Sustainability, climate change and the environment are the hot topics for finance in 2020 - PKF Francis Clark
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Sustainability, climate change and the environment are the hot topics for finance in 2020

I confess to being tearful when I read excerpts from BlackRock’s C.E.O Larry Fink’s annual letter to the chief executives of the world’s largest companies as reported in the New York Times.

My tears were a mixture of melancholy and joy as it was reported his intent is to encourage every company, not just energy firms, to rethink their carbon footprints.  The joy was the fact that this was a statement from a C.E.O presiding over the world’s largest fund manager with $7tn in assets and this could be seen as another positive milestone in businesses putting climate change and sustainability centre stage.  The melancholy as to me we seem to have wasted a decade to get to this position.

Larry Fink’s annual letter

Extracts from the letter include:

  • “Climate change has become a defining factor in companies’ long-term prospects. Last September, when millions of people took to the streets to demand action on climate change, many of them emphasised the significant and lasting impact that it will have on economic growth and prosperity – a risk that markets to date have been slower to reflect”
  • “Awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance,” …. “The evidence on climate risk is compelling investors to reassess core assumptions about modern finance.”
  • “While government must lead the way in this transition, companies and investors also have a meaningful role to play”
  • “We believe that all investors, along with regulators, insurers, and the public, need a clearer picture of how companies are managing sustainability-related questions. This data should extend beyond climate to questions around how each company serves its full set of stakeholders, such as the diversity of its workforce, the sustainability of its supply chain, or how well it protects its customers’ data. Each company’s prospects for growth are inextricable from its ability to operate sustainably and serve its full set of stakeholders”.

And, probably my favourite “Over time, companies and countries that do not respond to stakeholders and address sustainability risks will encounter growing scepticism from the markets, and in turn, a higher cost of capital.”

Mark Carney sets the tone and quotes CEO of Morgan Stanley

At the end of 2019, Mark Carney made similar statements to those in Larry Fink’s letter in his interview with the Guardian newspaper, where he made the stark warning to businesses – Companies and industries that are not moving towards zero-carbon emissions will be punished by investors and go bankrupt.

He was also quoted in the interview as saying “Failing to act would have severe consequences, he said. “I don’t normally quote bankers, but James Gorman, who is the CEO of Morgan Stanley, said the other day: ‘If we don’t have a planet, we’re not going to have a very good financial system.’ Ultimately, that is true.”

The environment will take centre stage at our March breakfast briefing

Inspired by recent statements from the business and finance community, including those referenced above, I am currently organising my March breakfast around the theme of “Green Business: Green Cornwall”. I am very pleased to say that locally based Fourth Element have provisionally agreed to speak about why they have placed the environment at the core of their business.  I am hoping they will be joined as presenters by contacts from Cornwall Council, to outline their Climate Emergency Plan and Tevi.  I am liaising with Cornwall Chamber of Commerce to dovetail this event in with their annual Sustainability Conference, which I understand is pencilled in for 12 May 2020.  More details of the March breakfast event will appear on our website in due course.

By Andrew James

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