KEESA:
There is no one size fits all approach to drawing up and implementing a climate change strategy. There can however be best practices and now as investors move forward in implementing their response to climate change, the steps commonly followed include. Integrating strategy and policy.
Integrating in practice reporting and target setting. Now each step has a focus on a specific group or audience and engaging with a specific framework.
Our initiative to help us understand the frameworks and investors, companies and broader society involvement we have Sagarika Chatterjee, Director of climate change at Principles for responsible Investment or PRI. And David Harris, Global head of sustainable Finance at London Stock Exchange group. Thank you both for joining us.
SAGARIKA:
Thank you, really delighted to be here with you.
DAVID:
Thank you for having us.
KEESA:
So first of all, we talked about some of these frameworks data and we're aware this can be a bit of an alphabet soup. So if you can give us an overview of the frameworks, including who therefore was the audience for.
DAVID:
I think you're right.
A lot of a lot of investors are now taking action on climate. Also wanting to try and collaborate.
DAVID:
Work with others and understand the whole myriad of different initiatives and frameworks that are out there.
And I think to help them try and navigate this what what we at Elsec did with PRI was we developed a a joint paper and an outline of all of the different initiatives. So this is the investor guide to climate collaboration.
It covers all of the the main initiatives so it raced to 0.
So at G fans, which stands for the Glasgow Financial Alliance for Net Zero and the initiatives that make that up, the net zero Asset Manager initiative, the the net zero Asset Owner Alliance. We've also got a yeah and others. There's also the transition pathway initiative, but climate action 100 plus the Paris aligned investment initiative, The investor agenda. We've also got initiatives and collaborative groups like the Institutional Investors Group on Climate Change, which is behind some of this work, but also, you know, so they're equivalent. US in North America with NCR. The investor network and climate risk so and there are many more besides. So what this what this guide aims to do is show to outline each of these initiatives, but also how they fit together and what we what we felt would be helpful would be able to give. Investors really a framework for action and then understanding the different initiatives through. That's through that more kind of action orientated framework and our frameworks really divides into four parts. The first part A is the investment process.
How to integrate climate into climate policy into strategy? How to integrate it into the end, they're
All fabric of As the investment approach. The second Part B, is engagement, so this is not only kind of engagement with underlying corporate issuers and and and other issuers. It can also be about policy advocacy as well and how to collaborate around that, and also how to how to you know how to link this into that. Direct engagement with investee companies. Part C is disclosure. And that's about disclosure in terms of an investor's own approach and being able to disclose the markets. Based on CVE, this is the task force on climate related financial disclosure, GCSE. One hub and covers the types of disclosure that companies should be making, but it also provides a kind of disclosure that investor and finance sector organisations should be should be providing as well.
And last but not least, we have target setting and this is actually really relevant through each of the other areas. But actually, what does what does net zero target setting look like? And what what's the basis of setting good targets and and? And so across. Each of these four categories in they interlink into different existing collaborative investor initiatives so all the guy does is it really knits that altogether highlights you. Know how I think how the different initiatives stack up against those four action areas, and I think provides hopefully A good way for investors to start to navigate this?
KEESA:
So that's great information. A really good outline in terms of what each of those areas are, and if we want to dive into specifics around some of the initiatives.
KEESA:
I love to 1st speak about specific steps for action with race to zero that campaign and qifan, so sadly, could you take us through?
SAGARIKA:
That yeah, sure. So what is race To zero? it's a global campaign, and that is supported and led by the United Nation. Options and it's got a very strong focus on the Paris Agreement and COP26 which is the big conference of all of the governments that have said they're in the Paris Agreement and Cup 26 is happening in November 2021 hosted by the UK in Glasgow. So raced to 0 is a way to.
SAGARIKA:
Bring together.
SAGARIKA:
All of the actions that everyone who isn't a government but is incredibly important are taking so it includes over 400 cities over 2000 businesses, over 160 financial firms, universities and healthcare organisations.
SAGARIKA:
It's the largest kind of coalition.
SAGARIKA:
Of non state actors.
