It’s becoming almost de rigueur for delegates at conferences discussing climate range and responsible investment to be asked to leave their carbon footprint at the front door. And so it was with the annual International Responsible Investment Conference which began in Melbourne on Wednesday.
The hosts had calculated that the international and domestic delegates had produced a combined 107 tonnes of carbon travelling to and attending the conference, and this had been duly offset by the conference organisers.
“That works out to be about 0.4 per tonne of carbon per person,” Louise O’Halloran, the executive director of the Responsible Investment told the assembled throng.
“If anyone feels they have contributed more, could they please see our staff at the front door.”
Now that may sound all rather twee, but appearances can be deceiving. While the “responsible” part of the global investment community might once have considered itself at the margin of the industry, it has now become quite material — and issues such as carbon, water, waste, food and energy security will ensure it will become more so in the future.
Consider these statistics. The managers who have signed up to the Investor Group on Climate Change manage a total of $57 trillion between them. They are having quite an influence as they put pressure on companies to take responsibility for first measuring and then finding a strategy to deal with their carbon emissions.
The value of funds signed up to the United Nations principle of Responsible Investment (PRI) amounts to $16 trillion. And Australia is at the forefront of this trend, with 40 per cent of all its funds under management signed up to the PRI compared to the global average of 10 per cent.
What does this mean for the boards of companies that these funds invest in? An awful lot that they (the boards) are simply not prepared for, according to Fred Buenrostro, Jr, the retiring CEO of CalPERS, the largest public pension fund in the US with some $US250 billion under management.
“The CEOs would rather not know,” he laments.
Buenrostro was the architect of CalPERS’ move into clean-tech and environmental sectors in 2004, through a $1.5 billion commitment. It was an idea hatched while Buenrostro was doing his annual stint as a ski instructor in the Sierra Nevada Mountains. The guy with the locker next to his owned a company that specialised in environmental technology.
CalPERS initiative was a trigger for other funds to follow. The clean-tech industry is now booming. According to Chris Greenwood, head of research at the London-based New Energy Finance, global investment in the industry has jumped from $US33.4 billion in 2004 to $US148 billion in 2007. Within three years it should jump to more than $US400 billion, and will require $US600 billion per year in coming decades as the global economy retools to a low carbon future.
Australia’s share of all this in 2007 was a miserable $1.5 billion, or 1 per cent of the global flow of funds, and placing it at No. 14 on the global ranking. The bitter irony of this is that why some have argued that Australia’s 1.6 per cent contribution to the global carbon count means there is no point for it to act, it also means it’s not getting its fair share of the investment flow. However, that is likely to change if the government gives the go-ahead with its promised renewable energy target. Such a move could lift annual investment to $23 billion.
Another interesting figure produced by Greenwood was the money being raised on equity markets to fund such technologies. In 2007, it stood at $US23 billion. Australia’s share stood at $US130 million, or a paltry 18th place. Some $US7 billion was raised on the Madrid Stock Exchange, $US3 billion on Nasdaq, and $US2.1 billion on the Frankfurt exchange.