Learning from the corona crisis and staying the course on climate change
The ongoing crisis is painfully reminding us of the vulnerability of our economies and global financial systems and is a wake-up call for strengthening the resilience of those systems. It is also a reminder of the urgency of reducing the risks of unconstrained climate change leading to more frequent shocks of this type in the future.
How can investors contribute to increasing the resilience of our economic and financial systems? First, align your investment portfolios to a scenario leading our economies to net-zero greenhouse gas emissions by 2050 at latest aimed at limiting temperature rise to 1.5°C above pre-industrial levels (e.g. by joining the UN-convened Net-Zero Asset Owner Alliance). Second, if your mandate permits, allocate a part of your capital to companies providing break-through innovations in areas such as clean energy, resource efficiency and the transition to a circular economy. Third, take a long-term approach to investing avoiding speculative investments and asset classes that destabilise financial markets. Fourth, take a forceful stewardship approach (with clear goals that if not met lead to divestment) in engaging with companies that are working against a transition to a more sustainable economy. Fifth, collaborate with other investors in shaping a more resilient architecture for our financial systems (e.g. through initiatives such as Principles for Responsible Investment, Climate Action 100+, the Institutional Investors Group on Climate Change, the UNEP Finance Initiative etc.).
The current crisis is ultimately strengthening the case for sustainable investing and could reveal itself as a powerful accelerator toward a more sustainable trajectory of our societies.