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Assets not Liabilities Climate Change

Owen Paterson : “Absurd, Bizarre”

[What follows is not a verbatim recording of comments made by the participants. It is drawn from brief notes made during the event and has not been verified with the speakers.]

Summary

At the “Good Money Week” Houses of Parliament reception today, Dr Julian Huppert, Liberal Democrat MP for Cambridge, echoed the views of some of the other speakers, calling Conservative Owen Paterson MP’s recent remarks on climate change and energy futures “truly absurd and bizarre”. Several speakers spoke of a parliamentary consensus around the Climate Change Act. Caroline Lucas, Green Party MP for Brighton Pavilion, spoke of a letter signed by a group of Members of Parliament, calling on the trustees of the parliamentary pension fund to divest itself from fossil fuels. Although the response so far to this letter was “she’s a lone voice and I don’t know what she’s talking about”, Laura Sandys, MP for South Thanet said about “climate safe” investment, “we are the mainstream, and we need to behave as if we are the mainstream”. Barry Gardiner MP for Brent North said that long-term thinking on climate change is absolutely necessary unless we want to risk market failure.

Details

The UK Sustainable Investment and Finance Association (UKSIF) held a reception at the Houses of Parliament today in Westminster, central London, to celebrate the annual “Good Money Week”. The UKSIF aims are to grow the market for sustainable investment and finance; to be the voice for responsible investment in the policy and public arenas; and to leverage their network to achieve these aims. UKSIF’s Chief Executive, Simon Howard opened proceedings, introducing the speakers and recalling that Caroline Lucas MP has been named one of the “Top 100 Eco-Heroes”.

Simon Howard spoke of the UKSIF sustainable investment concerns : climate change, human rights issues and social issues, [and that the message is getting through, but that in some circles he wonders] “Is there any point in me talking about the Carbon Bubble ?”

Dr Julian Huppert MP (Liberal Democrat) : Money makes the world go around. We need to make it go round the right way. In climate change everybody has to play a role. There has been big investment in renewable energy, but… We would like to see five new pieces of legislation : an Access to Nature Bill – including biodiversity; a Heating and Energy Efficiency (of Buildings) Bill; a Circular Economy Bill; Zero Carbon (Decarbonisation) Bill; and a Green Transport Bill.

[In terms of the public debate we need to explain] why it’s sensible from an investment perspective. For example, why do so many pension funds want to come in and talk to the Chancellor of the Exchequer [about sustainable investment] ? They’re not green, hippy environmentalists. Ethical investments have out-performed (see the Barchester report). You can make more money, and you can do good as well. Triodos say that over a quarter of investors would like their pension in environmental and social investment sector. Climate change isn’t the only aspect of social investment. [Tackling] inequality, and aims such as social mobility… supporting the Living Wage (as SSE have done). The future is looking very optimistic for sustainable investment.

Barry Gardiner MP (Labour Party) : Julian talks faster than I can think ! I well remember several years ago I went to Christmas Eve mass with my wife, and our woman priest gave the worst sermon I’d ever heard. Coming out I said to my wife “That was really inspiring !”. She said “Inspiring ? But that was the worst sermon I ever heard”, but I said, 25 years ago, we would not have believed it was possible for a woman to be permitted to be a priest. There is a temptation to think “Oh my God ! There’s so much that needs to be done”. But an awful lot has been done already – we are making progress. In 2006, Labour launched the Stern Review which made a [huge impact]. It fundamentally changed things. Then the 2008 Climate Change Act [Baroness Bryony Worthington was in the room]. Now we have over 500 climate change-specific laws in 66 countries. The other day, Mark Carney, Governor of the Bank of England recently endorsed the work of Carbon Tracker [and its work on “Unburnable Carbon”]. Long-term thinking on climate change is absolutely necessary unless we want to risk market failure. There is such a gap between the short-term [decision-making] and the long-term. Companies with sustainable investment [plans] for the long-term have been shown to have improved value in their company. Managers make short-term decisions on the basis of their remuneration packages. We need to look at a way to help companies making investment decisions with getting sustainability [criteria] at the forefront of the Cost Benefit Analysis when making those decisions. If you haven’t read both reports of the Natural Capital Committee – shame on you. There is a change in the way value is ascribed. The Government will need to [base their policy on this] by 2020. There needs to be sustainable investment and management.