SAGARIKA:
Now to be a part of the race to zero campaign, you need to commit to taking action and demonstrate you're taking it, and so the campaign requires that any organization that wants to be a part of it joins an initiative that involves pledging to reach. Net 0.
SAGARIKA:
In the twenty 40s or sooner or by mid century at the latest.
SAGARIKA:
Setting out a plan, ideally in advance of COP 26 on what steps will be taken on. Net zero, particularly in the short and medium term, taking action and then committing to reporting on progress annually. Now that's at a high level, there's actually a loader kind of good practice, detailed criteria.
SAGARIKA:
Around things like scopes to be covered offset.
SAGARIKA:
A whole range of areas, so the main benefit of joining is you get to be a part of the UN Cup.
SAGARIKA:
26 official race to zero campaign and that campaign and those who are in it will be profiled in November in Glasgow.
SAGARIKA:
For two reasons, one.
SAGARIKA:
Is to rally up more rapid emissions.
SAGARIKA:
Reductions from everyone that isn't a government 'cause we're all incredibly important to this. Can't governments alone? But the second reason is to inspire governments and so that they look at what businesses in the finance sector are doing, and they can see that the real economy is moving and that they should also take more rapid and urgent and.
SAGARIKA:
Vicious action now the different initiatives that are in race to zero, and so the ways you can join it already exists.
SAGARIKA:
They include one for asset owners and the UN convened net zero acetone alliance and for asset managers. The net zero asset managers initiative and there are more and that are shortly going to be.
SAGARIKA:
Joining braced his heroes, there will be an insurance alliance that focuses on underwriting and others we expect, so you ask me Keizer, about the Glasgow Financial Alliance. What is that? Well that brings together all of these race to zero finance initiative?
SAGARIKA:
And tries to take the approach of saying OK, well how do we get?
SAGARIKA:
Everyone in the financial.
SAGARIKA:
System, the whole finance sector to work together on NET 0.
SAGARIKA:
So they make their own.
SAGARIKA:
Commitments depending on what kind of a finance sector actor they are as a owner, asset manager, Stock Exchange, and then come together.
SAGARIKA:
To coordinate and the reason for coming together is quite simple. We can't have completely different versions of what good looks like in terms of net 0.
SAGARIKA:
And we need to all roughly roughly agree on how we're going to get to net zero. So what are the sector pathways?
SAGARIKA:
What other technologies? What policy changes do we need? What signals are we giving back to corporates? Whether we're lending to them or we're investing in them? And so this coalition, the Glasgow Financial Alliance coordinated and stewarded by Mark Carney.
SAGARIKA:
And the high level champions is going to strategically coordinate towards COP26 and there'll be a few deliverables that come out of it, but I'll stop there for now, keytar.
KEESA:
So that's really a great summary, an indication of how these things are playing out, and you mentioned some of the urgency that we're looking at.
KEESA:
You know the twenty 30s mid century at the latest for some of these in terms of the initiatives, it sounds like some of them have been around for a while. I'm just wondering what the timelines are. So you talked about the Paris Agreement.
KEESA:
Which we know has been around for a while. We talked about COP 26, which is coming at the end of this year.
KEESA:
Are there some really concrete, tangible objectives that have already been met? Are that we're looking at meeting in the very near term?
SAGARIKA:
Yeah, it's a. It's a great point.
SAGARIKA:
So some of the initiatives have been around since 2018, obviously.
SAGARIKA:
I mean, people in the space have been taking action for some time. We've had many leaders and pioneers across different geographic markets, but nevertheless all.
SAGARIKA:
Of the net zero initiatives that.
SAGARIKA:
Are established in the part of race to 0.
SAGARIKA:
A relatively nascent. So there's an important component to that is, we all need to work together because this is very, very difficult and we don't have all of the methodologies we're piloting.
SAGARIKA:
We're pioneering we're building prototypes. I think that's a very important component, so in the near term between now and Cop26.
SAGARIKA:
We'll have the G20 Finance Ministers tracks meeting together in Venice. There's going to be a climate conference around mid July.
