# New analysis. How corporate overlords are unlawfully ignoring future climate impacts.

## Метаданные

- **Канал:** Just Have a Think
- **YouTube:** https://www.youtube.com/watch?v=YtS0j4hXCAs
- **Источник:** https://ekstraktznaniy.ru/video/36980

## Транскрипт

### Segment 1 (00:00 - 05:00) []

In recent years the mantra of fiduciary duty, so enthusiastically blurted out by men in suits on Wall Street, has increasingly manifested itself as a mad, short-term scramble to publish quarterly earnings reports that demonstrate revenue and profit growth curves, with no real eye towards future implications or consequences. But in reality, fiduciary duty is far more wide ranging than that. It means exercising informed judgment and due diligence to protect corporate assets, comply with laws and regulations, and crucially – to make decisions that reasonably aim to promote the company’s LONG-TERM health and value. Now a group of highly experienced commercial lawyers called the Net Zero Lawyers Alliance has published an industry guidance paper spelling out in graphic detail exactly what needs to be done to protect a company’s ‘long-term health and value’, specifically against the risks of climate related damages and loss of income. And the fiduciary duties outlined in this document represent a whole new way of thinking for the world’s top executives. Hello and welcome to Just Have a Think. This latest paper builds on previous publications that we’ve featured on this channel in recent years. It aims to provide a step-by-step guide that business leaders can, and really should, now start to follow very carefully if they want to demonstrate to their shareholders and the wider public that they’re carrying out long-term climate-related due diligence to ensure the financial survival of the company they represent. And, just in case any of those company executives have been living under a stone for the last couple of decades, or perhaps more appropriately, up in an isolated ivory tower, this new paper goes to the trouble of outlining what those climate-related risks are. We get the now painfully familiar charts of global temperature increases, which last year averaged more than one-point-five degrees Celsius above pre-industrial times, and the paper also references the UN Emissions Gap Report that we looked at on this channel a couple of weeks ago. That report tells us that the world is on course for a ‘catastrophic’ temperature rise that would bring debilitating impacts to people, planet and economies. The famous Atlantic Meridional Overturning Circulation, or AMOC for example, and the less well-known Subpolar Gyre, which very significantly affect the climate in North-West Europe, now look closer to collapse than previously thought. According to a new Utrecht University study “The collapse time is estimated between 2037 and 2064 with a mean of 2050. ” Professor Stefan Rahmstorf, physical oceanographer at the Potsdam Institute for Climate Impact Research commented on that paper by saying “A single study provides limited evidence, but when multiple approaches have led to similar conclusions this must be taken very seriously, especially when we’re talking about a risk that we really want to rule out with 99. 9% certainty. Now we can’t even rule out crossing the tipping point in the next decade or two. ” If the subpolar gyre goes as well, then we can expect much colder and stormier conditions in Northern Europe, with even shorter growing seasons, more extreme heatwaves in Southern Europe, a sharp rise in sea levels on the US East Coast and more chaotic weather patterns across the North Atlantic. And those are just two of several irreversible tipping points that we humans are now hurtling towards on our current trajectory, as this graphic from the Global Tipping Points Report shows only too clearly. We’ve already breached the level for the mass die-off of coral reefs, destroying a crucial global ecosystem for countless species of marine life. There’s enough water locked up on the West Antarctica ice sheet to raise sea levels by five metres or more, and wipe out many of the coastal cities in the world’s largest economies, not to mention destroying the lives and livelihoods of hundreds of millions of other more vulnerable coastal communities who’s agricultural fields would be wrecked by invading salt water and whose homes would either be completely submerged or at least damaged beyond repair. We’ve certainly all heard about melting glaciers, haven’t we? Everywhere from the Alps to the Himalayas. That’s another crucial system that provides essential drinking and irrigation water for literally billions of people living in the countries below those mountains. Once that seasonal cycle disappears, it’s gone for good. And of course, as the glaciers give way, they tend to inflict potentially lethal flash floods on towns and villages in the foothills below. And last but not least, we face the die back of the Amazon rainforest. Potentially turning one of the world’s richest and most diverse ecosystems that sequesters billions of tonnes of carbon dioxide each year, into a dry, treeless Savannah. All of that should be completely unconscionable to anyone with a moral compass and an ounce of foresight. But the point being made by this latest paper is that it’s not just environmental activists and concerned citizens who should be reacting rapidly to these threats. Corporate Executive Boards and investment fund managers also need to wake up and smell the fire, because everything I’ve just described will have a material impact on just