[Despite advances] all of the progress so far could still be derailed. The speakers here [all reasonable people] from from different political parties, each of whom have screaming weirdos in them. If you want to get real understanding of the differences between the Parties, you need to get four very different people than ourselves. The consensus [on climate change] is in danger of breaking down. You only need to look at Owen Paterson MP’s remarks to see…

I need to do the [Labour Party] policy bit. We want more powers for the Green Investment Bank. We want Zero Carbon electricity in the 2020s. We want to deliver a new climate change adaptation plan, and we want a Stern Review for Resource Security.

Laura Sandys MP (Conservative) : We’re living a lot longer and we need more long-term thinking. We need to find a way of engaging everyone… We need all to act collectively. We have to refresh how we engage with people. Why is it when you look at investment, why are we not talking about the “Brown Economy” instead of the “Green Economy” ? [We should be highlighting that those who make] normal decisions [are doing so on the basis of whether or not they are] climate-safe. Why are we not owning normality ? We need messages about where the smart investment is going and not get captured by the 19th Century model of economics. We are the smart investors [coming to consult with] whichever Chancellor. We are landing the argument in the frame of decision-making. There are lots of stranded assets [in fossil fuels – and people are coming to realise this and factor it in]. The insurance sector knows [exactly what climate change means]. We are the mainstream and we need to behave as if we are the mainstream. We need to take [notice] where investments are not going to meet [rightful targets]. Adapting and engaging. It’s an opportunity for the UK to maintain leadership in climate-safe investment. I hope to be working with you when I leave this place [she stands down as Member of Parliament at the 2015 General Election]. We make the weather – and progress in sustainable investment.

Caroline Lucas MP (Green Party in England and Wales) : I can assure Laura that I think green is normal. Yes we have come some distance, but the issue is so urgent. We have been banging on [doors] for 40 years. Imagine if we’d have [emphasised this priority earlier]. I still remember that quote from the Age of Stupid film, Pete Postlethwaite asking “Why didn’t we stop climate change when we still had the chance ?” What separates us [the speakers at the event] is in a degree of urgency. Climate change should be the over-arching, overwhelming political priority. [… On policy] there should be a Government sustainable spending scorecard. The Green Investment Bank has to be allowed to borrow, now. It should play a bigger role – zero-interest borrowing. We talk about the Green New Deal – it would harness business – investment is good for the economy. There is talk about Green Quantitative Easing – instead of the money being issued to those who sit on it or waste it on non-sustainable growth, getting the money directly into green infrastructure projects. Getting the right regulations for the right sources of funding – including crowdfunding. The Coalition Government wants to cut the Enterprise Investment Scheme (EIS)… [huge negative impact].

MPs need to put our money where our mouth is. The pension fund is £0.5 billion. A Stewardship Code was implemented last year – this is not enough. The Bank of England’s Mark Carney has warned about unburnable carbon. We should start divesting our pension fund. There is a letter to the Chair of the Pension Fund to ask – to start with an impact assessment to see when… Divestment is taking off. Glasgow University… If it’s good enough for the Rockefellers, it’s good enough for us. $50 billion – now is the time to join them.

[…]

[ Questions from the floor ]

[…]

Dr Julian Huppert MP : People scorn the idea of the “greenest government ever”, but I think this is the greenest government ever, because it’s greener than all those before. We have seen a doubling of renewables [for example]. [There are some wrinkles] Owen Paterson’s recent remarks were truly absurd and bizarre. You have to try and make these arguments […] We’ve spent too long talking to people who really care about climate change. [There are campaigns on polar bears and Bangladesh] but most people have never met a polar bear and don’t go to Bangladesh, they just don’t care. If people want action on climate change to prevent their homes getting flooded, that’s OK. If HSBC comes to the table and says this matters – [that matters]. Those of us talking about environment will never get through.