SAGARIKA:
That I think, could be another kind of mini moment where we bring together private finance with some of the official sector or finance ministries staff to talk about how. How do we take greater action towards COP 26 and beyond and some of the.
SAGARIKA:
Topics that will be coming out of the Glasgow Financial Alliance will be how do we bring in more people from the finance sector into the net zero and journey and pathways that we're on? What kind of convergence can we get around sexual net 0 pathway?
SAGARIKA:
Days how can we advance further on portfolio alignment metrics and KPIs? Got a consultation underway right now and then.
SAGARIKA:
What kind of mobilization of capital could we have to assist emerging markets and low income countries in climate solutions and then finally?
SAGARIKA:
What kind of messaging and communications could we have back from the finance sector to the real economy to client?
SAGARIKA:
To corporates and to policymakers in terms of what we in the finance sector need to see happening.
SAGARIKA:
So these are.
SAGARIKA:
Some of the things that I think will start see coming out between now and Glasgow November 2021. And then I'd expect in Glasgow in 2021 that we'll see a subset.
SAGARIKA:
Of really innovative ahead of the game finance players actually announcing what are their 2025 targets? What are their 20-30 targets?
SAGARIKA:
And clarifying what exactly they need policymakers to do so they can go even faster and implement their commitments at scale.
KEESA:
Great thank you for that and if you could take us into the objectives of TPI and CA 100 plus David that would be great.
DAVID:
Absolutely. So these are collaborative investor initiatives set up initially by by asset owners to provide a basis of consistent climate analytics.
DAVID:
Particularly useful for corporate engagements and the idea is is that for investors to become very joined up and in how they're assessing and how they are engaging companies in terms of developing credible climate strategies so TPI which stands for the transition pathway initiative. It's also backed by the London School of Economics. Grantham Institute provides the kind of the academic rigor behind it. To essentially have two scores to come out of that, one is a a TPI management quality score which looks at how effective and how good at strategy and the governance is for a company around climates.
So which actually links back to some of those TCFT? That's the task force on climate related financial disclosure. Indicators so it covers things like, you know, has the company identified that climate is. You know significance and strategic issue is it got senior accountability? Is it reporting on its emissions? Is it setting targets? Is it linking this into executive remuneration is has it got an internal price of carbon and basically more of these other than the higher the score the company gets and it's already transparent? All the data is also available on the London School of ecoNomics websites you can see precisely, which indicates each company meeting the second part is a climate performance score, which looks at the targets that company has sets and whether those are aligned with the level of decarbonization that's required to achieve 1 1/2 degrees or two degrees of temperature warming. So based on the level of decarbonization that.An industry needs to achieve how good is the company targets that will turn features into into climate action 100 plus TPI has. Probably around over $20 trillion of assets under management behind it in terms of its members. See 100 Plus is even bigger than you. Get a circle of over 50 trillion there and it's 100 plus because it's started off with the 100 most systemically important companies on climate change. It's plus because I think it's it's now closer to 200 companies, much of the CPI data feeds into it, but also data from other sources as well. Well, and that provides a set of kind of a basis for consistent engagement to encourage companies to improve. So there's a. There's a. There's a available CA 100 Plus benchmark I I should say. Also Footsie Russell data feeds into both GPI and C100 plus as well. And we got comfortable with that being being available to everyone and that's also available. The climate action 100 Plus website. So the idea is to get joint join up investors in the way that they're collaborating and engaging companies on on taking action In climate.
KEESA:
Great information there. Thank you. I know that June 29th is a big day. A really big day, and so Sagarika would love to get your thoughts on and just get your your input on the PRI elsag event on June 29th in terms of what type of information could we expect to be shared? Who will be the audience? And we would be able to.
KEESA:
Take actions based on that information that's.
SAGARIKA:
Here yeah, great thanks so you know London Stock Exchange group and PRI. We've really tried to focus on implementation practical guidance.
SAGARIKA:
How we're gonna get There and a big part of the puzzle. We're getting to net zero as soon as we can. Is climate data. This comes up all the time across different geographies, so On 29th of June, we're really delighted we're going to have a full, dedicated webinar that's just focused on climate data. And we're gonna have a contribution Comes from GPS, so one of the largest investors in the world and from the Asia PAC region. We're also gonna have contributions from U.S. Treasury. Her obviously looking at SEC and climate disclosure as well as having contributions from New Zealand Super and various thought leaders and experts in this space. The kind of topics. We're going to be looking at.
