Green Fix
Welcome to the Green Fix, the climate & sustainability podcast for Australian corporations and their ESG practitioners. We explore the top challenges and opportunities in the industry, how they are impacting your business and your work, so that you can keep your sanity.
Green Fix
Funding the Transition, with Duncan Paterson and Susheela Peres da Costa
Welcome to Episode 4 of the Positive Tipping Points Special! A 7-episode special series on the road to COP30 in Belem, with guest host Liz Courtney.
Markets don’t just reflect change—they can create it. We sit down with two leaders in responsible investment to unpack how stewardship, smarter regulation, and clear definitions are accelerating corporate decarbonisation and funding solutions at scale. From boardrooms to supply chains, they reveal where investor pressure truly lands, when escalation matters, and why Scope 3 conversations are reshaping strategy across sectors.
We dig into Australia’s new sustainability reporting regime and what comparability unlocks for capital markets. But good data is only a start; the real edge comes from analysis that weighs abatement costs, feasibility, and long-term risk. Our guests break down the crucial difference between risk, relative sustainability performance, and impact, and how sloppy language feeds greenwashing while precise terms protect ambition. Fiduciary duty isn’t a brake on climate action—it’s a mandate to manage systemic risk over decades, which turns pensions and sovereign capital into engines for transition.
Divestment gets a sober assessment: selling shares usually changes owners, not outcomes. The bigger lever is enabling clean solutions with new capital while engaging incumbents with clear milestones and consequences. We explore why renewables now outcompete fossil fuels in many markets, where technology can design out waste across value chains, and how circular thinking creates durable advantages. The stakes for laggards are rising—physical damage, stranded assets, reduced access to finance, reputational hits, and shrinking export pathways as trading partners tighten standards. Australia has a chance to lead by investing in IP, basic science, education, and advanced manufacturing, turning ideas into industry.
You’ll also hear personal journeys into climate finance, practical advice for students and career-changers, and two bold system fixes: cut mis/disinformation at the source and price externalities so value tracks harm and benefit. Ready to see how capital can push us past the next positive tipping point? Follow the show, share this episode with a friend who cares about climate and markets, and leave a review with the one lever you’d pull first.
Your Hosts:
Dan Leverington
Loreto Gutierrez
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Welcome to the Green Fix, a positive tipping points special series, with guest host Liz Courtney, an award-winning film director and science communicator. This seven episode weekly special is offering a fresh lens on the climate conversation. We'll explore the science of solutions, the many sparks of change already underway, and the moments when small shifts create a big impact. Expect good news stories, evidence of real progress, insights on the urgency of acceleration, and above all, a huge dose of optimism about the world we can build together. Enjoy the show.
Dan Leverignton:Welcome to the Green Fix, Lost Div Tipping Points. I'm Dan Leverington.
Liz Courtney:And I'm Liz Courtney. And in today's episode, we're going to dive into funding the transition. And we're joined by Duncan Patterson and so Sheila Perez De Costa. Duncan, would you like to do an acknowledgement to country before we start?
Duncan Paterson:Thanks, Liz. I'm delighted to do that. We're really pleased to acknowledge that we're coming to today from the lands of the Gatigal people of the ORA Nation. And we acknowledge elders past, present, and emerging.
Liz Courtney:Duncan is a leader in the responsible investment area with over 25 years experience. He's currently the Director of Investment Practice and the Investor Group on Climate Change. Duncan has played key roles in developing industry frameworks and policy through groups such as the Australian Sustainable Finance Initiatives. He's held executive and board roles focused on advancing climate alignment and sustainable investment, including as founder and CEO of the ESG advisory firm CAER and global head of ESG Thought Leadership Groups. So welcome, Duncan. I'm going to pass on to Dan.
Dan Leverignton:Thanks, Liz. And so Sheila has played a pivotal role in developing global standards in active ownership and responsible investment, contributing to initiatives such as Active Ownership 2.0 for the UN Principles for Responsible Investment and Industry Definitions for the Global Sustainable Investment Alliance. She's currently serving as the principal at the Stewart's Center and Senior Consultant of Sustainable Markets to the Commonwealth Superannuation Corporation. Throughout her career, Sashila has advised some of the world's most influential institutional investors, banks, and asset managers on responsible investment strategy, governance, and stewardship. Thank you both for joining us today.
Liz Courtney:So we're going to dive in. We've got questions for both of you, some to share together. But firstly, we're going to have a look at the power of the investment engagement and stewardship. And I'm going to actually start Shishella with you just to ask you how do you see the active practice of stewardship as a positive tipping point for company strategy?
Susheela Peres da Costa:That's a great question. And it's one that I asked myself a lot when I began this work of stewardship about 2006-ish. That was a time when some of Australia's largest listed companies were starting to get conversations happening with some of their investors for really some of the first time. So they'd always had strong relationships with investment managers. But some of the organizations that sat behind the investment managers, typically pension funds, superannuation funds, foundations, even retail investors, rarely had an opportunity other than showing up at the AGM and maybe filling in a proxy voting form to communicate in a more nuanced way about what their priorities were. This kind of direct dialogue ended up unleashing a whole lot of collaboration between the leaders of Australian companies and the investors who were going to own their shares for a long time. So where investment managers were often very focused on a narrower version of profit and a nearer term orientation to what a company was doing. It was the investors that sat behind those investment managers that were very much interested in, well, how are you managing your ethics and culture? What are you doing about carbon transition risk over the long term and so on? That has been a fantastic partnership and a kind of an informal partnership actually with people all through these big organizations. We very often found ourselves allied with the company secretary and their business unit or the chief sustainability officer when they started to be chief sustainability officers and their teams, often about finding the common language that enabled either those individuals or investors to speak the language that the leadership understood in terms of the objectives that we shared for a healthy, well uh adapted company in the long term.