Caroline Lucas MP : The greenest government excelled by going beneath the low bar. Investors don’t have a clue [where policy is going. It keeps changing. They are saying] let us know what the policy environment is [and then they’ll get on with it]. This enthusiasm about fracking [the hydraulic fracturing of shales to extract gas] is worrying, [from a local environmental impacts certainly, but also] from a climate change perspective. The tax breaks will make it so much harder to [move away from this]. The nuclear decision is deeply unhelpful. It’s locking us into high electricity costs. I expect the French are laughing. Probably the Chinese too. We’ve got a long way to go with our colleagues [in the House of Commons] as well. We have already had one response to the letter to the pension fund : “she’s a lone voice and I don’t know what she’s talking about”. [Yet this call is based on] sound economic sense. It’s a worry that the climate consensus might be crumbling. The more Government feels spooked by UKIP, the more poor policy will follow. We should be acting for a stronger EU and stronger environment [and energy] policy.

Question from the floor : Is renewable energy more democratic ?

Answer from the speaker panel : Control capital or allow more people to participate – will make us all better off in the long-term.

Caroline Lucas MP : Nothing like Germany, there communities are in control [of the Energiewende – Energy Change] – communities… democracy… [buying their power grids]… As long as energy policy feels like something the Big Six [electricity suppliers] are doing to you, as long as you feel your consultation rights are nominal… [you are going to resist energy change. However, if you are part of the process, and end up sharing the rewards…]

[ Barry Gardiner MP ? ] : I’m not sure we have won the economic argument. [Are there] enough people […] like Carney ? There is a general assumption amongst the general public that green is expensive. Energy efficiency [energy demand management and reduction] is not talked about. Persuading people that green is a sensible investment decision… We need a new narrative – the democratisation argument. The reason why the Energiewende has been so successful is precisely because it was democratic. If I were in a developing country, I would want to go down the microgeneration [non-grid] route, not the centralised energy route. Sustainable investment is about much more than just energy – critical is water – can be the biggest threat to a company.

[ Question from the floor about the MPs pension fund ]

Caroline Lucas MP : We are already talking to other members of the board. They have a role to play in showing the way forward. Hope others [MPs] join us putting points to the board. We need to divest. We have found that information about what we’ve invested in is opaque. Is any of it in fossil fuels ? Finding out. Not just a lone voice. Lots of us signed it. We want an Early Day Motion [to flag it].

Barry Gardiner MP : I cannot comment on the letter. I was previously one of the trustees of the Pension Fund. 15 years ago the only information from Cazenove was an annual invitation to luncheon. When I had the temerity to ask how they were using our money, it was deemed inappropriate. There is more transparency now – information should be there for the trustees.

[ About Paris 2015 ] I used to chair GLOBE. The important thing for 2015 is what went wrong in 2009. We are not going to get an umbrella agreement. Paris would be a joining place for top-down and bottom-up inititatives already taking place. Getting a confidence in China for example – they have already proved [they are pursuing climate-safe policy] – can have some confidence [that they can deliver]. Building that trust from the bottom up.

Dr Julian Huppert MP : I have an interest in Australia – the situation is terrible. Tony Abbott got rid of the meteorological services. They passed 8 bills in a hour that were still being printed to get rid of climate change legislation. All sorts of bad things.

Caroline Lucas MP : I think people power still has to be [deployed]. How do we get that traction again ? I recommend Zadie Smith’s article on how we galvanise people – need to touch peoples’ hearts again. I recommend the “For the Love of…” campaign.

[ Question from Julia Groves of the Trillion Fund ] The Individual Savings Accounts (ISAs) are relevant – not yet been decided about this but if 23 million people have invested £433 billion – if we can get just 1% of that invested sustainably – that’s a significant amount.

[ In conversation ] [Client several years ago lobbied for 2% of funds to be sustainably invested] Now they’re asking for 5% [they couldn’t have asked for this 5 years ago] would have been batted out.

[ In conversation ] Return on investment is always the first concern of trustees. Is culture change necessary ? Can the Charities Commission help form direction for charitable fund investments ?

[ In conversation ] Tim Morgan’s – Project Armageddon – Tullet Prebon : “Thinking the Unthinkable”.

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