However, the recent developments at BP, Shell and Statoil show the benefits of engagement and underscore the fact that unless investors have a seat at the table, change is difficult to accomplish.
Engagement allows investors to query how fossil fuel, energy and resource companies plan to manage the transition to a low-carbon economy and what the impact on their asset values would be when some of their reserves ultimately prove unusable.
Investors have great power at their disposal to ensure that companies take a long-term view and act in the best interests of not only their shareholders, but society at large.
The time to use that power is now.
Fiona Reynolds is managing director of Principles for Responsible Investment
Proactive approach: Climate change letter to G7 finance ministers
A recent example of how investors can be proactive with policymakers is a letter to G7 finance ministers, which was signed by some of the world’s largest money managers and pension and endowment funds. The letter urged ministers to support a move to a low-carbon investment environment.
Organised by Principles for Responsible Investment, Investor Network on Climate Risk, Investor Group on Climate Change and Asia Investor Group on Climate Change, the letter has been signed by more than 120 institutional investors from across the globe.
They called on the finance ministers of Canada, France, Germany, Italy, Japan, the UK and the US to support an agreement for a long-term, emissions-reduction goal. That goal aims to limit the average global temperature increase to 2°C by 2040.
The letter said: “We believe climate change is one of the biggest systemic risks we face. With the right market signals from policymakers, investment in low carbon and climate-reliant opportunities can follow, and climate impacts and resulting economic dangers can be mitigated.”
The letter also said additional investment was required to reach these goals, and called for “well-designed policies that shift incentives and ensure the deployment of available technologies, while achieving a just transition for workers and communities”.
If action is delayed, more stringent policies would be required in the future.
“With the appropriate policies in place, we will be able to accelerate our investments in low-carbon assets and advance the shift to a low-carbon economy,” it added.
Source: Fiona Reynolds, Principles for Responsible Investment
