Both institutional investors and the companies they take stakes in must innovate to take meaningful action on climate change, says Hugh O’Reilly, president and chief executive officer of the OPSEU Pension Trust.
“We have to accept that as an investor community, we haven’t done nearly enough,” says O’Reilly. “In light of that, from a certain perspective, there are some small, foundational steps that we should take in order to start building the momentum and confidence to lead this in the right direction.”
Investors need to be able to price climate risk, says O’Reilly. For that, they need more and better disclosures from companies. “The one thing government can for sure deliver to us is the production of a regulatory safe space,” he says.
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“Right now it’s difficult for issuers and others to disclose on the basis of climate scenarios because I would imagine they have a fear that they could be held legally liable if they’re wrong. So my view is, we should create what I’m calling a regulatory safe space and within that safe space there should be an agreed upon scenario that issuers report in accordance with. And provided they do that, they ought not to be held legally liable if they end up being wrong.”
He says that agreeing on a likely climate change scenario that can function as a working model for companies to plan for is what the business world needs to see meaningful climate action. “It doesn’t matter what your political stripe is, we don’t. We’re long-term investors, we need to be able to price this risk,” he says.
As well, investors will be required to rate companies on their ability to adapt to the climate changed world, he says. “We want to understand what the companies that we’re investing in are doing in terms of adaption, once they identify these risks. What are they doing to adjust those risks? We also think that this is a way to create a bigger political consensus around these issues. If people are working in helping adaption efforts, whether that’s making public buildings more energy efficient, commercial buildings more energy efficient, using innovation to do that, that creates jobs.”
O’Reilly laid out these idea, as well as other steps the OPTrust is taking, in a presentation at a Climate Week NYC seminar on Tuesday.