PLSA ESG 22: Important to create ‘balance’ on road to net zero

In order to reach net zero effectively, a balance must be struck between concern for planetary wellbeing and asset investment, Phoenix Group head of climate investment risk, Hetal Patel, has commented at the PLSA ESG Conference 2022.

Whilst attending the panel on transitioning existing savers to an ESG default, Patel emphasised the importance of striking a balance on the way to achieving net-zero, stating: “The reality is we just don’t think the assets to enable a balanced net-xero strategy are available at this point in time.”

Patel went onto explain the difficulties in pressing forward without this balance and the actions needed to achieve it sooner: “At this point in time, assets that are considered green or net-zero aligned are only a very small slice on the spectrum of assets. In order for that to change we need to see system-wide change.

“We need to see policymakers make policies that discourage carbonisation, we need to change consumer behaviour to demand much more of companies.

“When we see all that change then the investible opportunity in net-zero aligned assets broadens, only then does it become feasible to have a genuinely balanced net-zero strategy.

“Having net zero today, in theory, is possible, but it wouldn’t result in a balanced investment strategy and that’s where we could diverge from our industry interests.”

At the same panel, Standard Life head of unit linked investment solutions, Gareth Trainor, shared some of the challenges to achieving an ESG default today.

“I think the biggest challenge has been not getting away,” he stated.

“I’ve got a lot of stakeholders who are extremely passionate about certain topics and actually it’s making sure that we keep our feet on the ground and balance this moral vs financial aspect.

“We’re here to provide a return for customers and we’ve just for to keep that in the forefront of everybody’s mind.”

This was not the only challenge, according to Trainor. He also pointed to the prioritisation of opportunity cost (deciding what to spend time on), operational complexity (the moving of assets and of customers), the driving down of costs and convincing customers of the longevity of the transition to ESG.

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