Each month, Mercer brings together in-house subject matter experts, employee advocates and external thought leaders for an online discussion of the most pressing issues. The program is called #MercerChats and takes place entirely on Twitter, where individuals around the world engage with Mercer’s intellectual capital and other leading thought leadership to share insights and discuss solutions to help organizations thrive. Below is a summary of our June 2022 tweet chat, highlighting some of the key themes discussed and insights shared.
Even amid a global pandemic, geopolitical crises and economic uncertainty, if there’s one issue that’s top of mind for global leaders, its climate change. With impacts being felt by every individual on the planet and the potential for truly catastrophic damage, climate change presents a challenge that’s difficult to comprehend.
But if climate change is difficult to comprehend, it’s even harder to act upon. How do you prompt people to solve a problem on a global scale when the costs of inaction are distributed across continents and decades? By enlisting the support of actors who think and operate on just that timeline: institutional investors.
Over the last decade the institutional investor community has transformed from broad-brush greenwashing to become true leaders in the advancement of climate-conscious business practices. Using their substantial scale, long-term outlook, and advanced risk assessment practices, these actors are now going beyond ESG consideration to support positive change through impact investing.
To more fully appreciate this market shift, we invited some of the world’s leading voices on ESG practices, climate impact investing and alternative asset management to join us in a discussion on climate change investments. Below are highlights from our conversation.
While some may argue that the time for action was decades ago, there’s no time like the present. As Vanessa Hodge pointed out during our conversation, each day brings us closer to a new irreversible tipping point and unknown challenges. But even if we are on track to meet or exceed the Paris Agreement’s 1.5 degree goal, there is still opportunity to stem the tide and make real commitment to positive action.
By and large, the institutional investor community has responded to that imperative. Whether because they’re uniquely able to do so - Barbara Friedberg pointed out that this group has access to tools and resources that individuals do not – or because they’re incentivized to plan for long-term risks in a way other investors are not, institution investors are in a unique position to become pacesetters in the transition to climate investing. Across the industry, we’re increasingly seeing firms take up this mantle and overcome what Dr. Sweta Chakraborty described as the “inertia of Inaction” and confront the real impacts of climate change as a challenge to address and solve
We need global collaboration with governments being bold in their actions to make sure we stay on target. We are close to hitting more ‘tipping points’ where temperatures will run away from us and into the unknown.— Vanessa Hodge
Individuals don't have the tools to properly evaluate the nuances of ESG and climate investing - asset managers need to be encouraged to take the lead in #climateinvesting— Barbara Friedberg
Asset owners have significant opportunity to overcome the inertia of inaction thanks to both human and business inclination to the status quo. Overcoming “business as usual” attitudes in the face of real climate impacts are both challenging and solvable— Dr. Sweta Chakraborty
If the time is now, the question becomes how. How can a global community of investors actual move the needle on a problem on the scale of climate change, and even if their efforts would make a difference, where do they begin?
Every journey needs a destination. Tess Page pointed this out during our chat, noting that if investors want to drive a positive climate impact, they need to define what that looks like. By identifying success, investors can begin working towards it, whether by expanding activities in private markets, as suggested by Cara Williams, or through other new and innovative solutions that may arise. Angelika Delen picked up on this process, sharing how after investors have identified climate-responsible investments, they then need processes to keep tabs on these selections to ensure they continue to offer positive climate impact. Yesterday’s gold standard for climate investing will not be tomorrow’s, and investors need a way of keeping pace with these advancements if they want to have a transformational impact
Boring one but start by gathering where you are now (there may be gaps in the data) then work with asset managers & advisers to define what good looks like. Remember it is easy to “look good now” but needs to be forward-looking for transition— Tess Page
ESG are critical considerations to take into account but to make an impact then private markets can be a good option-directly choosing the areas to effect change— Cara Williams
It’s not only about finding the right investments across all asset classes but also having the appropriate processes for selection and monitoring. What are the KPIs to choose the relevant #investments to tackle climate change? Investors have to deepen their beliefs and processes to understand the risk of what if they don’t tackle climate change.— Angelika Delen
Just like riding a bike, getting started with climate-change investing is the hardest part. Where should investors concentrate their capital, and what should they prioritize as they look at the positive and negative impacts of their investments?
With climate investing, sometimes the answers are simple. Take water, for example. As John Lloyd shared, water is everywhere and affects pretty much everything, but for too long it’s been undervalued and overlooked as an asset to the global economy. By properly valuing natural resources, investors can more accurately reflect their scarcity and price them into their long-term investments.
Rather than searching for a golden ticket, the key may lie in diversified bets. Per Jonathan Cross, achieving net zero is about more than solar panels; it’s a shift in business models, mindsets and entire industries to move away from actions that accelerate the most disastrous impacts of climate change. Ultimately this commitment may require a more holistic perspective. As Ian Horne put it, sustainability means investing in all manner of things, and sometimes the most impactful investments aren’t the flashiest.
Water is required to sustain life, is a necessary component of all ecosystem services, and affects pretty much everything – food & agriculture, supply chains, health, renewable energy, climate and the environment overall.— John Lloyd
Achieving net-zero by 2050 will require more than an energy transition. It will require shifts in business models towards more sustainable practices alongside a resilient biosphere that can absorb & store residual GHG emissions.— Jonathan Cross
Sustainability involves investing in all manner of things. Some investments qualify without having any ESG benefit. With impact, we are actively looking at building the future, and while that can make for volatile investing, this is a future we need to build.— Ian Horne