### Segment 2 (05:00 - 10:00) [5:00]

about every commercial operation in the world. The paper’s authors characterise the current investment system as a “prisoner’s dilemma”. Here are two fund managers. They both have a fiduciary duty to their investors. They both may be fully aware of everything we’ve just discussed, but neither of them knows whether the OTHER one is as clued up as they are. Each of them worries is that if THEY switch to cleaner greener projects, the other will stick with polluting ones that might ostensibly provide better short term returns for their clients. So, neither of them makes the leap of faith to the new paradigm. They both keep pursuing short-term, often high carbon, returns and ignore what economists so euphemistically refer to as ‘externalities’ that collectively lock in systemic risk of stranded assets, and asset-value collapse. This chart from a twenty-twenty-four study by the investment arm of Norway’s Central Bank, which manages the assets in that country’s Sovereign Wealth Fund, compares the impacts on global gross domestic product or GDP, of the 2008 financial crash and the 2020 COVID pandemic to projected CLIMATE related losses as we head towards 2050 and on towards the end of the century. Five percent and eleven percent contractions were considered extremely problematic at the time, as I’m sure you remember. Those contractions caused years of crippling austerity and ongoing consequences that you could easily argue the world is still reeling from today. Well compare that to a twenty-seven percent reduction in global GDP by 2100 according to Norges Bank Investment Management and perhaps as much as fifty percent according to projections from the IFoA. So, the message is clear - unless fiduciaries INTERNALISE the collective dimension of climate risk and factor them properly into their financial risk assessments and due diligence, they WILL face wide-scale dysfunction and failure of portfolios and financial systems. According to analysis led by Professor Riccardo Rebonato of the Risk Climate Impact Institute the EDHEC business school in France, this level of GDP contraction will result in asset value losses of forty percent or more for commercial enterprises all over the world. And so, the authors of the paper pose the question: how must fiduciary duty evolve for investors and their intermediaries if they’re to have any chance of meeting the new climate reality and avoid being accused of dereliction of duty and rendering themselves liable for expensive legal action from shareholders, and perhaps even from governments in the future? The answer, according to these folks, is that the law doesn’t have to evolve, because the principles are already in place. Fiduciaries already HAVE to act in the best interest of their beneficiaries and to avoid the worst climate damages that those beneficiaries would otherwise suffer. The paper’s authors identify five core principles that every investment fiduciary and every executive boards should now be placing right at the heart of their financial and corporate planning and decision making: … Number one – first do no harm, which essentially means NO investments in new unabated high emission projects. Those projects not only perpetuate atmospheric warming, the paper explains, they also create climate-related, physical and system level risks that affect the value of ALL other assets held by the investors. The United Nations Environment Program puts it like this. “For a diversified investor, environmental costs are unavoidable as they come back into the portfolio as insurance premiums, taxes, inflated input prices and the physical cost associated with disasters. ” Number two – Integrate physical risk, stranded asset risk and litigation risk into Return on Investment Assessments. Pretty self-explanatory, I think you’ll agree, but for the avoidance of any doubt at all, the paper provides us with this S&P chart showing how catastrophically badly fossil fuel industry investments have performed against the S&P 500 index over the course of the last decade or so. It’s barely above breakeven, compared to a three-fold increase for the overall market. If that was the investment track record of your financial advisor, I suspect you would be none too pleased. Number three – Sustainable and responsible investing in transition This one is actually a positive. There are massive investment opportunities in renewable infrastructure, clean energy and innovation, much of which is far more future proofed than the crumbling fossil fuel industry, far more likely to generate better returns on clients’ money and, if this chart from the International Monetary Fund is anything to go by, have climate mitigation benefits that far outweigh the cost of their implementation. And I mean, no contest. A projected hit on global GDP of less than two percent by 2050 for the capital expenditure of new infrastructure projects, versus as much as eight percent or more GDP GROWTH as a direct result of having that infrastructure in place. All of which feeds nicely into point number four – ‘Active, effective stewardship to reduce financial and existential risks. ’ And point number five – ‘Policy advocacy

### Segment 3 (10:00 - 12:00) [10:00]

to lower climate risks and create a level playing field. ’ In other words, investors can get involved in creating the right legal and regulatory framework for a successful transition instead of hiding behind the existing framework. The paper’s authors mention things like emission limits, cap-and-trade systems, carbon and nature pricing, coordinated public-private policies and roadmaps to decarbonise all sectors, and the scaling and de-risking of finance for infrastructure and power supply in EMERGING economies. It's an awful lot to take on board in just one short video, and I’ve only given you a very brief outline of the paper’s contents. Thankfully it is an open access document that you can download and read more thoroughly at your leisure, and I’ve left a link to it in the description section below. The bottom line though, according to the paper’s authors, is that there is now really no good reason for any guardian of fiduciary duty NOT to take the actions outlined in the report. There are of course loads of arguments from those who oppose such measures, especially the people who run the fossil fuel industry. But they all amount to the same old distraction and delay by means of fear, uncertainty and doubt that the PR machines of industries like tobacco, big pharma, industrial agriculture and fossil fuel have been touting for decades. And all of them are quite effectively dismantled in the final section of the report. If investors listen to the FUD and sit on their hands, then instead of a dwindling of fossil fuel production through to mid-century, in line with a net zero pathway, we will get new exploration and new fields that will make this chart look like this. And that is not a world that any of us will enjoy. As always, let me know your thoughts in the description section below, but that’s it for this week. Don’t forget to like and subscribe if you found this video useful. It’s dead easy to do by clicking down here somewhere and it doesn’t cost you a penny. But it DOES make all the difference to my ability to operate effectively here on YouTube, so if you feel you can support me in that way then you would really make my day. You can also directly support me by joining the total legends over at Patreon dot com forward slash just have a think who keep everything going AND help me keep ads and sponsorship messages out of your way. And an extra special thank you goes the folks whose names are scrolling up the screen beside me here, all of whom celebrate an anniversary of Patreon support in December. Most important of all though, thanks very much for watching! Have a great week, and remember to just have a think. See you next week.