Lord Browne: world ‘trillions of dollars’ short for renewable investment

Lord Browne of Madingley, former chief executive of BP and current chairman of equity investors Beyond Net Zero, has bemoaned the current state of renewables investing worldwide.

“I have in mind only one key performance indicator in this area, and that is the amount of investments made towards getting down to net zero. At the last count this is roughly $1trn a year, approximately $3trn light to hit net zero, and therefore, inevitably, we are not going to make it.

“Lots of brave words, lots of very interesting speeches, lots of interesting targets, but almost no delivery [on net zero] yet”, said Browne.

Browne made the comments at a conference hosted by financial communications firm Edelman Smithfield, on a panel discussing whether the global regulatory and financial sectors were doing enough to meet net-zero targets.

Also speaking at the panel was Jeremy Taylor, UK CEO of Lazard Asset Management, Sarah Williamson, CEO of FCLT Global, and Stephanie Maier, global head of sustainable investment at GAM Investments.

Science-based targets

Beyond Net Zero has asserted that any of its investments must be following science-based targets to be reducing greenhouse gas emissions. This raised the question of whether environmental data was currently of good enough quality to define “science based”, including on methane, which by Browne’s own claim is currently being underreported by a factor of ten.

Maier said: “We know that ESG data is far from perfect, but we also know there's a lot of data there that we can use to make decisions to guide investment. The challenge is to keep improving that data quality, and also to be using the data appropriately that we have at the moment.”

During the panel discussion, Taylor pointed to a Lazard survey of analysts working for firms within the MSCI World Index, which showed that 7% of revenues would markedly improve with the move towards a more sustainable world.

“You can shift your opportunities to [this 7%], which we think will accelerate. Materiality, understanding companies, and understanding the need for incremental capital investments are absolutely key”, said Taylor.

Investor sentiment towards net zero was also recently displayed in a 2022 Global Investor Survey (GIS), which showed that 52% of investors are drawn to sustainable funds because of their environmental impact, yet only 38% find these funds attractive given their return expectations.

On the difficulties facing renewables investing in emerging markets, Williamson observed a “huge disconnect” between how large investors operate and the level of involvement necessary for such projects.

“If I wanted to invest in the Gulf of Mexico, I wouldn't go down there and look for the project, I would give the money to BP or Shell. What is missing is a way for the large investors to be able to move money into the global south in a way that is managed well and works”, said Williamson.

Also speaking at the conference on the topic of trends that will create winners and losers from 2023 was Luke Barrs, global head of client portfolio management for fundamental equity at Goldman Sachs Asset Management, who identified climate change as the top trend.

“From a bottom-up equity investment standpoint, there has to be focus on the macro ambition of trying to decarbonise the planet, and the existential threat of climate change,” said Barrs.

“There is a need to find a technological solution to this because I think very candidly, without it I don't know if it's possible to achieve that net-zero goal. So we're going to bet on innovation, we're going to bet on technology to lead us there in a productive fashion.”