Climate Action

Ian Simm on how investors must encourage more capital to be directed towards climate solutions

Ahead of the Sustainable Innovation Forum 2021, Climate Action caught up with Ian Simm, Founder and CEO at Impax Asset Management, to discuss how investors must encourage more capital to be directed towards climate solutions

  • 21 October 2021
  • Rachel Cooper

Ahead of the Sustainable Innovation Forum 2021, Climate Action caught up with Ian Simm, Founder and CEO at Impax Asset Management, to discuss how investors must encourage more capital to be directed towards climate solutions

What is the role of national governments to support the transition to net zero?

Governments must lead the way by agreeing more ambitious net-zero targets and setting out clear roadmaps to achieve them. The UK’s Net Zero Strategy, published in October, sets a good example for others to follow.

Much has been learnt over recent decades about how government policy can transform sectors of the real economy. The successful roll-out of renewable power generation in many markets owes much to long-term commitments, tapered subsidies and streamlined planning.

We're in the foothills of similar initiatives in the transport sector. The roll-out of electric vehicle (EV) charging infrastructure alongside new safety rules and standards is paving the way for the mass adoption of EVs in several countries. This process needs to accelerate, as does investment in alternative fuels for aviation and shipping.

The roadmap for decarbonising the heat sector remains particularly unclear. Replacing fossil fuel-based heating will likely require a combination of zero-carbon electricity and hydrogen derived from clean sources. Currently, solutions appear expensive and hard to scale. Governments therefore need to focus on innovation, appropriate trialling and demonstration, and, above all, international collaboration.

How can the investor community enable more capital to be directed towards climate solutions?

For too long, the risks and opportunities associated with climate change have been overlooked by investors, leading to the misallocation of capital. Addressing this effectively will be key to our future prosperity.

Integrating into decision-making both physical climate risks and the risks arising from the sustainable transition is a critical step towards a more resilient financial system. Practical tools including pricing models are on hand for investors, courtesy of the Coalition for Climate Resilient Investment, which Impax supports.

Given the complexity and uncertainty of climate-related impacts, we need better and more timely disclosure based on agreed standards using clear metrics. Central to progress here is adoption of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) by both investors and investee companies. Recently, Impax has contributed to development of a proposal by the Climate Financial Risk Forum for “climate disclosure dashboards.”

Ultimately, much of the money at stake is owned by pensioners and savers, many of whom seek reassurance that their capital is supporting a healthy planet. The finance sector must consequently evidence its "sustainability" claims and avoid "greenwashing". To this end, green taxonomies have a role to play to signal alignment.

Impax is partnering with the Sustainable Innovation Forum at COP26.  What is your role in driving innovation in climate solutions?

Impax is a specialist asset manager, investing in the opportunities arising from the transition to a more sustainable global economy. We manage assets for some of the world’s largest investors.

We believe that capital markets will be shaped profoundly by global sustainability challenges, not least climate change. These trends will drive growth for well-positioned companies and create risks for those unable or unwilling to adapt. Each of our investment strategies is designed to intentionally allocate clients’ capital towards those companies we expect to benefit as the global economy transitions to a more sustainable model.

The growth of Impax’s client base in recent years is tremendously exciting, primarily as an indicator of investors’ willingness to reallocate assets towards a lower carbon economy. By quantifying the environmental benefits linked to our clients’ investments in our portfolio companies, we can demonstrate the contribution Impax portfolios are making to emission avoidance.

COP26 is going to be a key moment to make progress towards delivering the Paris Goals. How can the summit speed up action against climate change and how is Impax contributing?

We must emerge from COP26 with a renewed sense of confidence about how to get national economies on track towards net-zero.

Crucially, ambitious commitments do not require the agreement of all countries, and I am encouraged by the recent emergence of “coalitions of the willing” among national governments around single-issue campaigns. Pledges have been made by key actors on issues like power, methane and nature-based solutions.

Negotiators can build on this momentum and overcome other obstacles to achieving the Paris goals. If governments, companies and financial institutions commit fully to what’s required to create a net-zero economy, I believe COP26 can be a pivotal moment in addressing climate change.

COP26 can also deliver progress by stimulating private-public sector dialogue that improves climate policies. As I have witnessed over two decades at the intersection of climate policy and finance, investors like Impax can play a part by pushing for clear and ambitious real economy policies that, ultimately, should mobilise climate finance.

Drawing on our long-term expertise in investing in the transition to a lower-carbon economy, Impax will be participating in the summit to further our engagement with policymakers, asset owners and the corporate sector.

Impax Asset Management are speaking at the Sustainable Innovation Forum 2021, to join them register here now.