‘Code red for humanity’ a wake-up call for private and public investment

By Cameron Micallef

August 13 2021
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Retail investors that have been advocating for sustainable and ESG investing are hoping a new report released by the United Nations will serve as a wake-up call to the financial industry and governments to act on climate change.

On Monday, one of the most comprehensive climate reports produced by the Intergovernmental Panel on Climate Change (IPCC) was released, detailing that the Earth is just 10 years away from hitting the 1.5 degrees Celsius threshold of warming in a single year.

Labelled a “code red for humanity” by UN Secretary General Antonio Guterres, the report explained that the globe is already 1.1 degrees Celsius warmer, with Australia alone having reached 1.4 degrees Celsius above pre-industrial temperature levels (1850-1900).

Responding to the shocking findings, the CEO of the Investor Group on Climate Change (IGCC) Rebecca Mikula-Wright highlighted the important role investors play in the transition to net zero, and flagged that a number of investors are already aligning their wallets with their values.

“This is becoming mainstream investor practice and helping shift capital flows to assets that have better climate risk profiles and are consistent with the Paris Agreement goals,” Ms Mikula-Wright said.

“In turn, and to remain competitive, many large Australian companies have also committed to achieving net zero emissions by 2050, and investors are now beginning to engage with them about developing detailed transition plans and integrate climate goals into capex decisions,” she told nestegg.

According to Ms Mikula-Wright, businesses in Australia will be forced to act on climate issues or risk Australian capital being sent overseas, as investors look for low climate risk opportunities.

She advised companies to follow the Climate Action 100+ approach, which sets out a series of benchmarks, helping guide companies towards managing their climate risk.

“These include setting Paris-aligned emissions reductions goals, making adequate and consistent climate risk disclosures and allocating sufficient capex aligned to their transition goals, among many other steps,” Ms Mikula-Wright explained.

While noting the critical role capital and investments will make in transitioning to a net zero world, Ms Mikula-Wright said partnerships between private capital, the public sector and institutional investors are key to moving forward.

“Investors recognise this, and while that shouldn’t stop them from taking their own steps to address climate risk, it is imperative they make their voice heard in policy discussions on climate change and energy,” the CEO continued.

“For example, 457 global investors representing US$41 trillion have joined the Global Investor Statement calling on governments to up their climate ambitions and implement meaningful policies.

“In Australia, 20 investors and banks, with $910 billion in assets under management, are supporting deeper emissions reductions for the nation by the end of the decade through Climate League 2030.”

This is despite Australia’s own Prime Minister Scott Morrison dismissing Mr Guterres’ desperate plea and reiterating that Australia would not commit to a target of net zero emissions by 2050.

Instead, the PM rehashed old arguments and his trust in technology.

“I won’t be signing a blank cheque on behalf of Australians to targets without plans,” he said.

While cautioning that Australia lags behind the rest of the world, Ms Mikula-Wright said she believes the government too will be forced to act.

“If the Australian government wants to remain competitive in global capital markets, it will need to adopt stronger 2030 targets and establish policies now to ensure an orderly transition to net zero emissions by 2050,” she opined.

However, the CEO opines that this transition would benefit the country, stating “credible 2030 targets and an orderly transition to net zero emissions in Australia would unlock around $63 billion in fresh investment opportunities to 2025,” Ms Mikula-Wright concluded.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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