Author: Hassan Nadeem

Interview: Brian Deese – Global Head of Sustainable Investing at BlackRock

Brian Deese is currently the Global Head of Sustainable Investing at BlackRock, the world’s largest asset manager. Prior to his work at BlackRock, he served as a Senior Advisor to US President Barack Obama. In this role, he had the responsibility for executing the Obama Administration’s energy, climate, and conservation strategies, and advising the President on a range of domestic and international issues. Mr. Deese also played a central role in negotiating the 2015 Paris Climate Agreement and directing the United States’ engagement with China, India, and other major economies on climate issues. Furthermore, he oversaw the Administration’s domestic energy and climate policies including investments in clean energy, and land and water conservation.

However, as the Global Head of Sustainable Investing at BlackRock, Mr. Deese leads the Sustainable Investing team is focused on identifying drivers of long-term return associated with environmental, social and governance issues, integrating them throughout Blackrock’s investment processes, and creating solutions for clients to achieve sustainable investment return.

This blogpost discusses his recent interview with Linsey Grant– a well-known podcast host and editor at the Business Casual Podcast. Deese explains why investing with the climate in mind leads to stronger returns. He also illustrates the importance of big data and the role of federal government in enabling the private sector to prioritizing sustainability.

According to Brian Deese, ESG Investing is not something that is entirely new. It has roots in the value driven divestment movement that saw investors pull investments from entire sectors – such as tobacco, ammunition, and increasingly fossil fuels. This trend has led to what is termed as socially responsible investing, which functions as an exclusionary screen to invest capital in sectors that are value and impact driven – such as sustainable packaging and renewable energy. However, in recent years, the data around environmental , social and governance factors has improved a lot- in both quality and volume and that has resulted in investors being able to apply materiality principles ( which ESG metrics are relevant to a certain business and which are not). This is evident from the fact that since 2012, the portion of S&P 500 companies that report sustainability information has grown from 20% to 90%.

Today, ESG Investing is primarily driven by risk mitigation. According to Deese, if a firm does not consider ESG factors in its performance, it exposes the business to operational risks. These can range from high natural resource intensity (water, raw materials etc.) to threat of litigation over environmental disasters such as chemical spills. Such operational risks manifest themselves in the form of poorer returns for investors over the longer run. In other words, firms that perform better on ESG metrics also outperform on financial returns, are more resilient to climate change, and thus are more attractive to investors such as BlackRock.

The question remains as to how the world’s largest asset manager is relevant to UNFCCC and the Conference of Parties. The Private Sector Initiative under the Nairobi Work Programme (NWP PSI) is designed to help businesses manage risks and adapt to climate change. The PSI also presents organizations with the opportunity to develop knowledge on climate change adaptation, build adaptive capacity and be part of a growing network of organizations taking measures to adapt to the impacts of climate change. Having an investor such as BlackRock on board will unlock value for the PSI as this provides a platform for exchange of ideas where BlackRock can leverage and share vital information regarding measures to encourage sustainable business operations in climate critical sectors around the world such as energy, cement, and automobile transportation.

Such a measure will enable both developing and developed countries to formulate and execute policies to meet their nationally determined contributions and help ensure that global warming is limited to within a 2 degree Celsius over pre-industrial levels. People such as Brian Deese, who have worked at the highest levels of both the government and private sector, are well-placed to make this happen.

Decarbonizing the Maritime Industry: Sailing Towards a Sustainable Future

One of the Climate Week NYC events I attended was the webinar on Decarbonizing the Maritime Industry: Sailing Towards a Sustainable Future. This webinar was sponsored and organized by Bloom Energy, and included panelists from Foreship ltd, Environment Defense Fund, World Shipping Council, and Port of Long Beach, California. All the panelists are experts in various facets of the maritime industry and are closely involved in enabling greater energy efficiency and developing low-carbon fuels for maritime applications.

 

Importance of Scientific Evidence in Informing Collective Climate Action

 

In April 2018, the Marine Environment Protection Committee of the International Maritime Organization adopted its first strategy for reducing emissions from shipping vessels. The 173-member country members have committed to reducing emissions by 50% from 2008 levels by 2050. While a commendable target, this commitment is not aligned with the scientific evidence present to limit global temperature rise to within 2 degree Celsius. For that to happen, the emission reductions from global maritime needs to be reduced by 70% (for 2°C) or 100% (for 1.5°C). However, as pointed out in the webinar, this agreement is intended to be a starting point for emission reduction targets, and guiding principles for the shipping industry to become part of the transition to low-carbon future. To that end, the review mechanism has been enshrined in the strategy to step up the level of ambition in 2023. During the review, the strategy will be reviewed considering the new science and available solutions, and one can hope that the Maritime Industry can adopt the Science Based Targets.

 

Stakeholder Perspectives

 

World Shipping Council (WSC) – The maritime shipping represents greater than 70% of annual global trade. While emissions from shipping represent only 2.5% of the global emissions, these emissions are projected to grow by up to 250% by 2050 in absence of emissions reduction measures. WSC represents maritime corporations in in terms of regulatory policy on a broader level, including environmental policy. The WSC representative is a former lead negotiator on a series of international shipping environmental treaties. This reflects the depth of understanding and commitment to environmental reduction by key shipping partners.

The top environmental priority for WSC is to enable maritime fleet to move to a new set of non-fossil fuel technology and     enable the transition to zero carbon emissions. For the WSC, it is no longer a debate of whether to make the transition or not, but how to accelerate the transition across the sector.

Environment Defense Fund (EDF) – As a stakeholder, the EDF Shipping Team is focused on establishing the legal basis for International Maritime Organization’s climate measures, in addition to exploring holistic solutions to addressing air pollution and emissions reduction.

The Port of Long Beach, CA – has ambitious climate action plans. It aspires to achieve zero emissions from cargo handling equipment by 2030, port trucks by 2035, and reduce total GHG emissions by 80% by 2050 compared to 1990 levels. The state of California and the port authorities are taking necessary measures to ensure these targets are met

 

Bloom Energy- As a commercial enterprise, Bloom Energy aspires to bring fuel cells that run on hydrogen, natural gas, or biogas to ships’ power plants. Using a flexible energy resource platform, Bloom aspires to help shipping industry unlock major efficiency, cost gains and reduction in maintenance downtimes.

 

Negotiation Tactics and Legislative Roadmap

 

Over the past few years, the World Shipping Council (WSC) has played an instrumental role in pushing its members in adopting energy efficiency measures. Maritime vessels that are now replacing current fleet are 30-50% more efficient. Furthermore, the WSC recommends fleets to reduce their nautical speeds by 20% to operate at optimum efficiency. However, all stakeholders acknowledge that energy efficiency gains will have limited impact due to ever-growing global trade. Hence the WSC is working with the International Maritime Organization (IMO) to identify a cost-effective technical pathway. To that end, the has WSC proposes to establish an IMO Research and Development Board that funds and supports applied research and demonstration on clean power generation technology. The goal is to determine what set of technologies would be the most feasible to be adopted across a wide variety of shipping vessels

Furthermore, in partnership with other stakeholders, the IMO is working towards adopting regulatory and market-based incentives. These include a proposal for industry-wide carbon market, and regulated transition to cleaner fuels.

 

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