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What top leaders are saying behind closed doors at Davos

by Nik Gowing

Filed under Climate Emergency

What a contrast!

President Trump, a leading global rejector of sustainability and the climate emergency in the main (official) hall of the World Economic Forum. He was urging people to “reject the perennial prophets of doom and their predictions of the apocalypse”.

A thousand paces away, down an icy sidewalk in a temporary marquee outside the security area, confirmation that sustainability and combatting the climate emergency are not just good business, but vital for its survival.

You won’t find any public record of these upbeat assessments from top figures in banking and investing. They spoke for 90 minutes on an unattributable basis.

But what they said needs to be heard far and wide in order to both re-assure and inspire.

Here is a sample of quotes.

On sustainability

“Sustainability is no longer niche. The price of unsustainable use of natural resources is painfully obvious.” Many present nodded agreement. “The entire dialogue around climate change and finance has shifted significantly.”

This is impacting values and pricing. “This is a moment of pivot. But we are not [full] on track yet. We need to scale up. It is now possible to shape the moment.”

From a top asset manager who described huge change: “The evidence is clear: if you ignore [this new direction of travel] you will sacrifice performance … finance has the opportunity now to be the catalyst for change.”

From a top investor: “It is a myth if you invest in sustainability, performance will be worse” and “from this year we will no longer finance coal-fired power stations. This is a hard line.”

The huge number of deniers and sceptics out there need to be excited by the likely returns. There is now $20 trillion available for investing in sustainability. However, either “we have money to invest but do not have projects, or we have projects but no investors”.

From a top real estate manager: “We have not made an investment in sustainability which has not been profitable, with pay back in later years.” He added that if a property is not sustainable, increasingly it won’t sell or have a value. It will be a stranded asset.

On risk and investment

“There is now a serious risk to assets because of fire, storm, heatwave etc.” This requires recalibration of risk. That is being done by regulators. There is a redefinition evolving of what is green and a new climate risk. “This will impact the financial price. It now matters for everyone with a portfolio [including pensions]. It is not just caring about it. It is now about [financial] performance.”

Much change and adaptation is needed. Behaviour and systems are out of date. Overall they need to be refashioned rapidly so that they knit neatly with the 17 Sustainable Development Goals (SDGs).

One example: the investing community functions based on incentives and bonuses. But this is out of sync with the SDGs. It restricts progress because these well-established operating practices encourage what should now be viewed as legacy practices.

“The methodology must change. We must change economic models and how we reward performance.”

On who should lead the change

Should business continue to lead, or must governments step up?

After the huge rift exposed at the Madrid COP25 climate summit in December between pro-active business and foot-dragging governments: “This will not work without a coordinated political response. It will not work unless governments come together.”

The message to governments: “Get your act together: do not just rely on business. Ultimately this is a public policy challenge.”

On the NEXT GEN

And the NEXT GEN is rightly having a huge impact on the process and consciences of investors. There is “ever greater scrutiny” from younger people.

The asset manager said: “We have never seen so much energy.” At a recent company town hall for 500 staff, the questions and pressure from the NEXT GEN employees were active and relentless. “They all hold our feet to the fire. The people we will let down are the young people. We will be judged and have to deliver.”

The core take away?

“There must be a clear path to a low carbon profile in your area. There must be a transition: you cannot just turn off a switch.”

And the likelihood for embedding change? “Once change is accepted, then change will be exponential.”

Will President Trump even want to be aware?

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