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How can the financial sector better align itself with the energy transition? Glennmonts insights webinar

July 29, 2020

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On Tuesday 28 July, Glennmont concluded their mini-webinar series titled ‘Glennmont Insights – Financing a clean energy future’. The one-on-one ‘in conversation’ events with key political and financial stakeholders took place over the course of June and July exploring how we can bring forward the investment required to achieve decarbonisation targets as we emerge from COVID-19.

The third and final event was titled ‘How can the financial sector better align itself with the energy transition?’ and saw Founding Partner of Glennmont, Peter Dickson spoke with Head of the United Nations Environment Programme Finance Initiative (UNEP FI), Eric Usher.

At the beginning of the discussion, Eric gave a brief overview of the role UNEPFI has played in helping to achieve consensus on climate change within the financial sector, detailing the increased momentum following the Paris Agreement in 2015 and the “wider sustainable developments goals” that aligned themselves with society’s demands on the climate. This ethos is so clearly “in Glennmont’s DNA”, he added.

Eric went on to highlight the obstacles we still face on the road to true decarbonisation, noting the role that leadership plays in directing the overall outlook for investment. He added that key players such as former Governor of the Bank of England, Mark Carney have played a huge part in setting standards, but that we must shift mindsets from striving for “green transactions” to establishing “green institutions”. He noted that since 2015, “everyone has made green investments”, but that we must bring green investments from the margins to the spotlight, creating a “green lens” through which we view all of our investments.

Peter referenced the World Meteorological Organisation’s recent report that suggests we are likely to move above 1.5 degrees in the next 5 years, asking what we can say to institutions and fund managers to incentivise them to play a more active role in tackling climate issues. Eric acknowledged the scale of the task ahead of us, saying that we must half our global emissions in this decade, and half them again in the 2030s – with an annual reduction of 7%. He further noted that in April of this year, at the peak of the COVID-19 crisis, global emissions had dropped by 17%, and informed projections estimate an annual reduction of 7% for 2020. The pandemic had shown us what is possible, but there have already been worrying trends as nations show a lack of imagination, looking to kick start a recovery with “high cost bail out packages for high carbon industries”, he added.

The integration of environmental, social and governance issues into institutional investment – especially within the EU, had seen shifts from being told you ‘can’ take environmental issues into account, to you ‘should’, and finally regulation that says you ‘must’ be conscious of these issues, Eric reflected. In addition, he said that there is a current review being conducted with the Principles for Responsible Investment (PRI) that will issue further guidance on how to achieve societal goals whilst generating returns. It was also detailed how the Asset Owner Alliance, who represent nearly USD $5.0 trillion in assets, have taken a sectoral approach driving decarbonisation, creating scientific-led pathways and supporting along the way. Eric described how further investment is offered as a reward for those who become “best in class” and divestment is used as a threat for those who don’t meet targets.

In terms of the developing world, it was suggested that by driving the cost down we will naturally see developing nations choosing to invest in clean infrastructure. Eric noted that this is a trend true of older, more established economies also, discussing the common use of the phrase ‘Just Recovery’ and that in practice this means providing alternatives to fossil fuels and not leaving communities behind, making specific reference to Australia and Canada where massive decarbonisation is needed but naturally feared.

To close, Peter spoke about the breakdown of Sino-American relations and the effect this will have on reaching consensus on global climate targets. Eric replied that we rely on strong leadership to be ambitious in setting global targets, warning that “we don’t have the meeting of minds that we had in 2015”. He remarked that China has made some “good progress” and that the US has the capacity to be world leading technologically, but that uncertainty is not good for innovation. On the US Presidential Election later this year it was stated that no matter the result, the US (at a city, state and federal level) is on its way to a consensus that investments must be green.

Eric concluded that if global energy markets can move away from murky subsidies, we have a better chance for consensus as we move forward, giving renewables a level playing field to compete with carbon heavy, outdated methods of energy generation.

Glennmont will continue play its part in support of the decarbonisation agenda and we would like to take this opportunity to thank everyone who signed up to listen, and especially our speakers Eric Usher, Lord Turner and Dr Alan Whitehead MP for their insightful contributions.

We look forward to welcoming you to future events.

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