The British war time leader speaks up in spirit on the investment sustainability battle ahead.
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As you have been seeing and experiencing, anthropogenic climate change is disrupting how we live. Continuing to act as though it is not a major challenge that has been worsening year upon year offers our children and theirs the grim prospect of a world scythed of civilisation by the extreme forces of nature run amok. This dire forecast is not alarmist rhetoric. The leading climate scientists are in agreement that we may well be on track for a world that will be 4 ºC or more warmer before the end of the century. They warn that the perils of inhabiting Earth under such conditions are multifarious and that whilst human society will continue, there may be widespread, perhaps even crippling hardships.
This spectre also does not bode well for investment prospects. To be sure, the effects of climate change represent universally faced, non-diversifiable, value-destroying portfolio risk. Risk that cannot be addressed with some adept stock picking or even re-weighted asset allocations; the standard risk management strategy used by your sector today. The blade of climate change will hack away at the profits of many more companies than those not afflicted by its cut and those that seek to capitalise on the destruction it reaps. Even long-term, well-diversified investors may suffer large losses compared to where they would have been in a world without warming. Such economic devastation, however, can be largely averted if the environmental, social and governance (ESG) investing community realises the tremendous untapped potential it has.
Investors, like governments and companies, have been alerted to the dangers of uncontrolled climate change for two or more decades. As a consequence of our collective neglect, society now faces the procrastinator’s penalty: there are only radical solutions from which to choose.
Although some maintain that our only hope is to focus our united energies on governments by prevailing upon them to fund research and development in market transforming technologies, impose new regulations, and guarantee energy subsidy parity, I am quite certain – and it saddens me greatly to say this – that being faced with such powerful vested interests that are so close to home, most governments lack the resolve to rise to the occasion. Tragically, today we can trust governments to do the right thing only after they have managed to exhaust all other possibilities. Personal experience has taught me that when faced with such a fundamental deficiency, a multi-pronged offensive is best employed. I have also learnt that positive action undertaken by a powerful group to address a problem faced by equally powerful entities encourages similar positive action, even among traditional adversaries, and in some cases collaboration in the name of mutual benefit.
Considering the associated failures resulting from being outflanked by short-termism, what is needed – and what I am calling for from the ESG community in particular – is stewardship of a type and scale that has never been seen. By undertaking this call to arms, humanity may find a common project around which it can rally and civilisation will literally be saved from virtually certain ecological ruin. In the process, large asset
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