Making a difference for the climate
The Olympics aren’t the only event that had to be canned in Tokyo during the delightful (northern hemisphere) autumn of 2020. PRI in Person was also due to be held there, in October, but has now been postponed until September 2021.
“What in what”? I hear you asking.
PRI in Person is the name of the annual conference of the Principles of Responsible Investment (PRI). This is an organisation, which is affiliated with the United Nations, that has signed up many of the world’s investment firms to a commitment to incorporate environmental, social and governance (ESG) considerations into their decision-making processes. Uniting Financial Services is a signatory because the ESG-based investing is aligned with the Church’s ethical investment principles, of which UFS is the champion within the Synod.
I’ve written before about how the Uniting Church was ahead of the pack in this arena. The ethical investment principles that we use today are almost unchanged from those first drawn up in 1980, so that what’s now called ESG investing is the DNA of what UFS does. This is across all our portfolios – whether we’re investing a congregation’s money that’s in a fixed term investment with us or in the Ethical Diversified Fund.
PRI is a hugely significant organisation for climate action. The world’s investment community was slower to come to the table on this than the Church and UFS, but the pace has picked up in recent years and, on the whole, large global investors are deploying capital in climate-friendly ways.
Some of the ways in which UFS investments are contributing positively towards the fight against climate change include:
- Green Bonds, which are fixed income securities in which the company that has issued the bonds uses the proceeds to finance positive green initiatives (eg a bank financing loans to wind farms). About 40% of our domestic fixed income and 12% of our global credit assets are in the form of Green Bonds.
- Property. A few years ago, in conjunction with the Clean Energy Finance Corporation, UFS seeded a property fund that’s explicit goal was to acquire office buildings with a poor carbon footprint and undertake the spending needed to significantly improve the footprint. This reflects one of the updates made to the ethical investment policy. Previously, we’d have been excluded from owning a building that had excessive emissions, but we wanted to adopt a more positive approach, using our investments to improve things. Since that fund launched in 2017 there have been several other funds with similar goals come to market, and the property industry as a whole now places more emphasis on the climate impact of buildings.
- Renewable energy. Several of our investments are in renewable energy projects. One in particular is the Palisades Renewable Energy Fund, which fosters the development of clean energy through the adoption of two measurable objectives. The measures relate to the number of homes provided with clean energy and to a calculation of how much CO2 is abated, or not emitted, because of the change in energy source.
- International Shares. One of the global share funds we invest in is with a company called Nanuk. The entire fund invests in companies that are benefiting from, or contributing to, improving global environmental sustainability and resource efficiency – primarily in areas such as clean energy, energy efficiency, industrial efficiency, advanced and sustainable materials, waste management, recycling and pollution control, food and agricultural productivity and healthcare technology.
Finally, at the industry level, tools are being developed all the time to assist fund managers to measure the impact of their investments on climate change. One very recent initiative is the launch of the Australian Climate Transition Index. The purpose of this share market index is to determine which companies included in the ASX 300 are best positioned to embrace climate transition and achieve net zero emissions by 2050. This is an Australian expression of a global initiative, that’s been signed up to by funds that manage over $16 trillion in total, developing a framework to help portfolio managers aim their investments towards the goal of zero net carbon emissions by the year 2050.
The PRI isn’t sitting around waiting for a conference to make progress on these things. However, when the PRI in Person event does get held next year, I’ve no doubt that a key topic will be the continued development of both the commitment to tackling climate change, but also to the tools to help fund managers follow through on that commitment. Being part of this movement in the investment industry gives me encouragement that there will be meaningful climate action ahead and that the Uniting Church is not alone in its passion about this issue. More and more, money is being made to matter in the mission to make the world a better place.