The monumental shift to a de-carbonised energy system should happen in a way that shares the benefits of the transition while supporting those who will be negatively impacted.
The issue
Institutional investors are aware that rising temperatures and changed weather patterns are having adverse impacts on water security and food production, health and well-being, and cities, settlements, and infrastructure. The systemic risk presented by climate change is a fiduciary concern, particularly for long-term investors, given how these risks stand to affect the ability of investment institutions to generate long-term sustainable value for shareholders and other corporate stakeholders.
Evidence of significant environmental challenges has triggered urgent calls for nations and businesses to transition towards greener, resilient, climate-neutral economies and societies. Yet, despite clear evidence and compelling calls to action, the issue remains highly politicised. While governments struggle to gain consensus on workable policies and solutions, businesses have been asked to play an even greater role in addressing climate-related challenges.
For the transition to a greener economy to be achieved and sustainable it must be ‘just’ — aiming to be fair and inclusive, able to create decent work opportunities, and aspiring to leave no one behind. This ICGN Viewpoint focuses on the role of good corporate governance and investor stewardship in contributing to a just and sustainable transition to achieving a resilient, net-zero economy.
Today, it is recognised that climate change is a systemic risk with significant environmental, financial, political, human, and social impacts. Successfully navigating the transition from emission-intensive and fossil fuel industries, toward cleaner or ideally zero-emission alternatives, will require the best and combined efforts of all stakeholders, including investors. While investors have long considered climate change in terms of financial costs and stranded assets, this ICGN Viewpoint considers broader aspects of good governance, stewardship, sustainability, and accountability. For the transition to be successful and sustainable it must be just, it must consider environmental and social costs alongside financial costs, and it must minimise negative social impacts while maximising opportunities and positive impacts.
The latest Report of the Intergovernmental Panel on Climate Change (IPCC) concluded that to prevent the worst physical impacts of climate change, urgent action is required to deal with increasing risks.1 Though as economies mitigate and adapt to the complex impacts of climate change, tough decisions will be required....
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