Christiana Figueres, the United Nations climate chief and one of the key architects of the COP21 climate accord in Paris at the end of last year, reckons there’s an “astonishing alignment” between climate change mitigation and the time scales of pension funds.
Ringing an “alarm bell” to delegates at the Pensions and Lifetime Savings Association investment meeting in Edinburgh, Figueres said that for long-term investors there was “an astonishing alignment of time scales (we’re not talking short-term liquidity here) and alignment of asset type” by which she meant infrastructure.
Arguing that the world is already undergoing a green transition, Figueres, who recently announced her departure from the post of Executive Secretary of the UN Framework Convention on Climate Change, said: “We cannot build what we can’t finance.”
What was the role of long-term investors in this, she asked. Paris, she said, was a “galvanising moment” for investment: “We are now decarbonising our economy, that is very clear.”
The intention enshrined in the Paris accord to get to a netzero economy over time was “something the finance sector should be looking at” given that institutional investors, in her view, were the least engaged in climate finance.
“We cannot build what we can’t finance.”
She went on: “We neeed to define fiduciary duty with a large ‘F’. Those invested in high-cost, high-carbon should get out of that very, very quickly” – or risk breaching their fiduciary duty.
Speaking on the same panel, Donald MacDonald, the chair of the Institutional Investors Group on Climate Change (IIGCC), agreed that Paris represented a “seismic shift”. He said countries’ climate plans, the INDCs in the jargon, would have “far-reaching consequences for pensions regulation”. In this context, investment consultants and the actuarial profession needed to ensure they are providing the right advice to pension funds. “Small and medium funds need to expect more from their advisors,” he said.