the low carbon opportunity - Hermes Investment Management

Nov 1, 2017 - By Tatianna Bosteels & Bruce Duguid, Hermes Investment Management ..... asset classes. This year we have measured the carbon footprint of our public equities, credit and real estate assets, representing 80% of our. AUM as of ...... equity general partners (GPs) and many limited partners (LPs), would.
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THE LOW CARBON OPPORTUNITY – AND THE RISKS OF MISSING OUT The Hermes approach to climate risk and opportunity

November 2017 By Tatianna Bosteels & Bruce Duguid, Hermes Investment Management

For professional investors only

www.hermes-investment.com

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CONTENTS THE CLIMATE OPPORTUNITY PRISMS

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ADVOCACY – INVESTOR’S VOICE IN THE CLIMATE TRANSITION4 Voluntary disclosure of climate risks and opportunities

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G20 countries and investor dialogue

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Investor voice on EU public policy

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EU Energy Union – putting energy efficiency first

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Supporting the UK government

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THE HERMES APPROACH: CONTINUOUS PROGRESS

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Our approach – creating a feedback loop of investment and stewardship

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Trees for Cities

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Intentionality and outcomes

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Reflection on target-setting

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Engagement: future-proofing business models

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Engagement progresses and focus

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Climate engagement work

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Public equities – deepening our climate impact analysis

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Integrated investment and stewardship approach

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Proprietary carbon portfolio analytics tool

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Pricing ESG risks in credit

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Low carbon strategy

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Private markets: governance and opportunities

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Real estate: from intention to outcomes

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• Real Estate: energy and climate targets and outcomes

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• Delivering outcomes through active operational management

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• Sustainable place-making for climate mitigation and adaptation

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• Physical risks: Flood risk management

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Infrastructure’s longevity

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• Enhanced governance for long-term returns

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• Climate risks, resilience and opportunities

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• Infrastructure for the transition to a low-carbon economy

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Private Equity – opportunities for growth creation from the low carbon transition

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• Private equity’s innovation as opportunities

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• Carbon risk monitoring

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HERMES INVESTMENT MANAGEMENT NOVEMBER 2017

THE CLIMATE OPPORTUNITY PRISMS Since the Paris Agreement on climate change, we have seen a number of unexpected developments. While the EU, China and the BRIC countries continue to voice strong support for the agreement, in June 2017 President Donald Trump announced that the US government would withdraw from the Accord. While this announcement made global headlines as a landmark symbolic gesture, in practice there will be limited impact in the short term, and it could highlight the benefits of moving to a low-carbon economy. The announcement has been strongly condemned by a number of US states, cities, large corporations and investors, some of which are forming coalitions to take actions in alignment with the Paris Accord US national action plan. In the last two years, we have also seen some crucial climate change developments impacting investment management. Following the intervention of Mark Carney, governor of the Bank of England and chairman of the Financial Stability Board, the central banks of the G20 countries have stated that climate change represents a systemic risk to the financial system. In parallel, there are growing moves to define more clearly the fiduciary duty of investors to account for the longerterm impacts to investments of environmental and social issues. One example is this year’s EU pension’s directive (IORP), wh