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Australian Pension Fund Settles Climate Change ...
Australian Pension Fund Settles Climate Change Lawsuit | Chief Investment Officer
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Launch of Trillion-Dollar Transformation Initiative, Focusing on Pensions and Climate Risk | Mercer and CIEL

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Trillion Dollar Transformation, a collaborative initiative by Mercer Investment Consulting (Mercer) and the Center for International Environmental Law (CIEL), is designed to educate pension fund fiduciaries on the challenges and opportunities presented by climate change.

Two cutting edge reports have been released detailing the financial and legal challenges climate change presents for pension fund trustees.  The key findings and recommendations have been summarised in this 2 page document.

Climate Change Investment Risk Management for US Public Defined Benefit Plan Trustees is a financial analysis by Mercer, identifying the various approaches trustees can use when considering investment risks from climate change. Mercer’s findings demonstrate that the average US public pension is markedly exposed to the potential for billions in lost asset value under a Transformation scenario, which is aligned with a 2oC global temperature increase outcome, the baseline goal of the 2015 Paris Climate Agreement.

In its companion legal analysis, Trillion Dollar Transformation: Fiduciary Duty, Divestment and Fossil Fuels in an Era of Climate Risk, CIEL reviews how climate change may affect the fiduciary obligations of pension fund trustees and concludes that a failure to acknowledge and respond to these financial risks may constitute breaches of trustees’ fiduciary duties.

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FUTURE SECURITY OF THE NATIONAL ELECTRICITY MARKET | Australia's Chief Scientist

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Australia’s Chief Scientist Dr Alan Finkel presented the Preliminary Report of the National Electricity Market (NEM) Security Review to COAG Leaders in Canberra last Friday.  The Preliminary Report identifies the forces of change confronting the NEM and key questions to guide consultations on the development of a blueprint for our nation’s electricity future.

“The blackout in South Australia reminds us that our national electricity grid is under pressure and in need of urgent attention,” said Dr Finkel, Chair of the Review.

“We now have a once-in-a-generation opportunity to reform the electricity sector to maximise its resilience in the face of rapid market changes.

“The goal is to ensure we have a secure electricity supply, at an affordable price for all Australian consumers, while meeting our international obligations to lower emissions.”

You can download the report here.

 

Directors fiduciary duties

Directors fiduciary duties

What are Fiduciary Duties?

Under the Corporations Act 2001 (Cth) (Act), a director of a corporation must exercise their powers and discharge their duties:

  • with the same care and diligence that a reasonable person would exercise in the corporations circumstances if they occupied the office held by that director (s180(1)); and
  • in good faith in the best interests of the corporation (s181(1)(a)); and

Generally, the best interests of the corporation are represented by maximising financial performance.  As result, it is not for the directors to infuse their own ethical considerations into decisions that it may lawfully make.

Having said this, the interests of the corporation can include the physical, political and regulatory environment in which it operates and so the Courts have held that directors can take these matters into account to the extent that they are linked with the interests of the corporation.

Risks

Historically, climate change was often regarded as an ethical issue for investors – a 'non-financial environmental externality' that was secondary to, and largely inconsistent with, the imperative to maximise financial returns.  Recently, however, the question of climate change has transformed into one of assessing material financial risk. 

More recently, the financial risks and opportunities presented by climate change have become a mainstream issue for the business community.  Debates over 'stranded asset' exposures (eg the IMF, OECD, WorldBank) and asset divestitures play out in the financial press.  Recognised economic and financial institutions warn of the significant economic consequences of climate change. And, globally, we are witnessing a surge in political and regulatory interventions in an attempt to deal with climate change and the resulting community concerns.

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Adapting Portfolios to Climate Change | BlackRock

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Implications and strategies for all investors

Investors can no longer ignore climate change. Some may question the science behind it, but all are faced with a swelling tide of climate-related regulations and technological disruption. Drawing on the insights of BlackRock’s investment professionals, we detail how investors can mitigate climate risks, exploit opportunities or have a positive impact. Climate-aware investing is possible without compromising on traditional goals of maximising investment returns, we conclude. We then reflect on steps that stakeholders in the climate debate are considering, including the use of carbon pricing as a cost-effective way to reduce emissions. Our overall conclusion: We believe all investors should incorporate climate change awareness into their investment processes. Read more