The end of investment as usual
There are different types of climate denial, says renowned US environmentalist Bill McKibben. There are those who deny the science, but there are also those in denial about how quickly it will happen, what the impacts will be, and how they can make a difference.
McKibben was the keynote speaker at a UTS Business School event exploring how market and corporate governance levers can enable the transition to a carbon neutral economy, and how business can benefit from this shifting investment landscape.
Researchers at UTS Business School have been analysing transition-ready business strategies and new business models for a low carbon economy.
McKibben is the founder of 350.org, an international movement campaigning for a fossil free world. He has been at the centre of recent global shifts in divestment and litigation.
He was joined by a panel of experts: Brynn O’Brien, Executive Director of the Australasian Centre for Corporate Responsibility, Mark Woodall, Chair of the Future Super Investment Committee, UTS corporate governance expert Professor Thomas Clarke and Dr Melissa Edwards from the UTS Centre for Business and Social Innovation.
McKibben described how a 2011 report by energy think tank Carbon Tracker, outlining the huge gap between the amount of fossil fuels that could safely be used and what mining companies had in reserve with their business projections, recast the challenge of climate change in a new light.
“I’d been working on climate change for a long time but I hadn’t quite understood until then that the end of the story had already been written,” McKibben said.
“Unless we somehow figured out how to dramatically change the business plans of some of the most powerful entities on the planet, there was no mystery at all to how this was going to pan out,” he said.
While relying on governments and policy reform was fraught due to the fickle nature of the political cycle, McKibben said levers such as divestment and shareholder activism offered an alternative way to create significant change.
Divestment is playing a major role in the transition – $6 trillion in assets worldwide has been divested from fossil fuels. "These investors have understood that it is wrong to profit from wrecking the planet," McKibben said.
Lawyer, strategist and advocate for more responsible business Brynn O’Brien described how she uses the tools of corporations law to hold Australian listed companies and their investors to account for their social and environmental commitments.
“I am increasingly of the view that massive quick collective action by the investment sector might be our one shot at slowing or stopping catastrophic climate change,” O’Brien said.
“If we contrast global financial markets with states – the structures for states to do things massively and collectively are not there,” she said.
In the last 12 months, O’Brien has put shareholder resolutions to mining giants BHP and Rio Tinto in relation to their financial support for fossil fuels lobbyists undermining national and global action on climate change.
“A month ago, as a result of shareholder action by 100 retail shareholders, we got BHP, the world’s largest diversified miner, to leave the World Coal Association,” she said.
Professor Clarke highlighted the risks to investors in the fossil fuel industry, and said the threats posed by climate change were “not just an ecological disaster but also a financial disaster”.
“There is $27 trillion of these stranded assets, which could never be used if we stuck to the Paris agreement. This is a similar figure to the toxic securities that caused the global financial crisis,” Professor Clarke said.
Mark Woodall, whose superannuation fund ‘Future Super’ has no direct investments in fossil fuel industries and does not invest in the companies that enable those industries to exist, said investors are realising ethical investment also equates to better returns.
“The right side of morals and the right side of money are now co-located,” he said.
“Future Super has the best performing super fund in Australia as a result of its decision to divest out of certain industry groups and to invest in things that are better in the long run.”
Woodall said he believes the world is at a tipping point in the use of renewable energy, and highlighted Britain recently running for three days without coal power, as an example of this shift.
McKibben argued the most important thing is not to change particular policies but to "change the zeitgeist – to change what is normal, natural and obvious”.
“Often this is accomplished by big battles against fossil fuel projects, and in Australia it is absolutely crucial to stop this insane idea of building the largest coal mine in the world,” McKibben said.
“Everybody should be making the point that this is not just a bad idea, it is a lunatic idea. If we can change public opinion, change the zeitgeist, then political change can come much quicker.”
The event was hosted by the UTS Centre for Business and Social Innovation (CBSI), the UTS Institute for Sustainable Futures and 350.org
CBSI researchers analyse companies that are transforming their culture, governance and business models to benefit from this transition to a low carbon economy.