The virtual event’s 39 presenters spoke on behalf of established organizations such as Volvo, Salesforce, Accenture, Honeywell, and Dominion Energy who are incorporating net zero priorities into their long-standing business activities. Recently established innovators who are driven by sustainability-related matters including Carbon Direct, Revolution, Engine One, and AppHarvest offered perspectives on their distinct paths towards 2050’s net zero goal. Investment managers, venture capital firms, investment consultants and other financial professionals shared insights for investors to apply their financial resources to enhance sustainability efforts. Emerging regulatory and reporting trends were also explored by government and business consortiums.
As the Summit’s Global Advisor, Natixis Investment Managers’ Nathalie Wallace, Global Head of Sustainable Investing, and Clarice Avery, SVP, Sustainable Investment Strategist, presented the Advisory Board Spotlight: Investing in the Transition: The Tip of the Iceberg where they offered pertinent views from an investment manager perspective. Highlights of the discussion included:
- Governments globally call climate change the existential threat of our time for the world and the financial markets. The changing nature of our energy consumption and production impacts investors, leading to a technological shift in how we use energy and the tools we employ to consume it – as we’ve seen in transportation.
- The challenges to transitioning portfolios to net zero are complex, such as the availability, reliability, and comparability of emissions data in corporate reporting. Further, while it’s easy to simply divest from high emitting sectors or companies, ownership of these assets may simply transfer to another investor, providing limited real world impact.
- Carbon offsets (initiatives to offset carbon emissions through land restoration or reforestation, reducing or removing carbon emissions elsewhere) are important in getting to net zero, since we can’t eliminate all emissions immediately. Investors should ensure, however, that businesses aren’t using offsets as a distraction in lieu of pursuing more challenging strategic solutions.
- The SEC is expected to require corporates to disclose carbon emissions going forward, providing much-needed tangible information for investors to assess companies’ exposure and positioning for forward-looking strategic investments and tactics to reduce their carbon footprint.
The recent COP26 in Glasgow was a consistent touchpoint throughout the conversations, bringing a level of cautious optimism to the Summit. To kick off Day 2 of the Summit, Sanda Ojiambo, CEO & Executive Director of the United Nations Global Compact, laid out a clear interdependency among the private sector, government, and civil society in achieving net zero. Referencing encouraging outcomes from COP26, while the private sector is taking the lead on climate issues, governments must lay out a clear framework to direct business’ commitments and ambitions. Ms. Ojiambo commented on the importance of cooperation in climate issues across the private and public sector, and across economies globally via a sentiment frequently related to Covid-19: No one is safe until everyone is safe.
In her introduction to Financing the Net Zero Journey, Liana Magner, Natixis’ Executive Vice President & Head of Retirement & Institutional, US, discussed the financial sector’s massive transformation to enable a carbon-neutral economy. Magner described Natixis Investment Managers' long history of sustainable investing in Europe through their affiliate Mirova1 and developing innovative Environmental, Social, Governance (ESG) products for US investors, including a target date fund series2 integrating ESG into the investment approach, now available in over 250 US retirement plans.
In Financing the Net Zero Journey, Jens Peers, CEO & Chief Investment Officer of Mirova US, a Natixis affiliate firm, addressed some encouraging outcomes of COP26, and what this means for investors, including key steps that investors can take.
- Positive developments from COP26 included garnering a net zero political commitment from all major economies, corporations setting their own net zero targets, multiple coalitions forming, the US and China announcing willingness to work together, and initial pledges against deforestation.
- Four key steps for investors to consider in transitioning to net zero: (1) educate yourself to understand changes needed to get to net zero; (2) consider the implications for shifting investment patterns, including divestment, and investing in solutions like energy efficiency, renewable energy, and reforestation; (3) rethink how we measure progress regarding carbon reduction, and a company’s total impact – simultaneously; despite encouraging initiatives in this area, not having perfect data should not hinder forward movement; (4) active engagement will be necessary to make change happen, and should be combined with other actions: divestment, investment in solutions, and effective measurement.
- Investment options across asset classes include direct impact investing in equities; bonds have an important opportunity for financing needs, as green bonds and social bonds can help to finance the transition. Direct investing in wind farms, solar farms, and reforestation, while small, niche opportunities today, will hopefully increase in the near future.
2 The target date fund series is not available to investors based outside the US.
Natixis Investment Managers’ distribution and service groups outside the US include Natixis Investment Managers S.A. (Luxembourg), Natixis Investment Managers International (France), and their affiliated distribution and service entities. These entities conduct any regulated activities only in and from the jurisdictions in which they are licensed or authorized.
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