Responsible Investing in the Anthropocene



Simon Dalby, School of International Policy and Governance


14 February, 2017

As a result of activities by the industrialized part of humanity the biosphere is changing in ways that have no parallels in the planet’s recent past. Economic activity is now dwarfing natural processes in shaping planetary change. Hence the increasingly popular use of the geological term ‘Anthropocene’ to clearly designate these new planetary circumstances.
These contemporary environmental changes, driven in part by greenhouse gas accumulations and resultant global heating, are accelerating. The current global trajectory is towards rapid, increasingly disruptive change. Unpredictable severe weather events are the most obvious manifestations of large-scale alterations to how the planetary system works; climate change is upon us.
This is having increasingly ominous impacts on numerous economic activities and their infrastructures, many of which have been designed on now outdated assumptions that stable and predictable environmental conditions will stretch indefinitely into the future. This condition of rapid global environmental change is the new large-scale context for contemporary financial decision-making.
The global community has been slow to respond to the climate crisis until recently. However over the last few years initiatives have been taken that respond to the current crisis by phasing out carbon based fuels and developing modes of economy that don’t cause further emissions of greenhouse gases. The 2015 Paris Agreement has begun the process of institutionalizing these innovations, even if Canadian decision makers have been especially slow to recognize this shift.
As a result responsible financial decision makers must now consider both the direct implications of environmental change on their investments as well as the consequences of likely government, corporate and potential legal action to deal with this novel situation.
In these circumstances responsible investing is about putting money into corporations and portfolios that have carefully worked out climate adaptation strategies. This requires both moving funds into the new economy, with a focus on innovation in non-carbon energy sources, and avoiding legacy economy fossil fuel companies and such things as vulnerable oceanfront real estate.
Fossil fuel corporations are at financial risk if their assets are, either, as increasingly is the case in the Canadian north, vulnerable to fires and other disruptions, or subject to future regulations curtailing carbon extraction. Care must also be taken to avoid corporations whose failure to disclose climate risks makes them vulnerable to lawsuits. These may come from shareholders who have been misinformed about the knowledge base used to make corporate decisions (as might yet turn out to be the case with Exxon), but also from those suing for compensation for damage related to severe weather events and rising seas.
Many media outlets in North America are still discounting climate change as a factor to be taken seriously in financial matters. Responsible investing requires decision makers to see through the ideologically driven dismissal of climate science so that appropriate trends are considered when thinking ahead. Minimizing either the speed or severity of climate change is to gravely mistake what is happening to the planet’s key systems within which the economy operates.
Given how rapidly climate is changing it is now irresponsible to invest in companies that are making climate change matters worse. Accelerating appropriate regulatory action to speed up climate change action can be helped by the obvious politics of divestment. This acts mainly to ‘shame’ fossil fuel companies by making their activities increasingly socially unacceptable, and hence more likely to be dealt with by regulation and political innovation to accelerate the transition to the post-carbon fueled world that the Paris Agreement promises in coming decades.
Thus responsible investment in these circumstances requires doing four key things:

  • investing in companies that are insulated from short term disruptions;
  • avoiding corporations, and in particular fossil fuel ones, with potentially stranded assets when regulatory changes are instigated in future;
  • avoiding potential future liabilities for climate change related damage;
  • supporting companies and financial instruments that move innovation in non-carbon fueled activities forward quickly.

In the case of Wilfrid Laurier University these key investment activities are entirely consistent with our stated institutional values and specifically our vision of ‘justice and sustainability now and in the future’. Responsible investing to ensure the long term financial health of our university in a rapidly changing world is a case of, as the old saying has it, ‘putting our money where our mouth is’.
In the process we at Laurier have an opportunity to be part of the solution to climate change while simultaneously ‘inspiring minds’ to think constructively about the future rather than facing changing circumstances with fear and anxiety.