Post Millennial Climate Warriors on-board: “Because we are the ones who are going to live with this crisis in the future…” – Greta Thunberg

There could not be a more powerful background messaging than this to last week’s panel discussion on Megatrends, at the AsianInvestor annual flagship event in Hong Kong. All investors must recognize what’s staring them in their face and can only ignore at their own peril. Two in particular dominated – Climate Change and the rise of the Millennial. Truly speaking it’s the post millennial! There were not surprisingly some streaks of cynicism – but I believe my panel left behind the key message, for the investment community, rather loud and clear. A serious sense of urgency is what one needs to work upon. Interestingly, David Sheppard in Financial Times (May 23^rd), echoes this, supported by some incredible facts and figures on the biggest villain of all – the fossil fuel industry. Here are some key excerpts:

1. Both Royal Dutch Shell and BP accept the need to overhaul their businesses in a manner that would have been unthinkable even five years ago, as the clamour from investors and activists has become too loud to ignore.
2. Shell has said it will take responsibility, over time, for reducing the net carbon footprint of the fuels it produces, essentially putting itself on the hook for the emissions produced when the company’s customers burn oil and gas in their cars and homes.
3. BP has not, arguing that while it can provide greater transparency on how its business is aligned with the Paris climate agreement, taking responsibility for the fuels its customers use would limit the flexibility the company needs.
4. The companies have got to this point in the first place largely due to the rise of ethical investing or a focus on companies’ environmental, social and corporate governance (ESG) policies.
5. Using the broadest definition of ESG funds, such as those that use exclusionary screens for only certain industries, the total of ESG funds in Europe and the US could amount to $ 23tn, according to BlackRock.
6. It means the activists that companies like BP and Shell confront are no longer angry single-share owning protesters who have come to vent their spleen at AGMs – but well-organised and motivated investment managers.
7. Groups like Climate Action 100+ and Follow This have signed up hundreds of institutional investors to back their engagement initiatives. Not all are ESG funds.
8. The world’s largest funds are also conscious that the next generation of investors has grown up with warnings about climate change. The top end of the “millennial” generation are approaching their 40s. Across the western world, they and their older “Generation X” siblings stand to inherit upwards of $30tn in the coming years.
9. Combined with a political climate in Europe that is moving towards adopting stricter targets for carbon reduction – the UK is widely expected to back recommendations for reducing net emissions to zero by 2050 – the energy giants have had to respond.

Diversifying Diversity

That despite the ongoing Brexit drama – the UK chose to declare a Climate Crisis – reflects the growing clout of not just the Millennial but the Teen, as well. And the lawmakers are giving into the passionate appeals of Greta Thunberg & Co. It will not just stop with new businesses like Beyond Meat (BYND). Last year in a blog post for the Chartered Insurance Institute (CII), I alluded to the diminishing influence of the State and rising clout of corporate institutions and individuals. Needless to mention influencers like the Pope (who recently spoke to the leading fossil fuel companies) and Church of England (which is revisiting investments of its pension funds in such entities). I must confess that I did miss arrival-of-the-Teen-Millennial signal in the rest of the noise. I would be really naïve to miss imminent Board positions for the likes of Greta and other teens who aren’t even millennials. Custodians of the Planet Earth. Yet another Megatrend for sure!