title:IIGCC   Guest Blog - Steve Waygood,  Chief Responsible Investment Officer, Aviva Investors.
IIGCC   Guest Blog - Steve Waygood,  Chief Responsible Investment Officer, Aviva Investors. | IIGCC

IIGCC BLOG

26th January 2017 03:05:00 PM (UTC)

IIGCC     Guest Blog - Steve Waygood,    Chief Responsible Investment Officer, Aviva Investors.

Reflections from Davos and Rome

As a Davos first-timer, I had no real idea what to expect. What I found fascinated me.

As always, there is some truth to the cliché: the hum of helicopters and rumble of limousines is never very far off. There is also a very exclusive set of meetings, complemented by a ferociously effective multi-tiered ticketing process. And the cold is harsh and biting, particularly at night.

I’ve no doubt that the real business of Davos is done in private one-on-one meetings. But there is another side to the World Economic Forum. The CEOs, heads of state, statesmen and – increasingly (1) – stateswomen present were made keenly aware of the social issues of the day. The Edelman trust barometer, which indicates the general population’s trust in business, government, NGOs, and media has declined broadly, and Oxfam’s survey on inequality, which shows just eight men own the same wealth as half the world, were a focus of discussion at the meeting – and will have rendered it something of a baptism of ire for first-time CEOs.

For my part, I was there for three reasons. First, to promote the Business Commission on Sustainable Development (BSDC) report, which endorses our concept of public league tables that rank companies on their performance in relation to the United Nations Sustainable Development Goals. Second, to build support for our associated World Benchmarking Alliance, which we are putting together alongside BSDC, Index Initiative and the Corporate Human Rights Benchmark, which I chair. And third, as a member of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), to represent Aviva as an asset owner and asset manager, and advocate for the associated recommendations in our Seeing Beyond the Tragedy of Horizons report, which Aviva launched at COP22 in Marrakech. To that end, we were proud to work with Carbon Tracker, IIGCC, 2 Degrees and others in co-hosting a series of side events, policy round-tables, dinners and networking opportunities at the meeting.

For me, in addition to a very successful launch of the BSDC report, the best news was the way ‘Davos-Man-And-Woman’ responded to the TCFD recommendations on climate disclosure. Paul Simpson of the Carbon Disclosure Project (CDP) offered this summary at one of our round-tables: “No company CEO pushed back strongly on the recommendations; there is overall support for the theme of standardisation and consistency; and all of the companies said they are not hearing enough from their investors”. This is good news for the TCFD debate and the last point is, of course, a key challenge for IIGCC members to reflect upon since it underscores the importance of IIGCC’s ongoing engagement work but also the need to persuade many more investors to make such activities a routine facet of their investment management practice.

Paul also mentioned that CDP had been involved in a big conversation about scenario analysis – specifically the issue of carbon-pricing corridors – and how to ensure it is effective, useful and comparable. Understandably, one concern was that because of the task force’s focus on report and accounts, we may lose the richness offered by more detailed reports. Other concerns were raised about the recommendations surrounding Scope 3 emissions, particularly by a few companies in the extractive sector which claimed such emissions are beyond their remit, as they are produced by other firms.

Personally, I think the solution to this simply requires standardised conversion factors, and the International Accounting Standards Board is best placed to work on these. There was also some resistance to investor disclosure, which I consider untenable – particularly where it is someone else’s money and they carry the risk. Equally positively, NGOs have also recognised they need to incorporate the recommendations into their work. For example, CDP is aligning its questionnaire around the TCFD recommendations and producing benchmarks ranking corporate performance in this area.

I had also seen some evidence of stakeholder alignment around the TCFD recommendations at the ‘Rome Roundtable’, convened by the Global Foundation, which - thanks to the efforts of Frank Pegan of Catholic Super and IGCC in Australia - was also attended by Stephanie Pfeifer (IIGCC) and Chris Fox (CeresINCR) as representatives for the Global Investor Coalition on Climate Change. Arriving in Davos via the Vatican was surreal. We’d had an audience with the Pope, which was incredible. I thanked him for what he had achieved with Laudato Si, whose impact has been described by academics at Yale University as the ‘Francis Effect’ (2).

During the broader meeting we worked with a number of archbishops, cardinals, ministers, heads of state and two central bank governors for two days. The Global Foundation is aspirational in scope and inspirational in delivery. It is likely to lend support to IIGCC, Ceres and others in our joint work to ensure finance supports the transition to a zero-carbon economy. Cleverly, the Rome event was in part designed to target those en route to Davos, which demonstrates the Church clearly believes ‘Davos-Man-and-Woman’ has both influence and a social conscience.

And this was the most interesting lesson I learned at the World Economic Forum: the social conscience of Davos is open for all to see. It is not a subconscious afterthought, nor a legitimising ruse. Indeed, for many of the stakeholders I met it was the raison d’etre of their trip to Davos – particularly given what everyone kept referring to as “recent events” in the US.

Given our collective concern at IIGCC regarding what President Trump might do to the UNFCCC Paris Agreement, the palpable depth of international support for the agreement at Davos was heartening. One very well placed stateswoman suggested the previous administration had tied up the US commitment to the Paris Agreement so tightly that it would be extremely difficult for Trump to unwind.

This was promising, but it is no guarantee. It is very clear to me that IIGCC will need to re-double its now very effective policy engagement to ensure we use our combined market savvy and investment nous to counter the short-termism of the Trump approach. More importantly, we also need to ensure we finance the technology that will drive the transition – so expanding the Climate Solutions Programme at IIGCC to help investors accelerate low carbon investment is timely. A series of properly-coordinated National Capital Raising Plans embedded within the Nationally Determined Contributions, and included within the UNFCCC Global Stock Take, would also bring us closer to this objective.

However, the market has already demonstrated it can deliver the capital to the right technology. It is the scale and speed of supply that needs direction. I have no doubt IIGCC and the other investor networks in the Global Investor Coalition can trump Trump, particularly with the Francis Effect supporting us.

NB: the Consultation on the FSB TCFD recommendations is open until February 12. Please do all you can to respond.

(1) WEF confirmed 21% of Davos delegates this year were women – 29% less than there should be, but progress on previous years and the result of a genuine effort on the organisers’ part.

(2) Yale and George Mason University study found 17% of Americans and 35% of Catholics say the Pope’s stance on climate change has influenced their own views on the issue.