california so um even before we get national regulation on the transportation sector we’re seeing it at a state level kirsten you’re right you have a lot of uh trustees and board members you know on the calls a bunch of staff who probably are wondering about implementation and what what investments we should we should make and but um i’m just i’m just curious if if you can point uh the group to to resources in the in in the governance area i mean you mentioned that the trustees are taking an important first step but but how um how best to move forward from a from a governance perspective because it doesn’t pertain to risk really or asset allocation or objective setting or oversight or all the above i guess my unfortunately maybe my answer is all of the above um but i think we’re seeing as as practices um you know in those four buckets the uh investment practice the engagement the disclosure and the policy work um recognizing that all of those fit into your fiduciary duty at the trustee level and so instructing your staff your your teams to really look hard at their area of work and develop plans that are moving towards alignment with the goals of the paris agreement towards a science-based target of a 1.5 degree future that’s that’s the right um direction at a board level to give i think in terms of reporting back we’re going from saying what’s your target to saying what’s your plan and um so that would be i think in many cases what the board should be asking of staff is show us your plan show us where it is you’re going to be making progress in terms of moving moving the investments and addressing this systemic risk i would just say in terms of resources the other thing that has become really a shift in my work is that investors are not acting alone they’re working in coalitions so we really are seeing these global coalitions become more um supportive of individual investors so um you know ceres partners with the iccr with the intentional endowments network um with lots of the faith-based um investors both on the pension side and on the endowment side coming together and saying what can we do collectively i think that’s also something um that the trustees should be looking for is partnerships that will enhance your work one of the uh items that if you have lon alluded to it one of the items that we will send your way are the case studies of the 10 investors uh who have been making concrete plans over time in each of these areas one of the things that struck me is everybody’s a little bit different right the other thing is that westpac the united methodist church is is included as one of those i have to be honest lon and i were talking earlier we uh you know we all aspire to be one of those uh test cases but that’s a good way to dig into what other investors are doing and we can vote make sure you have access to those to that case study yeah we also have some paris aligned investment case studies i’ll ask my colleague natalie to pop those into the chat as well couple of minutes here we probably want to build in a little bit of a break are there any kind of final questions that people would have of of chris and kirsten um hi it’s bob uh great presentation kristen and chris um one thing i heard about recently was the environmental impact of server farms and that was something that i had never thought of before and there’s been some conjecture about the you know the environmental cost of our emailing activity and maybe maybe more so obviously uh during the covid epidemic where everybody thinks that their carbon footprint has been substantially reduced by you know no commuting and no other travel i appreciate your thoughts on that so we’re seeing net zero commitments from some of the big um tech companies so from google and facebook and and um one of the ways that they’re taking action is they’re making commitments to 100 renewable energy so that that move as they begin to you know address their own carbon footprint specifically through those server farms or the data centers um making a commitment to renewable energy is critical i just worked with a group of those companies on a a just transition paper where we were really focused on not only the commitment to renewable energy but making sure that the jobs that are created in those renewable energy facilities are quality jobs and that they’re accessible to communities that have traditionally been left behind so uh i know that the power of procurement um in the case of the server farms they have the power to change the way that clean energy gets developed because they’re buying so much of it um i i’d say that’s exactly right that’s the answer uh to that question and also to the bitcoin question by the way which uh which has been coming up quite a bit too uh will bitcoin boil the oceans is an article headline i saw um not too long ago and and you know the the answer to this is um is there there are two parts to this answer one is anything that involves electricity um is its carbon intensiveness will be a direct function of how carbon intensive is the grid um where it draws the electricity from the and as we’ve established the grid is in transition because clean energy sustainable energy is just becoming the cheaper better source of electricity it’s going to take time um so yes it is you know and and actually we do look at these companies to make sure that um you know some less carbon intensive smaller tech company it might actually be heavily investing in 5g and satellite and cloud and and so it might be carbonizing quickly might not be a problem for today but it might become a problem in the future so it is important to uh focus attention on that but the other point which you know i i often just have to force myself to to be reminded of is that the big ticket items when it comes to climate change are deforestation coal cement steel long distance transportation glass agriculture uh utilities power generation it goes it goes basically in that order and you know that that you need we need to be you know we shouldn’t we ought not to take our eye off the ball of ending deforestation which is just uh you know there’s no excuse for it really um and um and and and also focusing attention on coal and those other harder to evade industries well um this is very illuminating discussions between two of you and then among all the audience and thank you kristen for sharing with us uh from your seat seeing the governance as asset owners and also kind of from investor point of view how to advocate for policy changes uh and then uh also advocate for investor various disclosures i think those are the really effective ways to bring us forward and then uh christopher first uh sharing with us all the industry movements uh regulatory funds uh and then i think it’s just a lot of topics so that we can continue for the whole day but this will help us maybe to think about goal settings and certainly uh to improve our thinking and framework and intimate governancy and the plans that we will later introduce to help us getting there uh so thank you uh kirsten and chris and thank you all of you your participation uh we will have more uh great discussions to come chris johnson and thank you both kirsten and chris
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UCC Climate Symposium - Panel 1: Policy Development & Investor Actions

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