The Role of Investors After Paris

Boston Common's President Geeta Aiyer was in the COP21 'blue zone' in Paris for Energy Day, as the investor voice on energy efficiency during the historic negotiations. I sat down with her to ask about the role of investors in achieving COP21's goals.
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Boston Common's President Geeta Aiyer was in the COP21 'blue zone' in Paris for Energy Day, as the investor voice on energy efficiency during the historic negotiations. I sat down with her to ask about the role of investors in achieving COP21's goals. Here's our chat:

Q. Will we be marking 12 December 2065 as the 50 anniversary of the day we finally took the transition to a low carbon economy seriously?

Geeta: The historic agreement signed this month in Paris by global leaders, is the exciting first major step in a very important journey! COP21 set a level of ambition unprecedented at climate summits. For the first time ever, we as individuals and investors have a clear, long-term goal to achieve an early peak of greenhouse gas emissions and zero overall global emissions in the second half of this century.

There are plenty of difficult challenges ahead if we are to limit global temperature rises to below 2°C, and perhaps 1.5°C but, yes, I think the Paris agreement gives us a huge and unique opportunity to revolutionize our economy and the way in which we live and work.

Three aspects give me hope about this particular agreement. First, all nations committed to action on climate change -- this was a huge achievement! It was the first time large and small countries, wealthy and poor, those with fossil fuel reserves and those without, heavy and light carbon users alike, all 195 countries were in on the agreement. Second, the commitments were developed by each nation for itself, in a series of Intended Nationally Determined Contributions (INDCs); not dictated by some central negotiation. And finally, there is an acknowledgement that we can and must do better -- a stated stretch goal of 1.5 degrees, that makes the 2 degree target and the INDCs a minimum rather than a ceiling, and challenges each of us to raise the bar.

Q. Many people thought the Paris conference was a forum for politicians and policy makers...why was it important that investors were there too?

Geeta: The Paris conference was by no means just about diplomats. Technical and policy experts from private and public sectors, corporate leaders, asset owners and investors were all at hand to pledge leadership, resources and creativity in reaching climate goals.

Limiting global warming to less than 2 degrees requires a major shift in the way we operate financially and economically. We need to dramatically reallocate resources, and develop and adopt cleaner, more efficient technologies. The funding requirements for such an undertaking are immense and require the determination and power of investors and large asset owners. The size of the potential investment required is estimated to be over $3 trillion over the next five years. Investors hold the key to realizing this investment potential and thus wield enormous transformative power.

Q: The opportunity is certainly huge! But I wonder what you found so inspirational about the Paris conference that makes you believe that it marks a fundamental shift and that we will be able to realise this opportunity on a scale that counts?

Geeta: Paris has given climate change a legitimate place in all decision-making especially investment decision-making. It's no longer the questionable "other" pursuit; it's part of a national and international pursuit. All countries are responsible for their own decarbonization plans and active parties to this agreement. Because of this agreement, one set of uncertainties is removed, enabling investment planning and action for the long-term by investors, corporations, public entities, communities and individuals.

The wheels are beginning to turn. Already, The Paris Pledge for Action has been launched. This brings together businesses, cities, investors, regions, and other non-state actors from around the globe to demonstrate that the signal sent by the agreement has been received and all parties will effectively implement and accelerate the transformation needed to meet the climate change challenge. 154 US companies have pledged to reduce their carbon footprints as part of the American Business Act on Climate pledge.

The exhibits at COP21 highlighted the role of global citizens in bringing about sustainable lifestyles. As individuals, our purchasing behavior can change corporate thinking, our political participation and voice needs to change policy and media priorities, and our priorities will drive impact investing and philanthropy.

Q: Time is evidently of the essence. What is your call to action for investors?

Geeta: My call to investors is fourfold. We must:

1.Use our capital to complement the efforts of banks and development finance - for example with long-term funds for infrastructure and improving the efficiency of real estate.
2.Change our narrative so when we talk about a "good investment" we mean what I like to call a "win/win/win/win investment"; great for the corporation, for the shareholder, the planet and the community.
3.Invest in energy efficient solutions. Whilst there was a lot of excitement around new technology in Paris, doing more with less should be our first imperative -- the technology is here, and the timing is imperative.
4.Use our voice as assertive, engaged stewards of our investments, to challenge companies across all industries to redirect capital and financing capacity, as well as R&D efforts and ingenuity towards cleaner and more efficient methods of operation, new products, and new corporate goals for carbon reduction.

Q: And finally, has the Paris conference shifted the investment focus for Boston Common Asset Management?

Geeta: The Paris agreement has reinforced our global investment strategy and our personal and professional commitment to avoiding climate catastrophe through our investments. Our investments favor companies with visionary management teams who are stewards of the transition to a low carbon economy. And we are active owners who assertively engage with portfolio companies, to improve their management of climate risks and opportunities. Recently we became only the second US asset manager to sign the Montreal Carbon Pledge - committing us to measure and publicly disclose the carbon footprint of our investment portfolios on an annual basis.

Our role as investors is to be a source of patient long-term capital for change, and an impatient voice for action!

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