Given the capital intensive nature of high emitting assets, the finance community will play a crucial role in assessing the optimum path to replace trillions of dollars of high emitting assets with low emitting assets. From the top to the bottom of the investment chain, climate change capability will be perhaps the most important skill a stakeholder possesses and understanding which asset owners do it well and which do it poorly will be critical for millions of retirees whose savings will depend on that capability.
As asset owners around the world disclose more fully, best practice development is certain to accelerate.
The gradual clawing back of responsibility for the functions that for years many asset owners have outsourced is a one-way trend that is already advanced amongst some of the leading asset owners.
The slow, and sometimes stumbling, nature of the regulatory environment surrounding climate change means that carbon-related liabilities and risks are entering investment portfolios at a gentle, some would say funereal, pace.
The recent Carbon Bubble report showed that a mere fraction of the world’s fossil fuel reserves from the balance sheets of the largest companies can ever be burnt once the pathway to a 2 degree limited world has been established.
The growth in active ownership has not only prompted many asset owners to review their investment policies and practices but it is certainly set to change the way asset owners engage with their members.