Investing in a COP21 world

Having lived through Australia’s back and forth of climate policy in the last decade, I must admit that I’m one of the cautious ones when it comes to view COP21 as a game changer. But hearing Emma Herd's resounding ‘COP21 changes everything’ and a week of conversations all things climate finance, I must admit: there definitely is a buzz on the streets. And what a great week it has been for CAER and climate experts South Pole Group - thanks Max Horster for your insights and putting up with our - admittedly a bit crazy - schedule! Kicking off with the Divest-Invest-Conference in Sydney, Max got up early the next day for an engaged roundtable with the IGCC. He was grilled on the value of carbon assessments, standards and methodology traps. Our meetings and presentations across Sydney and Melbourne provided updates on developments in Europe and the US: how the French carbon disclosure requirements ripple beyond French borders; why a friendly ask by the Swedish Government for portfolio carbon disclosure created a de-facto standard for reporting; and that regulators in California were able to stun even experts such as Max Horster with their ‘forceful education’, requesting insurance companies to disclose financed emissions and consider divestment from thermal coal. Amid all this the Australian Senate was asking for submissions to its inquiry on carbon risk disclosures, which appears in tune with many other European Governments who are investigating climate risks and their impacts on the stability of financial markets (for example the Netherlands, Sweden, Switzerland and Germany).

From our discussions it seems that core themes and questions most investors in Australia grapple with include:

• the context of carbon footprinting, and why they are only a heat-map and starting point;
• how one may approach a ‘2 degree compliant’ portfolio assessment;
• what it means to complement carbon assessments with forward looking metrics;
• why it may not be that important to worry about double counting in a footprint;
• in what ways to deal with company equity stakes in a carbon assessment; and
• when it’s important to understand the quality of carbon data.

For those who missed us last week, and interested in all things carbon assessments and climate friendly portfolios please get in touch!