Investors need to band together to engage with sovereigns on climate change in a more structured way, according to Adam Matthews, the director of ethics and engagement at Church of England Pensions Board.

“I think we need an equivalent of Climate Action 100+ working on climate change with sovereigns,” he said during a webinar organised by the Principles for Responsible Investment, which recently published a report on ESG engagement by sovereign bondholders.

“I think there’s an enormous space to bring a collective voice and perspective that we expect action from governments,” Matthews said on a panel discussion.

“They’ve outlined their global commitment through the Paris Agreement, society as such has said it wants to ensure we do not have temperature increases beyond 2°C and wants to aim for 1.5°C, and we need policies and regulations to align with that.”

Engaging with sovereign issuers was not lobbying, but part of a pension fund’s fiduciary duty, he argued.

He suggested the engagement should focus on aspects like countries following through on commitments to end fossil fuel subsidies and state-owned enterprises’ alignment with the Paris Agreement.

Engaging with sovereign issuers on climate change required investors to have the underlying data tools, Matthews added, revealing that the Transition Pathway Initiative (TPI) would by the end of the second quarter of 2021 provide sovereign bond assessments.

“We think that will enable the wider investor community to be much better equipped in their engagement in a more collaborative way with sovereigns on the issue of climate change,” he said.

An asset owner-led initiative launched in 2017, the TPI currently assesses companies’ preparedness for the transition to a low carbon economy. It currently does this for listed equities, but is expanding to other asset classes. The data are published via an open-access online tool.

Matthews is chair of TPI following Faith Ward of Brunel Pension Partnership relinquishing her co-chair role in connection with her appointment as chair of the Institutional Investors Group on Climate Change. Ward will remain on the TPI steering committee.

The PRI webinar was held last week.

Looking for IPE’s latest magazine? Read the digital edition here.

Topics