Sustainable Investment News Briefing: Goldman Sachs targets $750B in climate investments; Industries make halting steps toward reduced emissions: CalPERS faces “Big Challenge” of climate change exposure

Corporations and institutional investors need to step up their efforts in climate-related and sustainability investing, a growing number of experts are insisting. It’s not just good for the planet and the future of humanity; it can also make money, they note.

This news roundup takes a look at Goldman Sachs’ plans to do just that, as the bank outlines how it will put $750 billion into climate-related investments over the next 10 years. We also look at how industries overall are faring in the battle against carbon emissions, highlight the results of a recent webinar about how pensions and other institutional investors are responding to climate investment opportunities, and more.

Goldman Sachs pledges $750 billion in climate investments: Goldman Sachs says it will look to finance $750 billion in climate change-related activities over the next decade. In a Financial Times op-ed last month, CEO David Solomon says the firm “will target $750 billion of financing, investing and advisory activity to nine areas that focus on climate transition and inclusive growth.” Those areas include clean energy and transport, financial inclusion and sustainable food and agriculture.

“Companies have traditionally treated sustainability as a peripheral issue, focusing narrowly on the way they manage their impact on the environment,” Solomon wrote. “We don’t have the luxury of that limited perspective any more.”

He also called on governments to implement a carbon tax, saying that while markets will continue to “do much to address climate change,” that will not be enough, and government intervention via carbon pricing is now a necessity.

That, he wrote, “will channel capital to low carbon solutions and drive innovation.”

Besides its $750 billion pledge, Goldman will continue to avoid projects that support oil drilling in the Arctic, new thermal coal mines, and new thermal coal plants, the investment bank says.

Two environmental groups, the Sierra Club and the Rainforest Action Network, say Goldman now has the strongest fossil fuel policy among the nation’s six biggest banks, though they note that several foreign banks have stronger policies. Furthermore, they say, Goldman’s policy doesn’t address areas like fracking or tar sands.

And in his statement, Solomon made it clear that the bank will continue to offer financing for some types of oil, gas and related fossil fuel activities. “The world will continue to produce and use fossil-based fuels, aeroplanes, cars and industrial goods,” he wrote, “and Goldman Sachs will continue to support clients in transactions that are important to economic activity.”

Industries make halting steps toward reduced emissions: A growing number of companies say they’ll cut carbon emissions. But in the big picture, major challenges persist when it comes to getting the private sector on board in the fight against climate change, according to a report in the Wall Street Journal.

More and more big corporates have disclosed plans to become carbon neutral and embrace renewable energy in the near and medium term, the Journal notes. However, climate activists say most companies still have a long way to go and need to move toward being carbon neutral, and take other vital steps, at a faster pace.

Some investors agree. “Most companies recognize man-made climate change, but they’re underestimating the risks,” Lewis Grant, senior equities portfolio manager at Hermes Investment Management, tells the Journal.

Among the sectors that still face big hurdles, according to the report:

  • The transportation industry remains heavily dependent on fossil fuels, especially in commercial shipping. Such ships are responsible for some 3% of overall global carbon emissions.
  • The airline industry has said it will reduce emissions to 50% of 2005 levels by 2050, but that’s three decades from now, and significant changes aren’t expected anytime soon.
  • The agriculture industry is grappling with the fact that global livestock production is responsible for nearly 15% of all human-related greenhouse-gas carbon emissions. Meat alternatives have started to catch on, but those still comprise less than 1% of the meat industry’s overall sales, meaning their impact on reducing carbon emissions remains miniscule.


Similarly, Bank of England Governor Mark Carney says companies and investors alike need to do more to fight climate change. Carney said late last month that companies in general need to improve their planning for climate change, as well as improve the disclosure of their climate exposure and their plans to deal with that exposure.

“A question for every company, every financial institution, every asset manager, pension fund or insurer: what’s your plan?” Carney said.

Within the financial services sector, there’s been progress in terms of disclosure and carbon footprinting, but more is needed, and at a faster pace. “What we can’t have is a financial sector that ignores the issue and all of a sudden it has to deal with it,” he said.

“If there is no action, we will be in a climate emergency,” Carney added.

CalPERS faces “Big Challenge” of climate change exposure: About one-fifth of the assets held by the California Public Employees’ Retirement System have a “high exposure” to climate change, a new report has concluded. That, experts say, poses a “big challenge” for the public pension fund, the nation’s largest with $394 billion in assets.

