Sustainability Conference 2019

Renowned experts talked about global warming and climate change during a discussion entitled ‘Climate change – opportunities, risks and challenges for investors’ at the sustainability conference held on 25 June 2019 in the Palmengarten Botanical Gardens in Frankfurt.

Climate change is now firmly established with investors as a new dimension of risk, and measuring the environmental impact of one’s portfolio is becoming more important. The entire financial sector will play a key role in combating climate change, as allocation decisions also involve decisions about business models and how to handle emissions.

Climate change is the most significant growth opportunity of the century, according to Lord Nicholas Stern, a professor at the London School of Economics and one of Europe’s leading economists and climate experts. He firmly believes that the world can achieve the 2°C target set out in Paris, provided that there is broad international cooperation between governments and companies.

Anyone hoping that a scarcity of resources will lead to fossil fuels becoming prohibitively expensive, is mistaken, says Professor Ottmar Edenhofer of the Potsdam Institute for Climate Impact Research. There is still enough coal and oil in the ground to generate far more greenhouse gases than the atmosphere can handle. What is needed instead is a concerted international effort to develop an effective carbon pricing system.

On stage, Christian Lindner, leader of the Free Democratic Party of Germany (FDP), and Matthias Kopp, Head of Sustainable Finance at WWF, talked about policymaking. The topic of the discussion was: Is there a lack of political will to drive structural change? Christian Lindner asserted that this is not the case, but did call on policymakers to focus on a single regulatory approach instead of many. “We are about to take the most expensive – but by no means the best – path.”

Former German President Joachim Gauck reminded those present of their responsibilities as citizens and investors, and the importance of stepping up to the plate, particularly at a time when many people are scared of change. “If we refuse to take responsibility, then other, backward-looking forces will take our place.”

Global greenhouse gas emissions were higher in 2018 than ever before. The data is deeply concerning and shows how important it is to redouble our efforts to prevent climate change. The entire financial sector will play a key role in this. Failure to act, on the other hand, may be expensive. The costs could run into the billions because certificates will have to be purchased for all greenhouse gas emissions that exceed the targets. The calls for a concerted international effort to develop an effective carbon pricing system are growing louder.

The transformation of the global economy towards a carbon-neutral world offers a wealth of opportunities for companies and investors. It is important to take responsibility and to step up to the plate, particularly at a time when many people are scared of change. As responsible asset managers we are happy to face this challenge.