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Why Climate Change Action is Being Delayed

Futerra's Ed Gillespie explains to Morningstar's Hortense Bioy why financial advisers need to have urgent conversations with their clients about climate change

Hortense Bioy, CFA 10 May, 2019 | 10:32AM

 

 

Hortense Bioy: Hi, I'm Hortense Bioy, I am at the Morningstar Investment Conference in London with Ed Gillespie, who just spoke about climate change in his presentation. The title was quite provocative, "It's the climate, stupid" very provocative slides, passionate talk. What was your main message?

Ed Gillespie: Well, I think, I'm trying to echo Bill Clinton when he said you know, "It's the economy, stupid" and so climate is the biggest challenge of our generation. So, the main thrust of my message was this is a climate emergency. We've fiddled around for 20 or 30 years, not taking the kind of significant and substantive transformative action required. And we are entering into an endgame, where we have 10 or 12 years to turn this ship around. And it's going to require massive reallocation of capital. It's going to require a very different kind of investment practice and it's going to require everyone.

Bioy: You talked about predatory delay. What is it?

Gillespie: Predatory delay is a kind of idea that was formulated by Alex Steffen who is a U.S. futurist. And he uses it to describe, when the pace of change is being dictated by the losers. So, if you like we're in the middle of a transition away from fossil fuels, oil and gas into a kind of clean, green, renewable energy technology world and we are in the midst of that right now. The trouble is we have the incumbents, who are dragging their feet and stalling process in order to continue making the large profits that they currently do, with the understanding that the costs of that delay will be paid by others.

Bioy: So, the room was full of financial advisers, like can you give us couple of advice, couple of things that financial advisors can do to tackle the climate change?

Gillespie: Well, firstly, have the really honest, raw and authentic conversation with your clients. Sit them down and ask them, what do they think about climate change, are they concerned? Because actually we're looking at portfolios now, which will be maturing in 10 or 20 years' time and we have to fix the problem within 10 years. And people who have children or grandchildren under 10 years old, they will still be alive in 2100, where the worst aspects of inaction on climate change will really be biting very hard. So, I think, firstly, have that really frank and honest conversation and ask people whether they care. The big question I think is around, are you investing to achieve your financial goals or maximize your returns? But if maximising the returns means sacrificing the planet, then we should perhaps be reevaluating what our financial goals are and how we achieve them.

And then second thing is, I think people talk about like shareholder activism, which I think has a place, but we've tried to influence these businesses for 20 or 30 years with very little effect. I think now is a time for some divestment to squeeze the pips.

Bioy: Okay. Thank you very much, Ed Gillespie. This was Hortense Bioy from Morningstar, the Morningstar Investment Conference.

This article is part of Morningstar's special report on What the Experts Say

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Hortense Bioy, CFA

Hortense Bioy, CFA  is director of passive funds and sustainability research in Europe for Morningstar

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