Investors must travel a winding road to net-zero. Here’s a map

(Credit: Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Jo Taylor, President and Chief Executive Officer, Ontario Teachers’ Pension Plan

  • For institutional investors, the path to net zero is not straightforward – but it is navigable.
  • Earning both financial and environmental returns can be done, but it requires commitment, creativity and trade-offs.
  • Here are 3 central questions investment managers should consider as they make this journey.

Now, more than ever, investors have a dual responsibility to earn returns and make the world a better place.

At Ontario Teachers’ Pension Plan, we look after the retirement security of 329,000 teachers and this investing philosophy guides our thinking every day. We are one of the world’s largest pension plans and this scale means we can influence and effect real change in the world.

That is why we recently set a target to achieve net-zero emissions by 2050. As an allocator of capital, a builder of businesses and an active, engaged owner, we have a responsibility to maximize the impact of our net-zero journey.

The challenge is balance – balancing our broader responsibility to the world while delivering on our fiduciary duty to look after every one of our teachers.

Striking this balance is not easy for us, or for any other investor. In fact, there is no straight path towards net zero. Instead it is a winding road requiring commitment, creativity, and often, difficult trade-offs.

For me, this issue revolves around three central questions.

1. To engage or divest?

Investors are often askedif they will immediately divest holdings in companies that do not support the transition to net zero. I understand that instinct. And the fact is, it is easy to divest. But divestment does not fix the problem, it just passes it onto someone else.

At Ontario Teachers’, we support engagement over divestment. We believe in working with our partners to solve problems and build better, more sustainable businesses.

For investors this means working with companies they invest in to support their journey to net zero: from measuring emissions and setting reduction targets to developing transition plans and delivering on them. It means acknowledging that not everyone is starting their sustainability journey from the same place. Fossil fuels, for example, are much more deeply embedded in the fabric of some economies than others and therefore decarbonization is much harder.

We must deal with these realities as they are, not how we would like them to be.

The move towards net zero is particularly challenging for companies that extract, sell or transport fossil fuels. A transition away from these businesses is underway, but they will remain an essential part of the global economy for years to come. Engagement gives investors the chance to work together to achieve a fair transition.

Fundamentally, we believe it is better to retain a seat at the table than to walk away and hope others will do what is required.

2. Save the planet or generate returns?

For investors, the climate debate is often framed as a choice between climate action or returns; in other words, returns will suffer if you back sustainable businesses. Yet this is not a binary choice.

The transition to net zero creates major new investment opportunities – from the electrification of vehicles and carbon capture technologies to renewable energy and sustainable infrastructure.

It also creates risk. What makes a good investment today may not be the case tomorrow. Consumer preferences and government regulation are increasingly rewarding companies with more sustainable business models. This trend will continue to accelerate in the coming years.

Ultimately, institutional investors need to work alongside their portfolio companies, fulfilling their stewardship role by investing in solutions that contribute to a low-carbon future and delivering stable, long-term returns. energy, mining, metals, blockchain

What is the World Economic Forum doing to help companies reduce carbon emissions?

Corporate leaders from the mining, metals and manufacturing industries are changing their approach to integrating climate considerations into complex supply chains.

The Forum’s Mining and Metals Blockchain Initiative, created to accelerate an industry solution for supply chain visibility and environmental, social and corporate governance (ESG) requirements, has released a unique proof of concept to trace emissions across the value chain using distributed ledger technology. Building Resilient Global Value Chains | Sustainable Deve…

Developed in collaboration with industry experts, it not only tests the technological feasibility of the solution, but also explores the complexities of the supply chain dynamics and sets requirements for future data utilization.

In doing so, the proof of concept responds to demands from stakeholders to create “mine-to-market” visibility and accountability.

The World Economic Forum’s Mining and Metals community is a high-level group of peers dedicated to ensuring the long-term sustainability of their industry and society. Read more about their work, and how to join, via our Impact Story.

3. Who are the key partners on this journey?

Global investors cannot do this alone. There are many credible pathways to a net-zero future, but every path requires increased policy action from governments and regulatory bodies worldwide.

Only governments can create a predictable and stable regulatory environment that encourages and supports investors to take big bets on decarbonization. We need public policy that incentivises investors to take the right kinds of risks and we need a clear set of standards to properly measure and assess progress toward the net-zero goal. This is essential to the successful delivery of the net-zero transition.

