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A $ 213 billion investor targets the entire nation for climate change

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A $ 213 billion investor targets the entire nation for climate change

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By Matthew Burgess

(Bloomberg) –

Robeco Institutional Asset Management BV will soon start pushing Australia to phase out its dependence on coal and other natural resources, as money managers slowly start targeting governments for climate change.

Australia has a “particularly high risk profile” when it comes to climate performance, said Peter van der Werf, senior manager for equity and active ownership at the Dutch firm. As global investors implement plans to decarbonize portfolios by mid-century, Australia’s lawmakers must do the same, he said in an interview.

Reducing natural resources “are very difficult decisions because obviously they are very important sources of income for the Australian economy,” said van der Werf, based in Rotterdam. “That’s where in those conversations, institutional investors can also provide insight into how they would anticipate such a transition to occur.”

Unlike established asset manager groups like Climate Action 100+ that pressure companies like BHP Group Ltd. To align their practices with the Paris Agreement, bond investors who pressure governments to mitigate environmental risks, social and governance is a new concept.

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“Other than investing in green and social bonds, relatively little effort has been directed toward helping sovereign investors to actively contribute to the advancement of selected sustainable development goals – this is surprising,” as government bonds account for almost the 70% of the global market for $ 128 trillion bonds. , Robeco analysts wrote in a report this month.

Robeco was among the companies with $ 7 trillion in combined assets that involved the Brazilian government last year in an attempt to reduce deforestation in the Amazon rainforest. The investor group is also targeting Indonesia on forestry.

“Sustainability was something you could try and make a scorecard, but there was very little room to change that,” said van der Werf. Robeco’s bond managers are “very eager to start these conversations,” he said.

Australia will be next on Robeco’s list to accelerate the so-called just transition as the company seeks to decarbonize its equity and bond portfolios. The 176 billion euro ($ 213 billion) manager owned by Japan’s Orix Corp. has already avoided Australian debt in its Paris-aligned bond fund, but still owns the debt in other funds. Australia is among the largest per capita carbon emitters in the world.

Debt investors globally are grappling with assessing the long-term effects of rising global temperatures and how much economic growth must be sacrificed for countries to adapt. They are also balancing customer demands for cleaner, greener wallets with a fiduciary duty to make money.

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Australia can pay a price if it does not take stronger action to curb greenhouse gas emissions. The nation may join others in defaulting on its bonds by mid-century if strong policies are not introduced by the end of the decade. That could lead to sudden or disruptive changes to your economy, according to research by FTSE Russell. About a third of the economy and nearly a quarter of the workforce are exposed to disruption if key trading nations source cleaner materials elsewhere as the push to cut global carbon emissions accelerates, according to Deloitte Access Economics .

Australia is unlikely to be receptive to Robeco. Prime Minister Scott Morrison, who brandished a lump of coal in parliament, has steadfastly refused to commit to a deadline for net zero emissions in support of politically sensitive industries like coal and gas. Instead, the nation hopes that technology like carbon capture and storage will help meet its Paris Agreement obligations.

A spokesperson for Angus Taylor, Minister of Energy and Emissions Reduction, said Australia’s record is better than many advanced economies, noting that between 2005 and 2019 emissions fell faster than in Canada, New Zealand, Japan or USA

“Action and results are what matter, and our track record is one that will see Australia meet and exceed our emission reduction commitments while continuing to grow our economy and jobs,” the spokesperson said.

Robeco is seeking Australian institutional investors to help formulate the participation plan to be launched this year, van der Werf said. They are “closer to the fire” with a “sharper view” of opportunities to ease a transition, he said.

“You need to have a coalition of investors” to put pressure on all stakeholders who influence government policy, van der Werf said. “You can’t do this alone.”

© 2021 Bloomberg LP

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