Dr. Tom Gosling, London Business School, on Whether Investors Can Save the Planet
Mar 7, 2024
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Dr. Tom Gosling from London Business School discusses investors' role in climate outcomes, emphasizing rethinking net zero commitments and universal ownership theory. They explore challenges in aligning investments with a 1.5-degree target, balancing financial responsibilities with environmental goals, and the importance of strategic engagement for impactful actions.
Investors can shape climate outcomes through engagement and policy alignment, impacting the environment that drives results.
Net zero commitments require reassessment regarding feasibility, financial implications, and fiduciary duty alignment with the 1.5 degrees Celsius target.
Universal ownership theory presents challenges as diversified investors balance profit priorities at the portfolio level vs. sustainable company-level actions.
Deep dives
Investors Influencing Climate Outcomes
Investors may lack direct control over climate outcomes but can influence the environment that shapes climate results, such as through investment strategies focused on engagement, lobbying for policy alignment, and developing impactful products.
Reassessing Net Zero Commitments
Dr. Tom Gosling discusses how investors may need to reassess their net zero commitments concerning fiduciary duty, questioning the feasibility and financial implications of aligning investments with the 1.5 degrees Celsius target.
Challenges of Universal Ownership Theory
The tension between portfolio and firm-level fiduciary duties under the universal ownership theory poses challenges, as diversified investors prioritize profits at the portfolio level, potentially conflicting with sustainable company-level actions.
Realistic Climate Impact Assessment
The consideration of long-term climate impacts on portfolio returns may be underestimated by financial markets, as fears of catastrophic climate tipping points need to be balanced with the gradual economic implications in investment strategies.
Role of Investors in Addressing Climate Change
Investors can play a vital role in addressing climate change by engaging companies, influencing policy through lobbying, and developing impactful investment products, highlighting the importance of aligning investment strategies with fiduciary duties and realistic climate goals.
To what degree can investors control climate outcomes? Listen to Jason Mitchell discuss with Dr. Tom Gosling, London Business School, why investors may need to rethink their net zero commitments; what universal ownership theory represents in the context of climate change; and how engagement at different levels plays a fundamental role in terms of investor influence.
Dr. Tom Gosling is an Executive Fellow in the Department of Finance at the London Business School and an Executive Fellow at the European Corporate Governance Institute where he contributes to the evidence-based practice of responsible business by connecting academic research, public policy, and corporate action. His projects at LBS have included a collaboration with PwC on whether and how executive pay should be linked to ESG targets and a collaboration with The Investor Forum on What does stakeholder capitalism mean for investors? Tom is also on the ESG Advisory Committee at the Financial Conduct Authority and on the Advisory Panel of the Financial Reporting Council.
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