Low Asset

[TOP STORY] OMIG joins Net-Zero Asset Managers Initiative


SIMON BROWN: I’m chatting  now with Rob Lewenson, head of responsible investment at Old Mutual Investment Group. Rob, I appreciate the early morning time. A note sent out makes the point that the Old Mutual Investment Group has joined the Net-Zero Asset Managers Initiative. Before we delve into what you’re making the call for, can you give us some details around this initiative?

ROB LEWENSON: Good morning, Simon and listeners. I love it in the morning. It’s always important to talk about climate risk and climate science at this early hour, but it’s a crucial and important topic that is not going away, and that needs to be addressed urgently.

So yes, Simon, thank you. We have indeed joined the Net-Zero Asset Managers Initiative. What exactly is that? [A] cohort or group of international asset managers committed to supporting the goal of net-zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to limit global warming to 1.5 degrees Celsius, and to support investing aligned with net-zero emissions by 2050 or sooner.

Simon, at current count, we’re talking about – just to give you a sense of the scale of the commitment here – there are approximately 263 signatories representing $57 trillion in assets under management worldwide.

So we’re not talking about a small group of climate-focused asset managers here. We’re talking about almost, if not more than half the world’s assets under management being signed up to this initiative.

It may seem that this is just another initiative with no real consequences, but for us to sign up to this initiative we actually have to meet certain goals in a certain period of time. We are the second African investment manager to sign up to this initiative.

Our goals are set up quite clearly in terms of what we need to achieve. Number one, the commitment. Number one is to support a global goal to zero greenhouse emissions and limit [warming] to 1.5 degrees Celsius. There’s a whole slew of *** that supports why we need to, in a sense, decouple economic growth from creating greenhouse gas emissions, or GhG, and how that decoupling of that growth links to temperature rise on earth.

… in the last 70 years we have seen an exponential rise in GhG emissions, and at the same time a staggering increasing rate of temperature change on the planet. The science very much supports that. So we know that there’s a direct correlation between the amount of emissions you put out and the amount of warming that’ll take place on earth.

SIMON BROWN: That number – $57 trillion. I had to look it up; after a trillion comes quadrillion. So that’s about three quarters of a quadrillion. I’ve never used that word before.

What you’re calling here for, Rob, is essentially a South African-centric new index that focuses on low carbon, socially inclusive, and it’ll be listed, it’ll be an investment benchmark, so that investors, fund managers and the like, can focus around it, because our current indices serve their purpose, they are fit for purpose.

ROB LEWENSON: They are not; they are not fit for purpose, Simon. The Swix or the Capped Swix is taking us to a three- to four-degree warming by the end of the century, which will have catastrophic consequences. The carbon intensity of our Capped Swix is six times higher than where we should be in terms of what the world is aligning to in terms of the global north in a 1.5 degree Paris-aligned index.

So what [do] we need to do, how do we solve this?

We can either just do nothing and wait for Eskom to decarbonise its operations, which, yes, will account for about 50% or more of the carbon emissions on the Capped Swix, which is a good thing. It needs to happen. But we can’t just leave it there and wait for that to transpire.

We need to ensure that the companies that we invest in and continue to invest in are moving steadily and [have] clear goals to reduce the carbon in their operations to a net-zero outcome by 2050.

The other thing that we need to ensure is, of course, that to create this index specifically for South Africa will recognise our unique social context. To have the developed nations say, okay, it’s easy enough to shut down coal power stations and get a rapid decline of 7% a year to net zero, it’s easier for Europe or America to just decarbonise in that way, but we have a very different social context.

As you know, there’s this discussion about what a just transition looks like. Currently this government and the presidency – and the discussion globally – is starting to move to, okay, it’s all very well to decarbonise, but what are the social consequences of doing so in an emerging market specifically? South Africa is one of those emerging markets where social consequences will have the most impact on the economy, on the way people live, and so on.

So what we are proposing is a low-carbon benchmark for SA. It has unique characteristics that follow our national defined contribution as a country to the Paris Agreement, and it includes the importance of ensuring a transition to a low-carbon economy, which ensures that we don’t exacerbate the ridiculously high unemployment that we have in this country at the moment.

And in fact may create the opportunity or the catalyst to create and reduce unemployment by bringing labour into the green economy, the new way of doing business. By that I mean a low-carbon resource-efficient and socially inclusive investment across South Africa. There are many companies on the Swix that have a unique opportunity to take advantage of that.

What I’m saying, Simon, is that we have the best sunshine, we have the best wind in the world. We have vast amounts of open space, and we have the bulk infrastructure and ports and financial markets and everything to support a massive investment into green operations and green economic production, whether it be hydrogen, whether it be solar and wind. The opportunities really are vast.

SIMON BROWN: I like the idea. … there’s a lot of talk around ESG. I support ESG. This moves it a couple of steps further, and I think that is hugely important. I take your point. We need those new indices so that they can benchmark, so they can kind of give us a proper and a real sort of reference into the new future that we want.

We’ll leave it there. Rob Lewenson, head of responsible investment, Old Mutual Investment Group, I appreciate the early morning time.


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