ET Index: November 2015 Happy Hour with Sam Gill, Current CEO at ET Index on how to use the investment system to tackle climate change

14 Dec ET Index: November 2015 Happy Hour with Sam Gill, Current CEO at ET Index on how to use the investment system to tackle climate change

Finance Matters was pleased to welcome Sam Gill, Current CEO at ET Index to our November Happy Hour at Cognolink offices, located in The Steward Building in Shoreditch. The discussion was a very interactive session, centered on how to use the investment system to tackle climate change. The Happy Hour was organised ahead of COP21 in Paris, the 2015 United National Climate Change Conference, and following Sam‘s Road to Paris series published on Finance Matters.

The first half of the discussion was an active discussion on the Environmental Tracking mechanism as a practical means to utilise the vast amount of capital flowing through the financial system to tackle climate change. Following this, the second half involved an interactive brainstorming session with all attendees on how to can scale this initiative faster, taking the role of different actors within society, from a voter to a fund manager.

As a way of background, Sam Gill is an environmental entrepreneur whose vision is to change the way money is invested in companies. Since 2010 he has led the Environmental Investment Organisation, a not-for-profit research body to become the first and only organisation in the world to produce an annual series of public Carbon Rankings, scoring the world’s largest listed companies by their greenhouse gas emissions and disclosure. These Environmental Tracking Carbon Rankings pave the way for a series of stock market indexes, based on the rankings, which redirect capital away from the most polluting companies towards the cleanest, most efficient. In 2014 with support from the European Commission’s Climate KIC accelerator programme, he founded ET Index Ltd which to commercialise and develop the Environmental Tracking Index Series. Sam is author of Environmental Tracking 3.0, serves on the Board of a human rights NGO, and mentors several start ups.
Sam started the discussion by explaining the potential behind the Environmental Tracking mechanism as a practical means to utilise the amount of capital flowing through the financial system to tackle climate change. He underlined the difference between carbon risk and climate risk, of which the latter has developed into more of a moral obligation to tackle. Carbon risk is directly related to the potential loss incurred by the financial community on investments made in energy companies. Investment portfolios, he explained, are exposed to the risk of “stranded assets”, in which certain assets owned by energy companies will become unusable, which in turn could have serious repercussions to investors.
The simplest way to tackle climate change would be to implement a carbon tax, that would increase pressure on carbon on a global scale. However, this concept is very difficult to implement given the scale of having over 200 countries involved with different interests. Based on the current carbon budget, Sam explained that we are bound to surpass the threshold in 15-25 years, but the financial system can take an active role in creating incentives companies for more impact. The potential impact of investors internalising an environmental tracking index in its risk assessment is strong, as an enormous amount of capital is invested according to indexes. Utilizing such indexes could prove to be a very strong tool to change corporate behaviour.
To conclude, Sam explained that the advantage of publicly ranking and linking companies’ to an index is engaging with companies in a way that can ultimately influence their decision-making criteria based on investors’ perception and demand. The paradox of the concept is that it only works at scale, thus there is a need for the investor community to mobilise and further understand the strong potential behind utilising an environmental tracking mechanism.
Road to Paris Blog Series – Summary 
Part 1: Carbon Context – Why momentum is building whatever comes out of Paris COP21
Part 2: Climate Risk
Part 3: Carbon Risk
Part 4: Are we reducing risk at the individual level or the collective aggregate level?
Part 5: Including the full scope of a company’s carbon emissions
Part 6: Cutting through the carbon: knowing your carbon reserves from your carbon emissions
Part 7: Divestment versus Engagement – the battle of two ideologies
Part 8: Environmental Tracking as a practical solution to the climate crisis