Last month, the Quaero Capital ESG team attended the annual PRI event, this year held in Paris. The event was the largest responsible investment conference ever held, with over 1600 attendees from the industry.
There were many representatives from the French government, including a video message from Macron and a presentation from Bruno Le Maire who noted ‘we need a new capitalism for the 21st century, based on the notion of social responsibility’.
Unsurprisingly climate change was the over-riding theme; the urgency of it, the significant disruption many industries will face in order to mitigate it, and the subsequent opportunities.
Many expect that politicians will leave it too late to sufficiently incentivize the necessary shifts, meaning that we’ll have a required abrupt and disorderly policy response. Others expect to see increases in commitments in early to mid-2020s. 2030 is our last window of opportunity on climate change and biodiversity protection, so it’s the investments that are made in the next 10 years really that will matter.
What was made very clear during the conference is what our Accessible Clean Energy investment team is keenly aware of – renewable energy is passing through a major economic tipping point. About 5 years ago, 10% of the global population lived in countries where renewables were cheaper than coal. Now this is two thirds of the population. While in the past expansion of renewable energy investment was like pushing water uphill because costs were high, and public support was piecemeal, now it’s about letting water flow downhill. This will cause significant disruption to many businesses but represent a huge opportunity for others. To help quantify the risk of stranded assets, the organization Carbon Tracker estimate that the reserves on energy company books worldwide amount to about 10x the estimated amount that would limit climate change to below 1.5 degrees warming.
To meet climate change goals, required investment in infrastructure is significant. The President of the European Investment Bank noted that we’ll need to replace ‘the majority of our infrastructure stock. They aim to unlock EU 1 trillion by 2030 from PPP, and for 50% of their investments to be ‘climate friendly’ by 2025.
Finally from the PRI, as their membership continues to grow globally they are keen to be sure that their annual assessment truly separates the best from the rest. This means in two years the whole process will change. We achieved much improved scores for 2019 but our work is cut out to ensure that we maintain this high level.
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