The journey also requires strong partners. Partners who share a common vision, set of values and long-term outlook. Partners who are committed to working together to build businesses with lasting value.

Underpinning all of this is technology. New technologies and operating models are necessary to support the transition, but many are not yet at scale. Investors need to be there to support and, where possible, accelerate their development, guided by a clear, focused strategy for the long term.

All of this requires conviction and a resolve to make the tough decisions. The opportunities presented by the net-zero transition are immense, but so are the challenges. Working together, we can overcome these challenges, and do our part to secure the planet’s future.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Europe should make voice ‘more heard’ in today’s ‘dangerous world,’ says UN chief

The revenge of the fallen

Syrian crisis is ‘clearest example’ of foreign investment in terrorism, Deputy Prime Minister says at UN

This Syrian national has been trapped at Kuala Lumpur airport for 3 months

European Commission calls on national political parties to join efforts to ensure free and fair elections in Europe

Back to the Basics: Primary Healthcare

Learning lessons from across Europe – the hidden costs of COVID-19 on lung cancer

Eliminating gender based bias in medicine: the role of medical students

MEPs propose more transparent legislative drafting and use of allowances

Out with the old: Young People transforming Humanitarian Action

Parliament adopts deal to improve quality of tap water and reduce plastic litter

Mergers: Commission clears acquisition of Eaton Hydraulics by Danfoss, subject to conditions

5 ways to #BeatAirPollution

Security spillovers from Trump’s trade wars: China, Germany prepare for global disorder

Iceland’s slowdown underlines the need to fix structural issues

Wirecard: MEPs call for new audit rules, protection for whistle-blowers and EU supervision

Why salaries could finally be on the way up

Estonia: use robust growth to improve income equality and well-being

More funds needed to counter ‘persistent and multi-faceted humanitarian problems’ in Ethiopia

EU prolongs economic sanctions on Russia by six months

New energy security framework will help meet growing needs in East Africa, sustainably – UN economic wing

Postal workers in France are helping elderly people fight loneliness

We are witnessing a revolution in genomics – and it’s only just begun

Why transparency in drug pricing is more complicated than it seems

COP21 Breaking News_04 December: Launch of CREWS, climate risk & early warning systems

Merkel: Nationalism and egoism must never have a chance again in Europe

More funding needed to combat locust swarms ‘unprecedented in modern times’

Global warming: our responsibility

Beware the fragility of the global economy

Commission provides 20 cities with funding for innovative security, digital, environmental and inclusion projects

WHO and UNICEF in campaign to protect 1.6 million in Sudan from cholera

Falling inflation urges ECB to introduce growth measures today

Why are the financial markets shivering again?

‘Great Pacific Garbage Patch’ clean-up project launches trial run: UN Environment

EU labour mobility: Inconvenient truths for everybody

European Parliament and Eurovision sign partnership for European Elections

EU attempts to make new deal with Turkey as relations deteriorate

Technophobe or technophile? We need more conversation about digital transformation

‘Emulate his example’ urges UN chief as world celebrates Nelson Mandela: a ‘global advocate for dignity and equality’

MWC 2016 LIVE: Qualcomm looks to pick up Hamilton’s winning ways

EP and EU ministers agree on Erasmus+ programme for 2021-2027

My experience living with depression and schizophrenia in Thailand

Building cybersecurity capacity through benchmarking: the Global Cybersecurity Index

3 ways to rebuild trust in how we regulate technology

First calls under Horizon Europe to be launched by the European Research Council

Philanthropy must face a reckoning on race in 2021

New UN finance panel to push Global Goals forward

Conditions deteriorating alarmingly in Yemen, warns senior UN official

Commission reinforces tools to ensure Europe’s interests in international trade

EU mobilises emergency assistance for Croatia in the aftermath of devastating earthquake

Commission concludes that an Excessive Deficit Procedure is no longer warranted for Italy at this stage

Better ID card security to curb document fraud

Can we automate our way out of the savings crisis?

5 lessons for the future of universities

Things are bad and getting worse for South Africa. Or are they?

This is why AI has a gender problem

Commission paralysed before the banking leviathan

The world must pull together to stem the urgent crisis in our ocean

Alice in Colombia

The recipe for creativity involves a lot of ideas, and a short break

More Stings?


Speak your Mind Here

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s