Climate Change and the 21st Century Fiduciary

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Climate Change and the 21st Century Fiduciary Presentation to FINSIF Helsinki, 10 June 2015 Climate Change and the 21st Century Fiduciary

Transcript of Climate Change and the 21st Century Fiduciary

Page 1: Climate Change and the 21st Century Fiduciary

Climate Changeand the 21st CenturyFiduciary

Presentation to FINSIF Helsinki, 10 June 2015

Climate Changeand the 21st CenturyFiduciary

Page 2: Climate Change and the 21st Century Fiduciary

Why should fiduciaries care?

‣Even short-term portfolio performance impacts — e.g., Innovest/J.P. Morgan bond index

‣Proxy and leading indicator for management qualityand execution capabilities of portfolio companies

‣Longer term: wholesale industrial restructuringwill have major risk/return implications

‣Quality of life/social justice concerns

‣‘New’ fiduciary paradigm demands it

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Divestment? ‣Loss of leverage and engagement

‣Uncertain long term risk/return implications

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But the alternatives are mostly flawed.

Page 4: Climate Change and the 21st Century Fiduciary

But the alternatives are mostly flawed.

Carbon Footprinting? ‣A positive step, but no substitute for portfolio action

‣Extremely limited, flawed, and potentially gives misleading results: a) Not typically adjusted for jurisdictions b) No attention to risk management c) No attention to upside opportunities

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Clean tech? ‣Highly volatile

‣Deep expertise required to pick winners

‣Impossible to do at scale — .07% of total portfolio assets

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But the alternatives are mostly flawed.

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Low-carbon, ‘passive’ indexes? ‣No hope of out-performance

‣No ability to express views on individual stocks

‣No engagement

‣Exxon Mobil???

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But the alternatives are mostly flawed.

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So what to do?I’m hopelessly biased, but I’d recommend ACTIVE management, based on deep, multi-dimensional research

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