Our latest ‘Critical Conversation’ podcast features an exclusive discussion with Adam Matthews (Church of England Pensions Board) and Bill Emmott (former editor-in-chief of The Economist) on the key geopolitical and ESG risks facing companies in the coming 12 months.
Bill Emmott is chairman of the trustees of the International Institute of Strategic Studies (IISS) and was formerly editor-in-chief of The Economist. Bill is also a member of Critical Resource’s Senior Advisory Panel. Adam Matthews is director of ethics and engagement at the Church of England Pensions Board, co-chair of the Transition Pathway Initiative (TPI) and a board member of the Institutional Investor Group on Climate Change (IIGCC). The discussion was moderated by Daniel Litvin, Founder and Managing Partner of Critical Resource.
In this 30-minute conversation, recorded on 8 October 2020, Adam and Bill share thoughts on the potential for a Biden victory in the upcoming US election to significantly accelerate global pressures facing companies on climate change and ESG, the unfolding political and economic fall-out from the pandemic and the possibility that further global instability, crises in emerging markets, and rising unemployment will create additional fuel for populist movements.
Among the key points raised by Adam:
- The current focus on climate change in the US election campaign has never been seen before. A change in the Administration will bring about US re-engagement with the Paris Accord, and result in the creation of three significant blocs – China, the US and the EU – pushing for an accelerated approach to the energy transition. This could speed-up the overall transition to a low-carbon economy, as well as strengthen the ‘ask’ from investors towards companies.
- China’s intention to achieve net zero by 2060 is a game-changer – this is not an announcement they make lightly. It will impact all sectors that provide resources to China as most of the Chinese economy will have to radically decarbonise to meet that commitment.
- Companies need to develop strategies to navigate a multi-decade transition to a lower carbon economy or face being further isolated, and present an increased risk to investors.
- Neither companies nor investors can reach the common objective of net zero by themselves – there is an opportunity for a new landscape of ambitious partnerships between investors and companies to drive change, including by engaging with value chains. Investors can play a much more creative role in this respect.
- Investors are increasingly sensitive to the social approaches of companies. The Juukan Gorge disaster has triggered reviews by investors regarding how companies are engaging with communities. Investors will intervene more proactively in this area, as they did on tailings dams.
Among the key points raised by Bill:
- If Joe Biden wins the US election, it is likely to have a ‘calming’ effect – but could nonetheless be accompanied by new signs of American disarray and divisions that would further weaken American credibility.
- Globally, we will see economic recovery following the Covid-19 crisis, but not back to pre-crisis levels of growth. Economic weakness and rising debt levels will lead to increased global fragility.
- Rising levels of poverty will lead to a new set of ‘dominoes’ falling among the emerging economies.
- While the US-China rivalry and decoupling have been key issues in recent years, there will be a pause in this – and attempts to reset and re-establish a G2 world.
- Worsening unemployment and declining government support could fuel the resurgence of populism – with dangers for big companies emerging out of this situation.