The Thinking Ahead Institute’s climate beliefs working group has produced a challenging set of beliefs that, if adopted and applied, would transform institutional investing behaviours. Here Herschel Pant, a member of the group, describes the evolution of the output.
Tim talked about love and potentially using ‘heart knowledge’ to solve for climate change. Around the same time, I had the pleasure in joining him and 7 others (aka The Climate Super Team) in exploring what an asset owner’s climate beliefs should look like. I still remain baffled as to why I agreed to a 6am weekly call with a group of people I barely knew, to discuss a topic I hardly knew (imposter syndrome alert!). Perhaps it was me tapping that ‘heart knowledge’? Perhaps.
The first of these calls happened at the start of September, where we agreed to operate as a superteam – a first for all of us. Each one of us had different definitions, ideas, goals of what this meant – both about superteams and climate beliefs. We spent some time on understanding the ‘why before the how’ – aligning on a broadly clear plan of action with in-built phases to review progress. As Tim mentions in the preamble to this series the check-in / out was perhaps the most unique feature which helped us align over time. That is key – time. The weekly ‘mini therapy’ session helped all of us be more open and honest in our feedback.
Given it was a self-selected group, the ‘why we need climate beliefs’ was quickly agreed and acknowledged. The real debate was how ambitious can we / should we be. The practical side in all of us, sometimes, must be muted for a greater purpose. We, each of us, helped each other to do that at times. As a result, we eventually settled on answering the question “if an asset owner wanted to have real-world impact with their investments, what set of climate beliefs would help them achieve it”. This was phase 1 – probably the hardest task for us. We eventually started referring to it as ‘the island’ phase. There was acknowledgement that these may be seen as too ambitious and therefore we may require a more ‘practical’ set of climate beliefs. We agreed to do this in phase 2 and review and update as appropriate in phase 3.
Building the island ie the most ambitious set of climate beliefs yet, was quite a task. We started with about 35 beliefs across a range of topics with multiple rounds of voting and debate to merge them to a high-level list of 7. This was a big achievement – and that too in a few weeks! I personally thought this is a sign – 7 has always been rumoured to have a high spiritual connection. We naturally got to this number – we’ve cracked it, the beautiful island is built. Onwards to phase 2!
Change is the only constant. It’s an age-old idiom for a reason. As we patted ourselves on the back for building the dream island, we had another choice to make. Do we make another, more ‘practical island’ or spend the time allocated to phase 2 to build boats to help people get to the island? As you might have guessed, we went on to building boats. What did that mean in our context? We agreed that a preamble is needed to provide context to our set of 7 climate beliefs. After multiple iterations of it and some subtle revisions to the beliefs, we had a coherent set of climate beliefs with a preamble. Bring on phase 3!
As part of our review process, we gathered some external feedback on what we had done, from people who we knew would be honest with us. We received all types – what we’ve done well, what we can improve etc. That ‘practical’ aspect which we had chosen to silence was a clear gap. We had a choice to make – should we adjust the climate beliefs to reflect practicalities of today or focus on persuading people that to make real-world impact, they need to rise to these beliefs. It was a tough one.
We all acknowledged that the process we followed was almost as powerful as the outcome. Perhaps, if we added a list of questions that we asked ourselves during this process, it would get those asset owners wanting to make real world impact to the same point – broadly speaking? As our final set of beliefs hopefully reflect, we want asset owners to act. Therefore, we agreed to spend time to get people to see the island and the boats to get there. To aid this, we felt a set of 5 questions that asset owners should ask themselves to begin their climate beliefs journey might be useful to kick-start the process. We then proceeded to answer these questions, to share how we have answered it while recognising that different asset owners would have different answers.
- does your organisation see itself as an interconnected part of the global economic and climate system?
- how does your organisation view climate change?
- what does ‘decarbonising’ mean to you?
- could there be any unintended consequences of solely focusing on climate change?
- do you think fiduciary duty allows us to do anything about climate?
As the year and project were ending, we did a final review and recap of all the ideas and content produced – the dream island (ie set of climate beliefs), the boats to get there (preamble and questions to ask yourself) and a superteam case study to show that it can be done, if some time is spent on the why at the beginning. The review also made us realise that we could reduce / merge a couple of beliefs to make them more impactful. I know it would have been nice to have 7 beliefs but with 6, we can rest for a day. The executive team certainly deserves it.
- We believe climate change is an emergency and we are part of the economic system that must address this (we must act)
- We have all the evidence we need to act (we will act now)
- Acting ambitiously now will incur costs, but these will be materially less than those arising from a late transition or no transition at all (acting now, while costly, will be cheaper)
- We believe the only way to change the climate trajectory is to adopt the stop, substitute and siphon framework (we will invest differently)
- We will invest to create the future we all need which requires establishing new investment conventions (we will think differently)
- We will actively participate in the collective action required to address climate change (we must collaborate)
Herschel Pant is Senior Consultant Solutions at AXA Investment Managers. The document describing the climate beliefs is available here. Click to read the third post in the series, Stronger together by Herschel Pant.