As a heatwave strikes London, in this Q&A fund manager Duncan Goodwin and Helene Winch, Premier Miton’s Head of Responsible Investing, share their perspectives on the relevance of LCAW and climate change initiatives to investment.
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In brief
Now in its sixth year, we consider LCAW 2024, its significance and its four key themes.
• LCAW 2024 is focused on climate ambition at COP30, financing the transition, delivering a net zero and resilient UK and mobilising whole society action.
• Climate risk is an investment risk. The impact of climate-related events is increasingly impacting companies’ profits, for example.
• Companies are starting to, and need to, better quantify costs of climate change.
What is London Climate Action Week in a nutshell?
The annual LCAW festival is designed to demonstrate the “whole society engagement needed to support the delivery of decarbonisation and resilience”.
Marked from 22-30 June this week, it has coincided with a yellow heat health alert being triggered for most of England, including London, with temperatures climbing above 30C.
It was originally set up by climate change think tank E3G and the Mayor of London in 2019.
Participants this year have been hearing from organisations such as:
– ReLondon, a partnership of the Mayor of London and London borough’s to improve waste and resource management and accelerate a transition to a low carbon circular economy;
– the well-known Swedish furniture-maker IKEA;
– Pledgeball, a Bristol-based charity focused on engaging people around environmental sustainability through football;
– Tern Eco, an enterprise in Barnet, London, which helps retailers recover product for reuse or resale;
– and the Earthshot Prize finalist Sea Forest. The Earthshot prize is a global award for contributions to environmentalism and Sea Forest, an Australian company, developed a new feed supplement for cattle and sheep made from native red seaweed.
What are the themes for 2024?
Events have been held across London, including at the London Stock Exchange, the Design Museum, the Guildhall, the ExCel London, focused on four key themes:
– The “road to climate ambition at COP 30”, the UN Climate Change Conference which will convene in November 2025 in Brazil;
– Financing the global climate transition exploring “how reform of public and private finance systems can support a new global finance goal at COP 29 and future climate action”;
– Delivering a net zero and resilient UK “with pre-election discussions on how to deliver the transformations needed across the UK, London’s role in shaping this and delivery of London’s 2030 net zero target”;
– Mobilising whole-of-society climate action, with a focus on mobilising networks in law, education, health, fashion, arts and culture and beyond”.
On Tuesday, Helene Winch, Premier Miton’s Head of Responsible Investing, spoke on a Principles for Responsible Investment (PRI) panel event on investing for sustainability impacts and advancing the UK transition alongside the LSE’s Grantham Institute and the Pensions and Lifetime Savings Association (PLSA).
The session considered the pace of regulation and its role in driving the UK’s transition to net zero. It tackled questions like “How can policy makers and investors work together to create a positive, sustainable regulatory environment and support the new transition?”.
Meanwhile a “policy environment wish list” was discussed at the Institutional Investors Group on Climate Change’s (IIGCC) Net Zero Summit 2024, attended by Premier Miton’s Ben Briceno.
What are the implications for investors?
While climate change affects investments, action to mitigate or adapt also requires financial investment.
Duncan Goodwin, a fund manager focused on sustainable investment at Premier Miton, explains: “We are seeing climate-related events increasingly affecting companies’ profit margins. However, we are also seeing companies starting to better-quantify the investment needed to adapt and mitigate climate change, and they need to.
“Climate risk is an investment risk. This is because climate risks have an impact on a company’s profits. Physical risks associated with the impacts of climate change include the increasing frequency of threats to physical assets like buildings or equipment. This could be from shock cold snaps, flooding, or fires, for example, or from longer-term stresses such as long-term sea level rises leaving buildings potentially uninsurable.
“There are also transition risks. These are the risks companies face because of actions taken to mitigate climate change. An obvious example is the energy sector, which faces climate risks from policy changes designed to move global energy use away from fossil fuels, but transition risk affects companies in all sectors. While sectors heavily dependent on fossil fuels, such as those in energy supply, manufacturing, and transport, are hard hit, increasingly companies around the world are facing climate-related financial disclosure regimes, even if they are not in carbon-intensive industries.
“This means many companies may be, or already are, subject to rules requiring them to report to investors on what they are doing to mitigate the risks of climate change. Here in the UK the government formally endorsed a framework called the Taskforce on Climate-Related Financial Disclosures and reporting of climate-related risks and opportunities became mandatory for the largest UK companies (as well as asset managers including Premier Miton) from April 2022, for example. Then there are reputational risks, shifting consumer preferences and rapidly evolving competitive landscapes.
“The opportunities for investors are what’s important to us. The relevance of climate change to investors is not just about costs and regulations but innovation and investing in the success stories of the future. We’re constantly analysing trends and the financial performance of forward-thinking companies with meaningful solutions to real problems, including climate change.
“As an example, we’ve considered the role of railways in the transition towards a lower carbon world and how railroads in North America have business models that can make them compelling investment opportunities.
“My team is also particularly interested in the importance of forests as carbon sinks in the fight against climate change. Forests play a crucial role because they store carbon dioxide. They help keep it out of the atmosphere, preventing it from contributing to global warming. We are interested in companies leading the charge in making nature-based climate solutions, actions that protect ecosystems and improve management and restoration of land, their business.
“As well as their vital role in storing carbon dioxide, forests are also crucial to sustaining biodiversity. We expect awareness of the importance of protecting biodiversity to increase, and there are growing efforts to encourage companies to report on their impacts on nature too. Restoring and protecting nature is not just a strategy to tackle climate change because it removes carbon from the air. Forests, wetlands, and other ecosystems also play a part in protecting buildings, crops, water supplies and infrastructure.”
Helene Winch, Premier Miton’s Head of Responsible Investment, says: “London Climate Action Week was started to bring London communities together with the joint ambition to champion solutions to climate change. Premier Miton’s responsible investing team has supported London Climate Action Week 2024 this week attending events with IIGCC, Net-Zero Data Public Utility and PRI discussing all things climate. The City of London has always positioned itself as the green finance capital of the world, and with a potential new government and commitments in clean energy, it feels like this important topic has been revitalised.”