Well, where exactly are we in terms of climate? Data standards are reporting today, and where do we need to go? And then we're also going to look at what exactly do investors need to see from regulators in this space, as they obviously hold the key to unlocking a lot of consistency reliability Around financial disclosures and meaningful data that investors will need. Unless we get this climate data and we know we can't get it overnight, we're always going to have challenges in understanding exactly where our corporates in terms of net zero and getting beyond you know, some of the high level commitments to really understanding how well placed their businesses are.
KEESA:
Thank you for that and last question David. What are the expectations around the CFE and role the role of exchanges right now?
DAVID:
There's going to be 2 interconnected events on the 29th of June, so there's the event. This angarika just took you through now, which is part of the Elsag PRI Investor Action on on Climate Cop 26 series. But there's also a pre event and that pre event is a UN Sustainable stock exchanges Events is Co-hosted by London Stock Exchange and Johannesburg Stock Exchange is. We have been a Co-chairing, A working group of And collaboration of exchanges around the world to develop model climate reporting. Guidance based on CFE data pointers. TCFT provides you know the main global standard for for climate reporting and so the whole concept here is that exchange is sitting between companies and investors Are ideally placed to play a big role in helping drive higher quality, more consistent global climate data that investors so need. As we have been discussing to be able to help reallocate capital and so And although there's a whole variety of different initiatives going on to try and take forward TCFT reporting, including by the International Financial Reporting Standards Body, who's setting up the Sustainability Standards Board? Actually, exchanges can can start to take action now, so on the 29th we will be launching the model climate guidance.
And the idea here is that each exchange, this being developed by exchanges for exchanges, can then take that guidance and then they can then top and tail it and publish it in their own markets. And we hope that this will really help provide a lot of the you know the underlying data that is so desperately needed and help really accelerate All of this, even ahead of a lot of the expected regulation around TCSD, which which will come into into effect over upcoming years in a number of countries.
KEESA:
Great, and it sounds like all of this really points to a high level of partnership in terms of engagement.
It also points to investors taking action and wanting to engage with others. As you mentioned race to zero, a global campaign led by the UN but really focused on those non stakeholders. Some of the largest Coalition of those 400 cities 2000. Businesses, financial services firms, healthcare firms. So again, that level of partnership being raised. We talked about a lot about the net zero initiatives, though they may be nascent as at this point that really points to The need for these stakeholders to work together so all sorts of mobilization efforts there in terms of the messaging that we can deliver from the financial services sector to the real economy about what the financial services sector needs to see happening, Really looking at what kind of mobilization of capital is needed to assist and emerging markets, which I know is something that's Being discussed a lot right now, TPI and the climate action 100 plus what a huge first of all assets under management there is huge for from both of the areas with TPI really Looking at how good strategy and governance can be used and distributed, several items such as Senior accountability, senior level accountability is very important in terms of governance. The internal price of carbon etc and climate action 100 + / 50 trillion assets and management management. My goodness is a lot of Looking at some of the most systemically important companies related to climate change, which I know is going to be huge in terms of delivering that messaging that we talked about so we all know the importance of climate data and the importance of getting to net zero. And it looks like The exchanges will definitely be playing a higher role in terms of the higher quality of climate data that's going to be distributed and then with the partnership with London Stock Exchange has with the Johannesburg Stock Exchange. In developing that model, climate reporting guidance based on TCP is definitely a way to get us there. Sagarika and David, amazing information. Thank you so much for sharing that with us.
SAGARIKA:
Thank you, thanks very much, David
DAVID:
Thank you. We do encourage everybody to go and register for those events that that the Lords of the model guidance also features. Mark Carney. We've got some great speakers that also, Sagarika said, for the. For the PRI Elswick events and. And it would be it's free to join and easy to register. So to do come along.
KEESA:
Thank you so much.
