If PKA’s CEO Peter Damgaard Jensen had a genie and a magic lamp, his first wish would be that more investors signed up to the Institutional Investors Group on Climate Change (IIGCC).
“IIGCC has grown its member base significantly already,” he points out, claiming that membership of the organisation – which he took over as chair of last month – has risen by more than a third over the past two years to 135 members. “We’re taken seriously because we’re an NGO based on our members. So when we deal with politicians, for example, being able to show them the number of investors we represent them really makes a difference.” And it looks like his wish may already be coming true, as four more players signed up to the London-based organisation last week: JP Morgan Asset Management, HSBC Pension Fund Trust, Denmark’s PFA Pension and Hartree Partners, a commodities trading firm specialising in oil and natural gas. According to its most recent unaudited accounts, the IIGCC – which represents European investors only – has seen its revenues from membership fees rocket from £277,572 in 2014, to more than half a million pounds in 2015.
Damgaard Jensen took the reins from Donald MacDonald at the start of this year, and plans to focus on how the group can push to implement the Paris Agreement in Europe and elsewhere. “COP21 was a success, but the real work comes now. If we’re going to invest more in the climate space over the next 20 years, then we need the regulatory and political will to be clear: we can’t have things changing direction from one year to another, because then we as investors won’t step in.”
If the genie granted him a second wish, after continuing to boost IIGCC membership, Damgaard Jensen would ask for a fully functioning carbon market. “Preferably an international one, joining up the EU’s Emissions Trading System with others around the world.” This would encourage investors to price climate change into their investments, and have a major impact on the behaviour of a variety of key sectors. The IIGCC’s official line is that “a robust carbon price” – which could be implemented through a trading scheme, but also through a tax system – is “critical”. But, Damgaard Jensen adds, it isn’t the be-all-and-end-all: “We’ve seen plenty of progress in Europe even without an efficient carbon market, so it wouldn’t be wise to sit here and wait for it – we have to push on with other areas.”One of the first things the IIGCC has done publically since Damgaard Jensen took the helm is to publish its views on the preliminary recommendations of the Financial Stability Board’s Taskforce on Climate-related Financial Disclosure.
“The suggestions could be more ambitious,” he says, “but we have to start somewhere, and this is the first time that anyone’s tried to formulate a way of addressing this topic, so we’re positive about that.” He has his own idea of what is needed from climate disclosure, though. “Ultimately, as investors, we want a standard around the metrics being used to disclose, so that we can compare them.” The IIGCC could be the body to push for that standardisation over the long term, he adds. “It’s also important that reporting doesn’t simply focus on the negative – climate risk – but also on the positive: to investors it’s just as important to be aware of green opportunities.
“And we also want to make sure that this isn’t just a matter of the top 100 listed companies being engaged, while everyone else continues as normal. At PKA, we have a lot of investments in private equity and real estate, for example, and we as investors need to try and influence those areas, which isn’t happening enough yet.”
Real estate is a particular focus for the IIGCC, which says it has “a clutch of members with substantial assets in real estate who are keen to secure policies that will maximise environmental benefits whilst maintaining and enhancing returns”. In response to this, the organisation runs a dedicated work programme on the subject.
Damgaard Jensen has a lot of hopes as he prepares to lead the IIGCC over coming years, but he saves his third and final wish for something more profound than metrics or private equity: “The way we perceive risk urgently needs to change. Investors and politicians often see green investments as risky, but if we don’t make them on a big scale then we face rising global warming, sudden catastrophes and portfolios of stranded assets. It is very clear to me that this has to be understood: that not doing anything about climate change is a much riskier plan for everyone.”