Wim Van Hyfte, PhD, Global head of Responsible Investments and Research at Candriam, was one of the three speakers on Climate Action's webinar, The Role of Investors in Promoting a Just Energy Transition. Selected excerpts of the event that gathered over 650 participants, ahead of the Paris Sustainable Investment Forum Europe.
Climate Action is more than Environmental investing
ESG is not only about the E, or environmental part; as the previous speaker mentioned, the importance of integrating that Social dimension is absolutely key. Climate change represents a potentially irreversible threat not only to societies but also to our global economy. What is often forgotten and what I would like to stress as an investor is that they are intertwined so we need to consider both when we allocate our capital.
Before speaking about a just energy transition, remember what it means. The repercussions of a two-degree, or 1.5-degree, alignment for our economy reach beyond the obvious sectors of energy and power, to industry, transport, buildings, food and agriculture. In the end we need a really fundamental change in our economic model, and also a really fundamental change in our consumer spending behaviour.
That fundamental change obviously presents risks, but also offers enormous opportunities -- in which technology and innovation are key. Asset managers, and asset owners, have the responsibility to help guide that process and to incorporate all the impacted stakeholders. Candriam has been incorporating not only the climate, and the environment, but also the social dimension of the implication of energy transition into the investment process.
It's not only investors who are responsible. The most realistic path to address climate change is one of a smooth transition to that net zero carbon economy for that societal impact. Companies obviously do not operate in a vacuum. A few years ago companies may have been focused on shareholder value, with the governance is more seen as a restrictive factor and broader society not even considered. What we are seeing now is that both investors and companies realize that they need to consider the societal and environmental externalities of their activities. We are all part of a bigger ecosystem. Governments also have their role to play.
The impact is often viewed with too negative an approach. More and more what we are seeing is a positive impact. Thanks to energy transition, there is a lot of innovation, and a lot of new job creation. We see a really different way of doing business, taking into account all stakeholders in a more responsible way, including future generations.
Last year Candriam announced they would largely divest from coal exposure, precisely because phasing out coal is an absolute requirement from a climate change perspective. Most importantly, there are better, cheaper alternatives which can be implemented on the same scale. This does have an impact on some industries, and on some local communities and employment. Agreed, we need to balance the social impact against the environmental impact, but we need to look at the facts and figures.
Energy transition has created enormous opportunities in job creation, innovation, and I strongly believe we will continue to benefit from these trends.
Balance the Social Impact – But also Examine the Figures
Where does this bring us in terms of responsibilities? It is a shared responsibility. The focus has been on finance and investments, and we have an enormous responsibility. But being in ESG investing for more than ten years, I also believe we can not bear the brunt of a just energy transition alone. We are all stakeholders in this game. We as capital allocators have a clear role.
Interested in this topic? The webinar replay is available.