Nuts-and-Bolts Guidance from the 2016 Investor Summit on Climate Risk

While making strong motivational statements at the 2016 Investor Summit on Climate Risk in New York City on Jan. 27, speakers also laid forth an ambitious set of targeted goals to implement the Paris climate conference’s agenda.

These goals included implementing climate disclosure requirements; advocating for stable, economically meaningful carbon pricing; ceasing investment in coal; leveraging pension funds; scaling up green banks; clarifying what constitutes a green bond; and analyzing risks on an industry-by-industry basis.

Reaching these goals will require a massive, collaborative global effort. The speakers at this event were engaging in dialogue with many industries – including the oil and gas industry, the transportation industry, and others.

According to Mindy Lubber, president of Ceres, the conference attracted over 500 investors; close to 300 were turned away due to lack of space. Collectively, the investors in attendance managed around 22 trillion dollars in assets.

Speakers encouraged the attendees to keep their hopes up, work hard, and collaborate productively.

“When things are going badly, stay in the battle,” said Christiana Figueres, executive secretary of the United Nations Framework Convention on Climate Change, referring to a saying her father told her.

“We must learn to live together as brothers, or we will perish together as fools,” said Segolene Royal, France’s minister of ecology, sustainable development, and energy.

Collaboration throughout the political spectrum was a theme at the event as well.

"You're going to see groups all the way from the Cato Institute on the right to the AFL-CIO on the left having this discussion,” said Tim Wirth, vice chair of the United Nations Foundation.

Rachel Kyte, vice president of the World Bank, said she sees funding for clean energy as being a critical factor in sustainable enterprise.

The speakers recognized the extraordinary efforts that renewable energy-technology experts have made to build the industry. Greg Manuel, managing partner at MNL Partners, said the scientists and technologists in this field have been “mission-oriented from the beginning.”

A bottom-up approach has taken root among the negotiators and business leaders at the summit. Figueres said this was a “tacit agreement.” 

Throughout the conference, private-sector leadership was a key point. “Climate risk is an economic risk,” Royal said. “There is no room for doubt.”

“The private sector is the engine that will drive our action to the desired destination,” said Ban Ki-Moon, secretary-general of the United Nations. “Every dollar must be invested in low-carbon goods and services.”

“This is a field that’s afire,” said John Chiang, state treasurer of California.

Building on Groundwork from Paris

"The Paris agreement, I think, is a miracle in many respects,” Figueres said. “There are many of us who are in the market for miracles.”

Figueres said the scope of the global transformation is daunting. However, there is no other alternative. “We are standing in a portal through which we are going to go. We have to turn all these fantastic intentions into implemented activities.”

She said 188 national change plans have been prepared to date. “We have to move these plans from intended to implemented. We have to do so very quickly. It’s the indirect transformation of the entire global economy.”

Ki-Moon said financial innovations in clean energy are sweeping the globe, including developing countries.

Figueres said this economic transformation provides the opportunity to “put the global economy on steroids and really get it going.”

Previously, Lubber said, attendees at similar conferences had questioned whether addressing climate change was important. Now, she said, there is consensus.

This January's World Economic Forum Annual Meeting discussed climate change, Lubber said. Other recent international conferences have done so as well.

“It’s been a challenge for the next 25 years to make the dream of Rio a reality,” Wirth said.

In a previous initiative, Power Africa, stakeholders came forward, but it was difficult for them to achieve results. Corruption issues were problematic. Some companies were uneasy and bowed out.

Since then, international negotiators have honed their skills, Wirth said. “We really learned in the lead-up to Paris how coalitions could be built and how the private sector could be brought into this.”  

Targeting Concrete Global Goals

Kyte said that internal debates about project, pipeline and finance availability have now been resolved. “Now we need to get down into much more granularity.”

Business, nonprofit and government leaders have been hammering out many goals behind closed doors.

On a global level, Lubber said, every attendee at the conference should be calling on financial regulators to put climate-disclosure requirements in place.

She also encouraged everyone present to speak out in favor of stable and economically meaningful carbon pricing.

Royal said 60 countries or regions currently have carbon markets.

“A price on carbon and more standardized disclosure are the most important enablers of this transition,” Figueres said.

She also called for an end to coal investment. India is one market where this is crucial. She supports a transition to a hybrid market of gas and renewable energy followed by a second transition to renewable energy.

“We need to understand on an industry-by-industry basis what climate related risks are present. Without disclosure, you can have no understanding,” said Mary Schapiro, former chair of the Securities and Exchange Commission. She is working with a climate disclosure task force that is following up on the Paris agreement’s recommendations. The task force plans to complete its work in 2016.

“We’ve been given a short timetable,” Schapiro said.

Pension funds and green banks can help to amplify climate investment goals, Ki-Moon said.

“We need to identify what’s a green bond,” Chiang said.

Speakers identified China and the transportation sector as two areas for near-term investment.

Moving Financial Resources

“There’s seriously nothing more important than the flow of financing into this sector. It’s an astronomical challenge,” said Ion Yadigaroglu, partner and managing principal at Capricorn Investment Group.

There are substantial differences in interest rates for power-plant financing from nation to nation. To solve this problem, Yadigaroglu said, financiers should address issues of counterparty risk and land availability.

Currency problems can be particularly thorny. Yadigaroglu said financiers should work to get pension-fund investments into nations where these problems exist.

Michael Bloomberg, CEO of Bloomberg LP, discussed how the business community is responding to climate change. He said that no businesspeople he knows would say the world is coming to an end. This is because they are taking action. “Businesspeople, like mayors, do things to protect themselves against possible eventualities.”

Within the United States, Bloomberg said, the states that invest in transitioning to the new energy economy will be more economically successful than states that lag behind them. “Those who don’t move get left behind and that will hurt everybody.”

However, states vary in their economic resources, financial markets, clean energy markets and incentives, and economic priorities. Therefore, the transition toward renewable energy could exacerbate existing economic disparities within the United States unless policymakers and financiers facilitate investment across a broad spectrum of states and regions.

Political gridlock also complicates the situation. “We have a federal government that’s paralyzed and isn’t doing anything,” Bloomberg said. He said cities and the private sector are taking the lead.

“CEOs have to get on board,” Schapiro said. Her team wants to “engage boards of directors to ensure they hold management accountable.”

"Markets need to unleash the force of human ingenuity. The world now counts on you," Ki-Moon said. “We need massive scaling up of investment in clean energy and energy efficiency.”

Now that clean energy has become mainstream, Michael Liebreich, chairman of the advisory board at Bloomberg New Energy Finance, said we should change the vocabulary we use about it. “If you do one thing for me today, please never refer again to renewable energy as alternative energy.”

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