Sustainable Investment Forum – New York City
Yesterday the Sustainable Investment Forum was held at the Westin Times Square in New York City. This event was hosted by Climate Action in partnership with UNEP-FI. It chaired by John Authers, Financial Commentator from the Financial Times. There were about 300 asset managers, asset owners, bankers, government officials, non profit officers, and entrepreneurs in attendance.
For much of the morning the discussions focused on the disclosure of companies to the risk caused by climate change. In Europe, France passed a law last year requiring companies to report how they are handling climate change risk. Funds from the Scandinavian financial company Storebrand already report the carbon footprint of their mutual funds.
In the USA the SEC does require public companies to disclose material risk to their shareholders. Is climate change a material risk to business? Coincidentally the SEC started an investigation into Exxon Mobil and there were several discussions yesterday about fossil fuel companies and stranded assets. It was mentioned that investing in coal fired power plants is considered a “stalemate investment”. These climate change risks have to be considered alongside political and regulatory risks.
Environmental investments have been yielding 150-300 basis points above the average. For many companies and asset managers green is becoming the new reality. Consequently ESG is not only a nice thing to do but a path to profitability and a fiduciary duty.
The growing use of green bonds was discussed in the afternoon. Several speakers mentioned how China has really taken the lead on green investing. India has made huge strides since President Modi has come to power. Bryan Garcia of Connecticut’s Green Bank and Alfred Griffin of New York’s Green Bank discussed how governments could help de-risk green loans and jump start private capital flowing to clean energy projects.
Standard and Poors will unveil a ratings system for green bonds similar to their credit ratings. It will rate the level of greenness by looking at transparency, documentation, audit trail, and impact.
Three politicians were very practical. Mayor Chris Coleman of St. Paul discussed density issues along a light rail line and climate adaptation along the Mississippi River. Mayor John Dickert of Racine Wisconsin discussed how important it is to explain the financial relationship of an individual and climate change while making difficult decisions affecting constituents. The 26th Prime Minister of Australia, Kevin Rudd, stated “where the rubber meets the road with climate change is money”. Most noteworthy, he highlighted the amount of capital available and the number of worthy projects in need of funding and the need to marry the projects with the funding.