PLSA ESG 22: Investment in emerging markets ‘important’ in supporting green transition

Investment in emerging economies is “one of the most important things” that can be done to support the green transition, according to Transition Pathway Initiative chair and Church of England Pensions Board chief responsible investment officer, Adam Matthews.

Addressing the PLSA ESG Conference 2022, Matthews cited South Africa as an area where this kind of investment was important, as many of its industries, such as mining, attempt to transition to environmentally sustainable models but require assistance to do so.

He stated that these industries in emerging markets need “the confidence to deliver on [their] targets and commitments because they know the money’s there to support the transition”.

Matthews also described the challenges in carrying out these investments effectively, stating that the transition will mean owning some difficult assets whilst the alternative renewable assets are built up and making sure there are translated in a just manner.

Matthews also emphasised the need for co-operation when facing this issue stating: “We know we can’t do it ourselves.”

Nest CIO, Mark Fawcett, echoed this sentiment by insisting that: “We need to keep investing in developed economies for renewable energy, but we need to help emerging markets transition.”

Fawcett also emphasised that, whilst the current climate problem is almost entirely due to developed economies and they should bear the brunt of the blame for the issue, investment in emerging economies was a way to solve it.

Alongside this, Fawcett outlined his predictions for how Russia’s ongoing invasion of Ukraine will affect the move towards the use of renewable energy.

Fawcett stated that, as gas and oil from Russia become less available due to political reasons, there will likely be a move towards other types of energy such as renewable energy.

He noted that the conflict had the capacity to accelerate the move to renewables and investment in renewables, adding that cases had been observed of valuations of renewables being pushed up in the case of offshore wind.

However, Fawcett warned: “The concern we have is the shift may be back more towards coal and dirty fuel.

“We’ve already seen that in Germany to some extent when they shut down their nuclear programme as a result of Fukushima, that struck me as a retrograde step in terms of carbon emissions and the risk is people will start burning more coal because they can’t get their hands on oil or gas.”

Scottish Widows head of pensions investments and responsible investments, Maria Nazarova-Doyle, echoed this sentiment as she added: “To me when I saw what was happening, I thought surely the answer to our energy independence problem, cheaper energy and quicker transition to energy renewables, but it seems to be that a lot of people are saying ‘well the answer is more fracking’ or ‘more gas or more oil’, which seems to me completely nonsensical.

“I’m actually a little bit scared that that line might stick.”

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