SESSION TWO: REPORT
On Tuesday the 1st of December 2020, the second Hutton Series debate took place virtually from Panmure House.
HOW THE FINANCIAL SECTOR CAN HELP MITIGATE CLIMATE CHANGE
The Hutton Series on Climate Change is a series of events taking place across 2020-21 at Adam Smith’s Panmure House, bringing together a diverse cross-section of experts, business leaders, scientists, and concerned citizens in the service of one simple aim:
to identify ten key priorities, innovations & actions to mitigate the climate crisis.
Our keynote speakers for this second session were Keith Skeoch, Chairman of Aberdeen Standard Investments Research Institute and Interim Chairman of the Financial Reporting Council and Kirsty Hamilton, former Director of the Low Carbon Finance Group. Each led a keynote for five minutes, before taking questions and participating in a debate panel, led by Prof. Heather McGregor (Executive Dean, Edinburgh Business School, Heriot-Watt University). Our speakers were joined by Willie Watt Chair of the Scottish National Investment Bank (SNIB) and Prof. John Ludden CBE of Heriot-Watt University to debate and discuss how the financial sector can help mitigate climate change.
The event was hosted virtually by Panmure House and simultaneously live streamed as an interactive webinar via Facebook and the Panmure website. The broadcast is available on the Panmure House website.
Write-ups will be produced after each session by the Lyell Centre and the Research Centre for Carbon Solutions, and published on the Panmure House Global Gateway website. A final write-up will be produced ready for distribution at COP26 in November 2021.
Hosted by Graham Watson, Chair of The Panmure House Advisory Board
Chaired by Professor Heather McGregor, Edinburgh Business School, Heriot-Watt University
Introduced by Professor Richard A. Williams, Vice Chancellor, Heriot-Watt University
Keith Skeoch, Chairman of Aberdeen Standard Investments Research Institute and Interim Chairman of the Financial Reporting Council
Kirsty Hamilton, former Director of the Low Carbon Finance Group.
Willie Watt, Chair of the Scottish National Investment Bank (SNIB)
Professor John Ludden CBE, Lyell Centre, Heriot-Watt University
THE RESPONSE FROM THE FINANCIAL SECTOR
- VALUES: Encourage setting of social values in investment - “saving to save the planet”.
- CLARITY: Provide clarity of purpose to financial institutions by better identification of Environmental, Social, Governance (ESG etc.) investments.
- A WHOLE SYSTEM AND COHERENT INVESTMENT CHAIN: Create an integrated system where the various cogs across the financial sector, government and society are connected and rapid, workable and accountable and capable of accelerating change through investment. Policies must be well designed to ensure that capital can invest at the right pace and scale required to deliver climate objectives.
- A CLIMATE CHANGE AGE-GAP: Work with the future generations in closing a perceived difference of understanding and trust on issues of climate-change through discussions on their immediate and longer-term concerns with respect to the role of the financial institutions in both climate-damaging investments and climate-change solutions.
- MONITORING: Create a monitoring system so stakeholders can be sure that investments are made at scale and at a pace that is commensurate with net-zero targets. Track and rate investible outcomes through reporting systems and advanced digital technology.
- GOVERNMENT REPORTING: Require an Annual Climate Action Budget to be presented alongside the UK and Devolved Administration’s annual budgets on the state of investment, progress in actions and achievements against climate change targets.
- TASK FORCE ON CLIMATE RELATED FINANCIAL DISCLOSURES (TCFD): Make the requirements of the Task Force on Climate-related Financial Disclosures (TCFD) mandatory for investment companies, resulting in a clearer framework and taxonomy for investor’s choices. UK can show clear leadership in this area.
- GOVERNMENT INVESTMENT: Mobilise commercial investment through a well-connected public and private sector delivering the needed scale of well targeted investments e.g., in asset-backed infrastructure with private sector lease-back, decarbonising housing stock, in EV charging networks (build on earlier public sector pilot investment success, such as for wind energy).
- PENSION SCHEMES: Provide pension contributors with the tools that allow them to move away from default investment positions and encourage pension contributions in what are currently viewed as ‘niche investments’ in Environmental, Social, Governance (ESG). Require mandatory company positioning in reporting on climate objectives. Create an open market-place discussion on rankings of ESG financial tools.
- INVESTMENT: As immediate action is needed, investors can start by targeting the most impactful - e.g., grasp lower-hanging fruit to build investor confidence (e.g., wind energy, natural gas to hydrogen and heat-pumps).
- CARBON TRADING: Although an attractive proposition if politically and globally accepted and integrated into wider plans, it is viewed as being open to avoidance through loopholes and too slow to obtain buy-in and achieve scale.
- TRADE-OFFS: Behavioural changes in consumption are essential in the face of potential damage to economies and livelihoods from inaction on climate change, at the same time we must be alert to the unintended consequences of certain actions (e.g., demand for metals for EV and the economy of small-scale mining) and work across sectors and silos to avoid those while staying on track.