think ahead think ahead: Universal ownership: Navigating climate change
In this second episode of a two-part special edition of the think ahead podcast series focusing on sustainability, Alex Edmans, Professor of Finance at London Business School talks with Tom Gosling, Executive Fellow of Finance at London Business School about universal ownership and its role in tackling climate change.
Universal ownership is the concept that institutional investors hold such large, diversified portfolios that they represent a slice of the entire market or economy making them hold a stake in global economic health. As a result, they have an interest in reducing systemic risks to the economy, including climate change.
Through the lens of Tom’s expertise in responsible business, he examines the notion that universal owners can significantly impact climate change through financial self-interest. Universal owners face the daunting task of balancing environmental and social goals with their remit to maximize returns. If climate change is bad for the economy, it will be bad for the investor’s portfolio, but climate and portfolio goals will not always be aligned.
Tom highlights the difficulty of universal owners imposing losses on one company to benefit others, the limited impact of investor tools like divestment and engagement as well as government policy.
Listen to hear how the scales can be balanced for investment to be a force for good in tackling climate change.
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