The first of a four confirmed annual sustainable finance summits hosted by the university, was attended by Anne Simpson and Piers Hugh Smith from Franklin Templeton’s global sustainability strategy team. The conference brings together leading academic research with policy makers, practitioners, and civil society organisations to examine the state of sustainable finance and evaluate emerging best practices across different asset classes and sustainability themes.
The two-day agenda covered deep dives into the latest technical research on green bonds, physical risk modelling, biodiversity trends and climate litigation amongst other themes, with two highlights below.
Anne’s panel focused on conflicts of interest in the asset management industry and how important governance is to maintaining transparency to investors. As she emphasized, “If the system rests upon our ability to act as stewards and fiduciaries, then we in turn need to be under scrutiny- so the governance agenda is just as relevant. I think that is the next project in our community”. This answer was given in response to a question on asset managers voting on corporate directors on climate risk, in the instance the asset manager is competing to manage the pension fund of the corporate.
Calling out conflicts of interest
The call is for conflicts of interest to be disclosed and a formal part of the risk management framework to constitute proper investor governance. Sandra Boss, Head of Investment Stewardship and BlackRock, stated that conflicts of interest with climate related votes were ‘definitely not’ recognised day to day, which was refuted by Rob Baur, Maastricht University, that “you cannot say you have to trust we are doing a good job, you have to show what you are doing”.
The growing use of climate litigation
The conference also heard from Linus Steinmetz, a 19-year-old activist commenting on the case of Germany vs Steinmetz; On 24th January this year, a group of German minors and young adults, supported by environmental organization Deutsche Umwelthilfe (DUH, Environmental Action Germany) filed a constitutional challenge to Germany's updated Federal Climate Protection Act (“Bundesklimaschutzgesetz” or “KSG”).
Claimants argue the KSG's amended greenhouse gases (GHG) emissions reduction paths are insufficient in light of Germany’s constitutional and international legal obligations. Ultimately, the case was successful, striking down Germany’s climate targets as insufficient, and raising the national reduction target for 2030 from 55% to 65%. The basis of the legal argument was that failure to set adequate targets created a risk of violation of human rights of young people, should the effects of climate change not be properly mitigated, and the burden of carbon reduction be offloaded onto future generations.
Climate litigation is an emerging and increasingly effective tool that NGOs and other campaigners have used against corporates and governments to gain greater levels of commitment and in turn, action. In the corporate sphere, we can refer to the example of Milieudefensie et al v. Royal Dutch Shell plc. The ultimate verdict was Shell must reduce its CO2 emissions by 45% by 2030 compared to 2010 levels and to zero by 2050, in line with the Paris Climate Agreement, and again the basis of this case was that a private company violated its duty of care and human rights obligations by failing to address the systemic risk posed by climate change.
Watch Anne Simpson at The Smith School.
There is clearly a lot of work to be done, but this tool will prove invaluable in highlighting companies to prioritise in engagement activities related to the just transition. As Climate Action 100+ puts it – you can’t fix what you don’t track.