Highlights from Climate Week NYC 2021

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Investors took center stage at this year's gathering, which featured a focus on their role in driving global greenhouse gas emissions to net-zero, the need for credible decarbonization plans from companies, and hopes for action from COP26.

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Targets and timeframes

The need for to make climate change part of every financial decision and the influence of investors in spurring companies to transition to a net-zero economy ran through a series of discussions at Climate Week NYC 2021.

“We need to make sure there are strong targets and timeframes,” Fiona Reynolds, CEO of the Principles for Responsible Investment (PR)I, told Linda-Eling Lee, MSCI’s global head of ESG research, in a discussion hosted by PRI, MSCI and the COP26 High-Level Champions Team. Key comments from Reynolds, who helped convene the Net-Zero Asset Owner Alliance.

  • On commitments to decarbonize. “We haven’t decarbonized the economy before. We need ways to measure progress.”
  • On the need for collaboration. “Collaborative initiatives need to stick to strong rules about disclosure. And to delist signatories that are not delivering.”
  • On the relationship between government policy and private investment. “When we can get policies and regulations to line up, that’s perfect. But long-term investors are going to hold their investments for a long time, so they need to forge ahead no matter what.”
  • On how to mobilize the capital that will be needed. “We need concrete time periods. I would like to see phase-out dates for fossil fuels, including subsidies.”

What investors need most from COP26

“The world needs Glasgow to be a success,” Gonzalo Munoz, the COP26 high-level champion from Chile, told MSCI’s Bruce Kahn, who discussed what investors need most to reach net-zero with Munoz, Wendy Cromwell, head of sustainable investment at Wellington Management, and Sheri Wilbanks, head of group risk management for AXA. Key quotes:

  • “We need to achieve more breakthrough actions,” said Munoz, who noted that reaching net-zero by midcentury will require the planet to nearly halve carbon emissions by 2030.
  • “The priority is real-world emissions reduction,” said Cromwell, who added that investors need to know companies’ complete carbon footprint. “We think that Scope 1, Scope 2 and Scope 3 data is critical for investment decision-making, as is location data. There should be less friction gathering it. So that we can more properly assess the risks companies face and that are inherent in our clients’ portfolios.”
  • Investors need “credible transition plans,” said Wilbanks, adding “a warmer world could eventually become uninsurable.”

Two new financial industry climate alliances

“This is the decisive decade,” declared Mark Carney, the U.N. special envoy for climate action and finance, in a virtual roundtable to launch the latest financial industry climate alliances for net-zero.

He was joined by founding members of both the Net Zero Financial Service Providers Alliance, which joins leading index providers, credit rating agencies, stock exchanges and accounting firms that supply market infrastructure for sustainability, and the Net-Zero Investment Consultants Initiative, in which members commit to align advisory services in support of global climate targets.

Choice comments from the discussion, which focused on what investors need to align their portfolios with a 1.5˚C emissions trajectory:

  • “The good thing about the Paris Agreement is that the world came together with a focus on 2050,” noted Henry Fernandez, MSCI’s chairman and CEO. “The curse of the Paris Agreement is that it is 2050, and that the world thinks that it has 30 years to achieve this, when in fact a lot needs to happen in the next five to 10 years that will then set the foundation for the back end of that period.”
  • “We believe that trustworthy data and solutions are the glue of financial markets,” said Sarah Wilson, CEO of Minerva Analytics. “Nobody can make informed decisions without trustworthy data.”
  • “We all know that this Asia is going to be the global engine of growth,” commented Herry Cho, head of sustainability for Singapore Exchange. “How the Asia region takes on climate action collectively may make or break the global success, including at COP26.”
  • “The transition is not going to happen by ignoring fossil fuels,” said Richard Mattison, president of ESG and sustainability at S&P Global. “It’s only going to happen by working together to make sure we can make progress in transitioning away from the use of fossil fuels.”
  • “We can influence the way capital gets invested to align with a net-zero pathway,” said John Haley, CEO of Willis Towers Watson, and a member of the investment consultants initiative. “That’s probably the single most impactful contribution we can make. The second is targeting real-economy emissions.”

Both alliances are part of the Glasgow Financial Alliance for Net-Zero, a U.N.-backed coalition that unites the leading net-zero initiatives. “The ultimate measure is the success of decarbonization in the real economy,” said Carney. “It’s getting capital to companies that need to put it to work in order to be part of the solution and seize the opportunities that come with that.”

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