Reducing the Cost of Capital (Part I)

‘Ahead of the Curve’ in collaboration with SYSTEMIQ – Episode 4

“It’s not just what you say, it’s what you do. It’s very hard to get at that in the financial sector,” Anne Simpson, Managing Investment Director, Board Governance and Sustainability at CalPERS, the largest public pension fund in the United States tells us on the latest episode of ‘Ahead of the Curve’.

She might have been talking about the promise of wealthier countries to make $100bn of climate finance a year available to poorer countries, something that was promised at COP16 in 2009. A report at this year’s COP said that target would now be met by 2023.

“We need to see the $100bn as a floor, not a ceiling, and we’re already scraping to get there,” commented Katherine Stodulka (Partner, Sustainable Finance for SYSTEMIQ and Director, Blended Finance Taskforce), Simpson’s fellow guest on the podcast, who also explains how that $100bn will unlock greater sums of capital investment.

Simpson might also have been talking about around 100 of the 10,000 companies the CalPERS pension fund invests in, who were responsible for 85% of the emissions of their investees, despite “fine words” about the Paris Agreement. So what’s the problem? Why aren’t financial institutions being consistent in what they say and what they do?

Information is key; CalPERs were only able to identify the biggest carbon offenders in their portfolio with the help of think tank Carbon Tracker. Finance employees need to be incentivised to find ways for companies to tackle climate change, thinks Simpson – their performance bonuses should be linked to it. And there needs to be “climate competent” board members focused not only on profit, but on people and planet too.

Tune in for more ideas and for one example of how investors got board members at a well-known oil company changed to give them a shot at transitioning to a more climate-friendly future.

This episode is hosted by James Cameron, a Friend of COP26 and Senior Adviser to SYSTEMIQ. James is also a Senior Adviser to Pollination, Tulchan, and various other companies. He is also a Non-Executive Director to the Octopus Renewables Infrastructure Trust (ORIT) and Crown Agents and served as Chairman of the Overseas Development Institute (ODI). He is also an entrepreneur, barrister, and mentor.

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