Robeco was among firms with $US7 trillion in combined assets that engaged Brazil’s government last year in a bid to reduce deforestation of the Amazon rainforest. The investor group is also targeting Indonesia over forestry.
“Sustainability was something you could sort of test and make a score card, but there was very little room to change that,” Mr van der Werf said. Robeco’s bond managers are “very eager to get these conversations going”, he said.
Price to pay
Australia will be next on Robeco’s list to accelerate a so-called just transition as the firm seeks to decarbonise its stock and bond portfolios. The €176 billion ($278 billion) manager owned by Orix Corporation of Japan has already shunned Australian debt in its Paris-aligned bond fund, but still owns the debt in other funds. Australia is among the world’s largest per capita carbon emitters.
Debt investors globally are grappling with assessing the long-term effects of rising world temperatures and how much economic growth must be sacrificed for countries to adapt. They’re also balancing client demands for cleaner, greener portfolios with a fiduciary duty to make money.
Australia may pay a price if it fails to take stronger action to curb greenhouse gas emissions. The nation may join others in default on its bonds by mid-century if strong policies are not introduced by decade’s end. That could lead to sudden or disruptive changes to its economy, according to research by FTSE Russell. About one-third of the economy and almost a quarter of the workforce are exposed to disruption if key trading nations source cleaner materials elsewhere as momentum to cut global carbon emissions accelerates, according to Deloitte Access Economics.
Australia is unlikely to be receptive to Robeco. Prime Minister Scott Morrison, who famously brandished a lump of coal in Parliament, has steadfastly refused to commit to a deadline for net-zero emissions in support of politically sensitive industries such as coal and gas. The nation instead is hoping technology such as carbon capture and storage will help it meet its Paris Agreement obligations.
A spokesperson for Angus Taylor, Minister for Energy and Emissions Reduction, said Australia’s track record is better than many advanced economies, noting between 2005 and 2019 emissions fell faster than in Canada, New Zealand, Japan or the US.
“Action and outcomes are what matter, and our track record is one that will see Australia meet and beat our emissions reduction commitments while continuing to grow our economy and jobs,” the spokesperson said.
Robeco is looking for Australian institutional investors to help formulate the engagement plan to be put into action this year, Mr van der Werf said. They’re “closer to the fire” with a “sharper view” of the opportunities to facilitate a transition, he said.
“You need to have a coalition of investors” to pressure all stakeholders that influence government policy, he said. “You can’t go at this alone.”