Responsible Investor comment articles
We are delighted to have a series of occasional Zero Ideas insights and perspectives published as comment articles in Responsible Investor.
Click on the headlines to read the articles in full:
The myth of ‘mobilising capital’
At last week’s UNEP-FI Global Roundtable in Geneva , I lost count of how many times panellists talked about “mobilising capital” and “mobilising finance”. We have mobilised hundreds of billions. We need to mobilise tens of trillions. In the same breath, panellists explained that this mobilised capital can’t be deployed until, and unless, there are the right conditions for a commercial rate of return on the money. But when there is, capital is good at mobilising itself; and when there isn’t, mobilising doesn’t solve the problem. So what does “mobilising capital” actually mean?… December 2024.
A transition plan needs a transition mindset
Business leaders and the environmental movement differ on many things. But they largely share one common perspective on climate change, which is to see it through the lens of conservation… Climate change, however, is not a conservation problem. We are not trying to conserve the status quo, because the status quo is what is unsustainable. We are not even trying to return to an earlier status quo, which would be undesirable, unattainable, and incompatible with a population of eight billion people. Climate change is a transition problem… October 2024.
Responsible Investor chose the right name
In a world where ESG gets politicised, and politics gets polarised, how can businesses or investors take a stand without taking a side? The key is to focus on materiality, not (just) morality. And the magic word that does that job, with all the right allusions for all the right people, is “responsible”… October 2024.
‘Science-based targets’ can never be what they say they are
There is a fundamental problem in the idea of science-based targets for individual companies. Climate science tells us objectively what the whole economic system needs to do. It can’t tell us what an individual company needs to do, because that depends on what everybody else will do. A company-level science-based target is based on science in much the same way that a Hollywood movie is based on a true story. When we claim otherwise, we are misusing science as a facade of authority… June 2024.
As we financialise climate change, let’s learn from microfinance
Microfinance has striking parallels with climate finance. The financial sector and NGOs together formed a movement to pursue a societal goal, where states were not making effective progress. The microfinance movement mobilised capital in pursuit of that goal. It introduced new financial solutions, roles and institutions, driven by enlightened motivations and thinking. But when these didn’t work as planned, it prioritised its financial interests and rewrote the societal goal to fit. Its lessons are worth learning… June 2024.
It’s time to challenge our finance-led theory of change
The point of the immense effort going into climate disclosures and reporting is that investors, lenders and other stakeholders can act on the information and steer the economy towards net zero and other sustainability objectives. But the Institute of International Finance has said that this is not the role of the financial sector. So what role are investors and banks playing in practice? And will it drive the impact we need to achieve the world’s climate goals?… April 2024.
Just because you should doesn’t mean you can
When vital investment projects in offshore wind in both Europe and America get abandoned by one of the companies most competent to deliver them, we need to ask what we are doing wrong. Ørsted recognized long ago that the transition from fossil fuels will be driven by substituting demand, not suppressing supply. And it led that substitution, selling its oil and gas business and investing and innovating in wind power, particularly offshore wind, leading the way in driving down the cost curve. A company that does just what the world needs and wants it to do now finds itself let down by a business environment that can’t support it through a tough cycle. The lesson to take from Ørsted’s courageous and outstanding leadership: just because you should doesn’t mean you can… February 2024.
Making this a decade of delivery, not disclosure
The demand for metrics and disclosures to feed the ESG ratings industry is driving an extraordinary activity of detailed quantification, which is absorbing money, talent and management attention at an unprecedented scale. And it is distracting from the big transition challenges for which we still don’t have answers. Of course, we need metrics – but we are disappearing down a rabbit hole of complexity. The Paris Agreement needs the 2020s to be our ‘decade of delivery’ – but on our present path it will be the ‘decade of disclosure’. We can’t afford to spend the decade putting in the accounting system. Worse, the accounting system that businesses are being driven to build is untested and ill-suited to the task. We are collectively betting it will work, but there are good reasons why it may not. This is a climate risk that is rarely recognised… January 2023.