Affected investments include those in sectors ike transportation, food and agriculture, energy, and materials and buildings, says the report, which was mandated by a 2018 state law. The law was meant to make sure the state’s pension funds were taking hard looks at their investment exposure to climate change.

The report was hampered by the fact that, of the 10,000 companies that CalPERS holds a stake in, less than half voluntarily disclose carbon emissions data, officials say.

The report also omits so-called Scope 3 emissions — indirect carbon emissions that come from a company’s supply chain, or from the end-use of its products. That means the new report could actually underestimate the potential portfolio impact of a carbon tax, or to other potential market changes.

Still, some experts say the new report, whatever its flaws, is a good step forward when it comes to CalPERS making climate risk more central to its overall investment strategy and outlook.

Court rules in favor of strong carbon reductions: The Netherlands must reduce greenhouse gas emissions by 25% from 1990 levels by the end of this year, according to a court ruling that experts say is both ground-breaking and the strongest ruling yet in the growing number of climate litigation cases worldwide.

The Dutch government has already been working to reduce emissions, but the ruling likely will mean even stronger steps will have to be taken. That could include shutting down many coal plants, including some that started belching greenhouse gases less than five years ago.

It’s not immediately clear what impact the ruling may have in the US, where a growing number of climate-related lawsuits have been filed against the4 federal government. Worldwide, governments face more than 1,400 such suits, and counting.

How institutional investors are tackling climate change (webinar): Climate change is a “macro disruption” that will have major impacts across all industries and geographies, said Alicia Seiger, managing director of the Sustainable Finance Initiative at Stanford University’s Steyer-Taylor Center, on a recent CleantechIQ webinar.

Pension funds and other large investors are in the midst of sorting out how to respond to these looming disruptions, she and other experts said on the discussion. The hour-long webinar, “How Institutional Investors are Addressing the Climate Emergency,” is available for replay at this link.

Another webinar speaker was Alex Bernhardt, US head of responsible investment at Mercer. He said one of the biggest challenges that institutional investors face on climate risk is how to assess that risk “given the complexity of its interactions and the fact that that it is a forward looking long-term risk phenomenon that’s going to unfold over decades.”

He has spent a lot of time on factoring climate change into asset allocation strategies, and believes investors must start doing this to account for the risk. He also highlighted the fact that, since asset allocation is the most important decision that asset owners make from a risk and return standpoint, they need to sharpen their focus on asset allocation and bottom-up security selection from a climate perspective.

“There are plenty of both regulatory and physical metrics that point to the fact that climate change risk is tangible and real and important,” Bernhardt said. He added that a small but growing number of his institutional clients are proactively quantifying the impact of their portfolios and aligning them fully with climate change risk.

Another webinar speaker, David Richardson, executive director – business development at Impax Asset Management, shared his thoughts about why carbon footprinting is not the optimal tool to measure climate risk — including reasons such as the use of old data, and the fact that it’s a backwards-looking process.

Richardson also explained how Impax looks at “cash flow impairment from climate change” in its investment process, and said that, in the near term, new government policies in response to climate change represent a greater risk than actual rising seas to certain economic sectors.

Seiger served on the New York Common Retirement Fund’s decarbonization advisory panel, which last year made some high-level recommendations to the pension. Those, she explained on the webinar, include that the pension pursue 100% sustainable assets by 2030, and also create a new climate solutions allocation.

“The fund was already a leader in investing in climate solutions and sustainable assets; we recommended that the fund double down on that and establish it as its own allocation, to help build expertise and a network within climate solutions investing,” Seiger said.

After the panel made its recommendations, the pension fund issued its climate action plan, which included stating its belief that climate change is a real risk to the portfolio; doubling the pension’s commitment to sustainable investments, raising the target from $10 billion to $20 billion over the next 10 years; and hiring a senior staff member to oversee the allocation, she added.

The webinar also surveyed attendees about what may be stopping them, as institutional investors, from acting on climate change. Of the respondents, 62% said they are already taking action, 20% said that they currently lack the internal bandwidth to do so and 18% said their organizations lack internal consensus on whether climate change is a risk or not.

Much more was discussed on the webinar; give it a listen via this link.


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