Inconvenient risk

Herald Sun
Saturday 27/10/2007 Page: 98

FEELING trapped at the end of a jam-packed gabfest exploring the financial services sector's links to climate change, Westpac's man in London Martin Hancock did the unexpected-he raised the bar. Less than 15 minutes after winding up the two-day United Nations' Environmental Program Finance Initiative Global Roundtable at Melbourne Park this week, Mr Hancock, who also chairs the initiative, was blocked from leaving the venue's car park. So conscious, it seems, of conserving energy were the venue managers that they had switched off the lights and locked up the conference centre minutes after the forum finished, shutting down the car park exits on their way out.

When it was clear assistance was not forthcoming, Mr Hancock hopped out of the car and using all his brute strength, he forced up the barrier so his driver could get out. It seemed a fitting metaphor for the forum. The finance institutions, especially those with their eye on long term returns on the funds they manage, are trapped in the vicious cycle of short termism. They know how compelling and, for now, attainable it is to focus on gains to be made from one quarter to the next, and certainly the market analysts demand it. But the quest for quick-fix earnings growth is scorching the earth.

WHAT to do, if you are a capitalist with a conscience, profit-driven yet passionate about the planet? This was the question 170 delegates from around the world grappled with in a global show piece event masterfully brought to Australia by Terry A'Hearn and his team at the Environment Protection Authority. Mr Hancock, the chief operating officer of Westpac's institutional arm in London, knows what has to be done and so he has raised the bar in another sense by throwing down the gauntlet to his peers and telling them to pause the growth and roll out sustainable finance. "Business as usual is not an option," he told the meeting.

He believes economies should slow down their growth, even to a stand still temporarily, and concentrate on developing technologies to reduce emissions. "Once you've figured out how we are going to neutralise the carbon dioxide, then we can go for hell for leather again," he told BusinessDaily. "To me it makes sense. "If financial services institutions don't crack this one, we are not going to be around in 15 years to enjoy the profits we are making now." The round table's message is that institutions need to take a hard look at their portfolios and assess how they will perform in a carbon-strained world that makes polluters pay. "Anyone who is a funds manager, especially of superannuation, needs to start asking now whether assets are going to be safe for 10 to 20 years. "They need to figure out what the risks are in a future grappling with global warming. "We are caretaking the pensions of the future and our time horizons have to be out there and not just in the next quarter," Mr Hancock said.

In a broadcast from Geneva concluding the roundtable's session, the UN Secretary General's right hand man, Achim Steiner, delivered some bad hot-off-the-press news. He told delegates he had just been informed by the Intergovernmental Panel on Climate Change, the 3000-strong international body that examines the science on global warming, that carbon emissions had reached even more toxic levels than they had anticipated. "We are now at levels 35 per cent higher than in 2000," said Mr Steiner who is UN Under-Secretary-General Mr Steiner was about to deliver UNEP's latest global environment report, with all its pessimistic view for the future of the planet and its inhabitants, thanks to the spiralling consumption that climate change is being blamed on.

It will form a plank of the IPCC's fourth report to be launched next month in Valencia, just ahead of the gathering in Bali in December that will revisit the Kyoto Protocol's emissions targets. "We simply will not meet the target of reducing emissions by 50 per cent of 1990 levels in 2050 if this meeting does nothing to move towards a low-carbon economy," Mr Steiner said. "The time has come to stop experimenting. "The principles of sustainable finance must become mainstream. "Without them there cannot be the transformation necessary to mitigate climate change." Mr Steiner challenged the delegates to change their models, to talk to governments, to take a lead in mitigating climate change, because no one else was doing it, he said.

DURING the two days, delegates pondered how they could reinvent their tools to make sustainable finance just as profitable as their traditional investments. The potential of a global market for trading carbon credits was dissected over and over again. The ANZ's sustainability manager, Lloyd Fleming, described an alternative scenario where carbon credits would be superfluous. "I'm throwing down the gauntlet to you all," he told delegates. "Envisage a future in which big technological breakthroughs have been made that have enabled the large scale roll out of zero-emissions renewable energy. "Imagine if we could shift our thinking away from carbon markets altogether." He said he had lived through so many technological breakthroughs in his life, that he believed it was plausible to run an economy without spewing carbon dioxide into the atmosphere.

"Don't rule this view out of your thinking," he said. Credit Suisse vice-president Otti Bisang agreed that huge advances were well within the realm of possibility by 2020. "That year, 13 years from now, I can't believe I will be singing the old Beatles' song When I'm 64,"he said. "Yet 13 years ago, I would not have imagined wireless broadband, mobile phones like the ones we have today and so on. "And 13 years ago, there was no Kyoto Protocol, carbon emissions targets, or sustainability imbedded in company policies. "Change can really happen fast."