These documents have been written following the research and discussion conducted by the Thinking Ahead Institute’s 1.5°C investing working group. The key objective of this working group is to produce research outputs that can usefully guide investors’ behaviours to ultimately become a driving force in transforming global economy to be compatible with the 1.5°C climate target while in the same time fulfilling their fiduciary duties.
Climate actions start with beliefs
Our planet’s life supporting system is the ultimate complex system that matters to every one of us. In addressing the challenge of climate change, investors are facing immense levels of uncertainty, compounded by a long time horizon.
These include unknown unknowns that are impossible to model or measure (eg the climate technology that is yet to emerge). A set of strong investment beliefs acts as a long-term compass to guide investment decisions in such an environment.
The investment industry and climate change | framing the problem
The scale of the climate problem, and the lack of meaningful progress so far, could engender a defeatist attitude. But it can also encourage a certain humility, and a focus. It is by collaborating with members on this supremely important topic that we can hope to surface the influential ideas and change the dialogue within the
investment industry. And from there we can hope to see changed behaviours and actions.
How warm is your portfolio?
A temperature rating is a very intuitive concept, particularly compared to other widely-used metrics such as carbon footprinting. It is something that not only professional investors but also end savers can immediately relate to. That makes it a very powerful communications device.
Temperature ratings can be beneficial for engagement practices, providing teams with an easy comparator of corporate carbon targets. In this regard, it is used as a behavioural change tool.
More primary investment
For now, we will assume the investment industry (more accurately, the organisations within it) wishes to at least do its fair share. In other words, the investment industry will look to reduce annual absolute ghg emissions by 25% (13bn tonnes). This leads us directly to the second question: how do we cut through the complexity to find the ‘one thing’ the industry should focus on?
Climate dashboard reporting
This paper lays out eight principles, as a useful guide for investors wanting to report their climate impact. Some of these principles are straightforward and self-explanatory. We then go on to provide a case study as an example of how the dashboard can be put into practice.