Climate Investor Report post-9 December 2015
 

Gavelling the world with diplomatic genius

Madame Pompadour, much-loved official mistress of Louis XV, would have relished the diplomatic genius of the current French Foreign Minister, Laurent Fabius, in delivering the breakthrough Paris climate agreement on 12 December 2015.

And so it was appropriate, four-days ahead of Minister Fabius gavelling the world’s nations to universally back the investor-friendly United Nations COP 21 agreement, that forty-plus investors, financiers and policy specialists met in the Salon Pompadour at the historic, 180-year-old Hôtel Le Meurice in the heart of Paris.

Photo: UN/Mark Garten 
 

A big, booming signal 

Paul Clements-Hunt, IPCM Partner and CEO of The Blended Capital Group, writes:
The investors and policy-makers gathered in the Salon Pompadour did so just four days ahead of the big, booming, definitive political signal delivered by the politicians and diplomats at CoP21.

Unequivocally, CoP21's break-through message to the world's cities, capital markets, businesses and industries, confirms that a full blown, low carbon energy transition at the dawn of a new industrial revolution is coming. The “how, when and exactly what” remain unanswered and will form the focus of the next five years of climate negotiations starting in 2016 in Marrakech.

However, the political clarity of CoP21's 12-page Paris Agreement —  at least at the highest level —  is unquestionable for it sets out multilaterally agreed commitments for post 2020 climate action. The political, economic, social and technological implications of the Paris commitments stretch out for the next eight decades of the 21st Century.

The ambiguities of the 20-page decision, which accompanies the diplomatically masterful Paris agreement, are understandable as this is where the compromises between almost 200 nations were hammered out to arrive at the political agreement itself.

This IPCM CIR update is specifically for the asset owner community and does not seek to replicate the many outstanding analyses of CoP21 that exist (for one of the best see Gerard Wyn's Energy & Carbon Blog.)
 

Where do global asset owners stand?

For the global asset owner community, whether pension funds, insurance reserves, foundations, endowments and or sovereign wealth funds, the questions arising out of Paris are manifold both from an opportunity and liabilities perspective.

Two themes that have run through the 15-month series of GLF/IPCM dinners on the Climate Investor theme, and which were reflected also in the final dinner held at Hotel Le Meurice on 8 December, are those of:

  • The growing prospect of legal action against asset owners that do not proactively manage climate risk
  • The associated issue around the expectations of 21st Century fiduciaries in a world marked by a range of evolving and poorly understood investment challenges and opportunities

During the dinner series from Tokyo (September 2014)  to Paris (December 2015), issues that have been tabled by investors, policy-makers and academics, inter alia, have included:  climate volatility; climate-driven political instability; energy and food security; stranded assets, notably those associated with fossil fuel extraction and distribution; real world investment potential of renewable energy and clean-tech versus media hype; climate refugees; and the growing need for climate resilient infrastructure.
 

Contributing to Cop21

In the immediate run up to CoP21 and the Parisian dinner, and through-out the 15-month long engagement with more than 170 of the world’s largest asset owners, both the GLF and IPCM teams had been promoting ideas that sat at the very heart of the UN CoP21 process. These include amongst other activities:

  • In November 2015 Groupe La Francaise Chairman, Xavier Lepine, published a thought piece promoting the idea of an Externalities Stability Board, of which a Carbon Stability Board would be a critical component. (See the paper in PDF)
  • During October- November 2015 IPCM Partner and CEO of The Blended Capital Group, Paul Clements-Hunt, worked with the Executive Office of the United Nations Secretary General, Ban Ki-moon, to conceive and launch the “Bangkok-Johannesburg-Blueprint” during Cities Day (December 8th) at CoP21. The Blueprint, backed by the UNSG’s Cities Climate Finance Leadership Alliance (CCFLA), is a set of recommendations to mobilize capital at scale into climate-smart urban infrastructure.
  • In November 2015 PCM Managing Director Gordon Noble moderated the Bangkok-leg of the “Blueprint” process and authored a 12-page “thought piece” to assist the UNSG’s Cities Climate Finance Leadership Alliance plan the road ahead Post CoP21.
  • In December 2014, IPCM Chair Matthew Kiernan and La Francaise Inflection Point (LFIP) Chief Investment Officer (CIO) Laurent Jacquier Laforge, presented to some of Europe and France’s largest asset owners the Carbon Zero concept as part of the 2014 annual Novethic event.

See the earlier, post-9 September 2015 Climate Investor Report page

21st CENTURY GOVERNANCE

Tackling externalities — the goal of carbon stability

Groupe La Francaise Chairman Xavier Lepine delivered a message to the attendees at the IPCM-Groupe La Française dinner at Hôtel Le Meurice that provided a sweeping analysis of the challenges that exist for investors and their investee corporations at a time when governance, information and data on companies and corporate behaviour is under renewed forensic examination.

The GLF’s Chairman’s presentation went well beyond climate change while stressing the evolution in both fiduciary responsibility and legal obligations for investors and companies operating in an environment where speed of change of policy, regulation, technology and the new “uber-transparency” of a permanently connected world, is the new normal.

Co-host Matthew Kiernan, founder of IPCM, stressed the rich opportunities for investors now emerging as the ecosystem of climate and carbon focused solutions providers and technology companies deepens rapidly. The Chairman and CEO of IPCM also stressed how investors cannot overlook those fossil fuel companies who are leading in efforts to carve out a pathway towards an energy transition that takes the global community beyond coal, oil and, in time, gas in coming decades. Kiernan stressed that while “appearing attractive” the fossil fuel divestment movement is not a realistic option for mainstream Chief Investment Officers.

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