Asset Owners Disclosure Project chair John Hewson appeared on ABC Radio National’s Big Ideas program last night, as part of a panel discussion on the impact climate change will have on our cities and the way we live our day-to-day lives. The panel was hosted by Paul Barclay and also featured John Connor, who is CEO of The Climate Institute.
Different panellists spoke of the impact a changing climate will have on their areas of expertise, from ecology and social policy to health and urban planning. Hewson took the opportunity to talk about the massive risks related to financial investment. After working with The Vital Few over the past few months, I realised I’ve become accustomed to the huge numbers involved – I suppose it’s easy to forget how staggering the concept of a $70 trillion risk (that is not being managed effectively) was the first time I heard it. And yet during last night’s discussion Hewson mentioned that $70 trillion – the amount currently sitting in super and pension funds worldwide, the equivalent of the entire planet’s GDP – and if you listen to the podcast you’ll hear the surprise in Barclay’s reaction. It’s the same shock I felt initially, which is a good reminder of how crucial it is for those of us in the know to keep raising awareness and helping to mobilise others.
You can read a summary of Hewson’s discussion of the financial risks associated with climate change or listen to a snippet of the interview here. Another key point in the discussion came just before that segment, when Hewson spoke of the “phenomenal business opportunities” available in the response to climate change. The whole program revolved around the way our cities need to adapt to a changing climate, and there are countless opportunities for innovative thinkers to develop products or programs (or energy sources!) that will help us manage that transition. The main problem, however, is gaining start-up capital – it’s difficult to secure investment in the very early stages of a project, especially given the limited funding available from governments.
That’s where that $70 trillion comes in. At the moment only two per cent of it is invested in low-carbon industries, and “if we could get the two per cent up to five or six per cent, there would be enough money globally to fund some of those businesses I just talked about,” Hewson said. As a result, freeing up capital for renewable energy projects is an awesome by-product of AODP and The Vital Few’s aim to encourage investors to measure and manage their exposure to climate risk.
“Adjusting within their portfolio – reducing their exposure to some of the climate exposed industries and increasing their exposure to the low-carbon industries is their best portfolio response,” Hewson said.
“It’s a significant risk, there are ways to deal with it, and that’s what we’re trying to drive by surveying these top 1000 [funds], rating them and hopefully embarrassing them into understanding the magnitude of the risk that they’re carrying.”
“Because it’s a very real risk – in terms of its financial consequences it dwarfs the global financial crisis.”
You can listen to the full Radio National podcast on ‘Climate change and cities’ here.