you have conviction and are stewarding company actions using voting as an accountability mechanism, that still applies. Gourlay: There is also a social responsibility. In parts of India and Indonesia, mining drives the economy. There are millions of jobs at stake if those mines close. Llewellyn-Waters: A just transition was at the heart of the global diplomacy at COP26. That was the tension that they sought to address. In the global policies coming out of COP, we saw down to the wire the tension around the rhetoric from phasing out to phas- ing down and that is coming through a social equity perspec- tive. For 100 years we have had unprecedented economic expansion in the developed world and now we are imposing restrictions on developing economies, which is fraught with tension.
It was bare-knuckle diplomacy. John Kerry on Chinese soil last year and the co-operation statement they re-signed at COP was
important, but it was hands on shoulders, heads pressed together diplomacy but the two largest emitters are now agree- ing to co-operate, so we should anticipate accelerated climate policy. Gourlay: China can do that because it is outsourcing its carbon footprint to other emerging markets. Llewellyn-Waters: There is a risk of carbon leakage. That was an aspect they sought to address to stop it becoming cheaper to manufacture in regions where there are less onerous carbon pricing mechanisms because
carbon does not care for
borders. We have the design of the Carbon Border Adjustment Mecha- nism in the EU, which proposes to price carbon content of products at the point of import. Our overarching investment thesis is that there will be an internalisation of carbon costs. This will be material from an economic return perspective going forward.
16 Feb 2022 portfolio institutional roundtable: Sustainable investing
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