Saturday, June 30, 2018

Follow the Money


Grantham Institute: Policies to finance energy efficiency in Europe



The Grantham Institute, part of the London School of Economics and Political Science (LSE), has taken leadership on climate investments since 2008, in a bid to change the economic system that is responsible for the degradation of the planet's ecology and living systems that give life to everything that exists on this earth. LSE's centre for policy-relevant research & training in climate change & the environment is chaired by Lord Nicholas Stern.

Since 2013, the man who made billions by predicting every recent financial crisis has spoken out on climate change. Jeremy Grantham, the environmental philanthropist who is part of the leadership of this group, emphasizes "We're trying to buy time for the world to wake up".  "Capitalism is killing the planet and needs to change. Capitalism and mainstream economics simply cannot deal with these problems. Mainstream economics largely ignore [them]," Grantham says."We deforest the land, we degrade our soils, we pollute and overuse our water and we treat air like an open sewer, and we do it all off the balance sheet," he adds.

They are developing investment tools to assist investors in directing their funds towards ecologically sustainable sectors. Their Transition Pathway Initiative provides an interactive tool that enables the assessment of companies’ carbon management quality and carbon performance, within a selected sector. They also have a research database on Climate legislation for countries, regions and territories. Their most recent public lecture of April 2018, notes that very few investors realise how rapidly the environment is being wounded, not just by climate change but also by overuse and by chemical waste:

"We may have created a world that is simply hostile to most living creatures including us. Contrastingly, very few realise how favourably and dramatically fast the relevant science is progressing and the cost of necessary technologies declining.  These opposite forces will determine whether we can even retain a world with as stable a global society as we have today, a modest definition of success.  The results will certainly transform the entire world of energy, resources and food in a few decades with unprecedented financial consequences." says Grantham.

Other investment managers have also developed policies around climate change and global emissions, primarily in Europe and based in London. They are seeing the path forward in carbon reduction and energy efficiency as the only constructive way for financial investment to be viable. Not only that, some of these companies are targeting the lack of corporate response to these critical issues. Legal & General Investment Management (LGIM), for example, names corporate climate leaders and laggards, and specifically targets climate change laggards with shaming and disinvestment. Of course, that may be like trying to shame Trump.

Louise Dudley, Portfolio Manager for Hermes Global Equities speaks out on a climate for change: matching awareness with action:

"In 2015, Bank of England Governor and Chairman of the Financial Stability Board (FSB) Mark Carney labelled climate change “the tragedy of horizon”. That is, the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors, imposing a cost on future generations that the current one has no direct incentive to fix. In his capacity as FSB Chairman, he also established the Task Force on Climate-related Financial Disclosures (TCFD) to give investors information to identify companies most at risk and best prepared for climate change.

It is therefore important for investors to understand climate-related financial risk. It can broadly be divided into two major categories – carbon risk, which is related to the transition to a low-carbon economy, and climate impact risk, which is related to the physical impacts of climate change."

In another example, the aim of the Institutional Investors Group on Climate Change (IIGCC)'s Climate Solutions program is to help investors identify, and to the extent possible, quantify the strategic implications of policy measures and physical risks to long-term investments with a view to inform communication with other stakeholders.

It's time to leave behind the old postwar metrics of economic measure and adjust to the realities of those destructive things left off the balance sheet of global investments. The GDP chimera is a measure that has led to massive global destruction and economic inequality in every country. There is no time left now for failure to act.

Update 7/3/18: Climate financing by the world’s six largest (MDBs) rose 28 per cent on the previous year.