It was shaping up to be a bonanza year for climate action, with huge media interest in Greta Thunberg, Extinction Rebellion and the November climate talks (COP26) in Glasgow. That’s all now changed with COVID-19 dominating the headlines and, moreover, our lives. It’s no surprise that COP26 has been postponed but it is disappointing: countries were due to submit tighter voluntary targets on carbon reductions and also to submit improved plans for adapting to climate change. This is much needed action that cannot be delayed, although initial signs from nations such as Japan and Singapore appear to suggest that setting ever more ambitious carbon reduction targets every five years – as per the requirements of the Paris Agreement – is too short a timeframe for policymakers. This means that, despite the urgency, the outcome of COP26 may have been underwhelming.
Either way, our concern is that on the other side of this pandemic, we’ll still be hurtling towards a changed climate. Some say that COVID-19 demonstrates that societies can make rapid and radical changes to avert crisis – exactly the kind of action we need to tackle global warming. But aside from the difficulties of enacting the Paris Agreement (and we agree that creating, enacting and rolling out new climate legislation every five years is hugely ambitious), the aftermath of COVID-19 is likely to preoccupy governments and their electorates for some time. In a faltering economy, climate change risks sliding down the political agenda, as it did following the 2008 crisis.
The good news is that the days where we relied solely on government legislation as a catalyst for climate action are long gone. Other stakeholders have proved effective in using the tools available to them to raise awareness and create change. For example, the surge in participation in Veganuary this year (where individuals pledge to follow a vegan diet for both animal welfare and, latterly, environmental reasons due to the high carbon intensity of meat products) was orchestrated by campaigners through social media, not through acts of Parliament. Business leaders too, have been using their high profile to press for climate action publicly. We’re even seeing some companies set net zero carbon targets.
The investor community too has an important role to play. The most progressive asset managers have taken heed of scientists’ dire predictions. We know that climate change will impact on our investments, not just in the distant future, but in the short and medium term too. At Castlefield, our B.E.S.T Sustainable funds are subject to a clear negative screen on fossil fuels. When we talk to the companies in our portfolios, we’re not just asking companies what they’re doing to reduce their carbon footprint (although that remains of critical importance) but increasingly we’re asking management teams how a changed climate will impact their business.
We’re aided by a comprehensive reporting framework developed by the Taskforce for Climate-Related Financial Disclosures (TCFD). Spearheaded by Michael Bloomberg and championed by Mark Carney in his role as the Chairperson of the Financial Stability Board, the TCFD encourages companies to take a serious and sobering look at how their operations and supply chains would be affected by changed weather patterns and increased climate volatility. The framework they’ve produced aims to get all major businesses reporting consistently on their climate risk. Once we’re through the worst of COVID-19, TCFD will be a key tool for investors, including ourselves, to use in our engagement with companies.
Of course, NGO campaigns and investor pressure are no substitute for government action, but we can keep up the momentum temporarily while governments globally grapple with the aftereffects of the pandemic.
By Ita McMahon
Information is accurate as at 06.04.2020. Opinions constitute the author’s judgement as of this date and are subject to change without warning. This material may not be distributed, published or reproduced in whole or in part.