PI Partnership
2021: THE YEAR OF PLANET AND PEOPLE
Abbie Llewellyn-Waters, head of sustainable investing, Jupiter Asset Management
Jupiter’s sustainable investing team identifies two of the most important ESG themes of 2021: climate change and social equality.
We believe there will be meaningful progress during 2021 on the climate emergency. One of Joe Biden’s first acts as president was to start the process of the US re-joining the Paris Accord, an international treaty on cli- mate change that was signed in 2016. The appointment of John Kerry as the United States’ presidential envoy for climate is an event whose significance should not be underestimated. Kerry is personally committed to climate diplomacy, having been instru- mental in negotiating the Paris Accord under president Obama. The Trump administration’s virtual absence from climate talks will now be reversed, and Kerry is expected to seek an ambitious deal at the UN Climate Change Conference, COP26, to be held in Glasgow in November 2021. Kerry’s appointment should meaningfully accelerate climate change policy. Of course, political changes are always at risk of being thrown out by a subsequent administration, and the acquit- tal of the former president at his second impeachment trial has opened the way for a possible Trump challenge in the 2024 elec- tion. However, that very prospect may steel Biden, Kamala Harris and Kerry to go further than they would otherwise have done on climate change.
The economic significance of tackling climate change will be mas- sive. Bill Gates recently said achieving net zero would be humani- ty’s greatest achievement. “It will be the most amazing thing humanity has ever done. If you look at the history of the physical economy, we have never made a transition like we are talking about doing in the next thirty years,” he told the BBC¹. The scale of change presents opportunities and risks for compa- nies. The rewards from successful innovation will be huge, while rising costs of carbon will hit some companies’ profits. Of course, we should not see rising carbon costs as punitive, but rather as an attempt to put a price on what economists call an ‘externality’ – a cost borne by everyone. Sir Ronald Cohen, author of a new book, Impact, has given the example of a company whose profit and loss account looks healthy on the face of it, but whose revenues are less than the environmental damage it causes. Investors will increas- ingly take these costs into account in coming years, and they will anticipate legislation that does the same.
18 March 2021 portfolio institutional roundtable: Responsible investing
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