Ecometrica’s Chief Financial Officer Adrian Smith reporting on a recent event at the Royal Society of Edinburgh.
On 29th October 2012, Ecometrica teamed up with the Carbon Disclosure Project and Scottish Financial Enterprise (a trade body for the fund management industry) to present a briefing on the importance of climate change to the financial sector, and the consequences of the new mandatory carbon emissions reporting legislation for quoted companies in the UK. The briefing was attended by Scotland’s leading fund managers and investment firms.
The message was simple. The financial sector plays an important part in deciding how society allocates its resources through investment decisions; it is thus critical to developing a coordinated response to climate change (and other environmental problems) that the financial sector recognises the importance of climate change and the risks of ignoring it in their investment strategies.
National governments setting targets on emissions, or international bodies setting international targets will have limited impact without the support of the financial sector. Indeed, the lack of a strong co-ordinated response to climate change from the various international bodies, NGOs, negotiating platforms and national governments has perhaps been a defining feature of the environmental movement over the last twenty years. For some, the financial sector is in a position to rectify this failure.
As such, over the following years there will be increased pressure on the financial sector to incorporate environmental considerations into their investment criteria (see for example the Natural Capital Declaration). This will represent both a challenge and an opportunity for the financial sector.
The pressure on the sustainable performance of the financial sector has the potential to channel investment towards those industries, technologies and companies which can build the climate resilient, low carbon future which is needed. This has been demonstrated by an innovative emission sensitive fund from Nedbank in South Africa that has significantly outperformed the JSE 100 (index of 100 leading companies on the Johannesburg Stock Exchange) since 2008.
Ecometrica will continue to work closely with innovative finance and investment companies to facilitate the incorporation of real-world environmental data into financial decision making.