Even as the disastrous impacts of climate change are becoming increasingly felt, companies and countries around the globe are moving towards sustainability at a faster pace than ever before.
At the Global Financial Leaders’ Investment Summit organized by the Hong Kong Monetary Authority, bankers and fund managers agree that the world is getting closer to reaching the net zero goal in 2050 to limit global warming to no more than 1.5°C, in line with the Paris accord.
But are we moving fast enough? The consensus is that we are moving in the right direction, but more needs to be done.
Valerie Baudson, chief executive officer of Amundi, one of the largest fund managers based in Europe, underscores the necessity of actively managing asset portfolios to transform clients into net-zero-compliant companies.
“As a very large asset manager, our role is to educate, to help, to transform, to analyze, but also very much to engage with companies, trying to make the whole community getting in the right direction,” she says.
Transition requires substantial capital to restructure a company’s business model. But Standard Chartered group chief executive Bill Winters insists that financing should come after establishing a solid framework, otherwise, with no clear rules to follow, companies will simply lose direction.
“We all have the apocryphal stories of having bought a carbon credit and paid real money for our shareholders, only to be told that we’re greenwashing. How did we get into this quagmire? Because we don’t have a consistent set of standards,” Winters stresses.
Even if financing is available, bankers will need to carefully utilize the funds in different markets based on the objectives of sustainability and economic growth. “Money isn’t the problem. Getting into the right place, being credibly consistent is a challenge,” he says.
Mark Carney, chair of Brookfield Asset Management and head of transition investing, and United Nations special envoy on climate action and finance, shares that many companies are in the middle of transition already. The risk is that after changing their business model to meet the sustainability goal, some companies, particularly in Asia, will end up with stranded assets that they have to abandon.
This poses a risk to economic development. “If you get to subtract two degrees, but directionally, stranded asset risks doubling in trillion, you need to manage the risks, and, on the flip side, grab the opportunity to meet the sustainability goal,” he says.
Technology will go a long way in supporting sustainability initiatives. “We need to make sure we make good decisions everywhere in the world. So, dealing with data, sharing them, cleaning them, providing the right information is absolutely essential,” Amundi’s Baudson says.
However, she remains cautious about using artificial intelligence (AI) as the technology has yet to prove itself in terms of accuracy.
Standard Chartered’s Winters says technology also holds huge promise when it comes to addressing carbon emissions, particularly in developing new verification methods for carbon projects and long-term solutions to recycle emitted carbon.
He voices concern, however, that the rise of such technology may keep carbon-intensive projects in the picture.
“If we continue to burn the Amazon forest, there’s not a lot that we can do in terms of direct air capture that’s going to save this 2% of carbon emission. We’ve got to keep the focus on the short term and be investing in these long-term techs,” Winters says.
“This transition is above all an industry revolution, we need the state to frame it,” Baudson says. “I’m absolutely trustful that boost of the intelligence of the human being, and the fact that we have started this revolution, will help us achieve the goal.”