Liz Courtney:There are so many interesting points you've brought up there. One of the things you were talking about is this whole period of short-term, middle-term, long-term. And we all know that the climate as a system is a very long-term system, which takes a longer amount of time to invest in and see actions and outcomes. So it's quite heartwarming to hear that those dialogues are actually starting to stretch around the framework that we're all trying to work within. And I think you also talked about partnerships. And I really think that um this whole partnership of working together through all the levels is a really important point. Duncan, over to you just for your commentary on that question.
Duncan Paterson:One of the things that really strikes me when we think about the active practice of stewardship is that for investors, climate is no longer a nice-to-have topic. From the perspective of IGCC's membership, and this is the investor group on climate change, the organization I work for, it's really striking that climate's moved beyond simply being one of those ESG topics that occurs in the conversations that investors have with companies. But it's now actually a fundamental part of their risk analysis and the evaluation they do as to whether or not a company is going to contribute to long-term returns for their portfolios. Um, and that's not just for listed companies, it's also for projects that they invest in, infrastructure they might choose to support. This is reflecting a mix of pressures from the real world in terms of physical risk and resilience and having to respond to the challenges that climate change is throwing at us as we speak. But it's also coming from pressure from regulators and stakeholders. And there's now fairly broad community acceptance of the importance of action on climate. So these pressures are manifesting themselves in the way the companies are governed. And as owners of the companies, investors have a responsibility to engage proactively with the companies they invest in, both in terms of um downside risks, but also in terms of identifying opportunities for companies to take action.
Liz Courtney:Thank you, Duncan. And I think that brings that whole awareness of the ecosystem within companies now that are having all to work together too.
Dan Leverignton:And Duncan, building on that, how are you seeing an investor's decision to actively engage with their portfolio companies actually accelerate the trajectory of that company's decarbonisation roadmap and disrupt what is otherwise a pretty gradual or incremental process?
Duncan Paterson:The first thing to think about, and Sashila's already touched on this a little bit, but I'm approaching it from a slightly different angle. Hearing from investors will really heighten the importance of an issue in terms of management's willingness to listen and respond proactively. And turning that around, in my experience in dealing with companies over many years, companies are not monolithic entities. Uh, there are different departments within companies that think about things in different ways. There are people within the organizations who are really seeking to drive change within those organizations, and sometimes they face headwinds internally as well as externally through regulation and so forth. So by having a part owner of the company, the investor, raise the issue, in many ways that not only brings the issue to the attention of management, but it also empowers those sections of management who are looking to take action on these issues and gives them stronger voices in some of those discussions. We shouldn't underestimate the influence that investors have in these discussions as well. Investors carry a pretty big stick. I mean, if they don't like the way a company is being managed, they have the option of voting against directory reappointments, and they can support activist-driven votes at AGMs, they can vote down remuneration structures for executives, that really gets people's attention when they do that. And ultimately, they can make the decision to withhold capital from an operation. So there's lots of different steps that companies and their investors can take to communicate more effectively around climate and to drive change. Having said that, there is a risk that too friendly an engagement process doesn't achieve very much and itself becomes a gradual incremental process. Um we're now seeing more investors looking to use their stewardship practices to push for real-world outcomes rather than simply calling for more policies and disclosure from companies. That's a really encouraging sign.
Liz Courtney:Following on from that, have you seen in action where there's been engagement with a small number of key companies? And does that engagement really create some sort of cascading effect that can really go on to influence, say, entire supply chains or sectors?
Duncan Paterson:There's a couple of different ways of looking at that question. One of the key things that we do at Investor Grip on Climate Change is act as the local secretariat for a global initiative called Climate Action 100 Plus. Um Climate Action 100 Plus is based on the reasonably simple premise that around about 100 of the world's largest emitters are responsible for around 70% of the world's emissions. And so if you do want to achieve change, engaging with those really big emitters is a critically important way of doing things. Um a number of our members work together in terms of ensuring that engagement with corporations is done in a way which is productive and leads to uh real-world outcomes. Some of those idea sharing exercises and um um work around collaborative engagement is really, really important. The other side of that coin is when you start to think of supply chains of companies, and we can talk here about upstream and downstream supply chains. So companies are very large buyers of products, and where companies have decision-making powers around where they source their products, what sort of policies they have in place around sourcing, that can be very influential. But they're also big um um producers, obviously, of products, and certainly Australia is a big producer of raw materials that are used around the world. We're increasingly seeing companies being called upon to think about the not just their immediate emissions, their scope one and their scope two emissions, but also their scope three emissions, those emissions that are arise from the operation and supply chain. And by engaging strategically with um a company's supply chain, there are real opportunities there to drive, to drive change throughout the um throughout the economy.
Dan Leverignton:So, how important is the new mandatory climate reporting regime that has come in, known as the Australian Sustainability Reporting Standards, in creating that positive tipping point for corporate transparency from here on out?
Duncan Paterson:This is a really important issue. IGCC's been campaigning on behalf of our members for some time for there to be a clear, consistent set of rules that mandate climate disclosure in the Australian market. By allowing for comparability, confidence in the data, it really allows the market to do the job that it was designed to do, which is to find the most cost-effective way of achieving particular outcomes. And when there is good information out there, when there's consistent information out there, it allows investors to identify those companies best prepared to deal with the inevitable consequences of climate transition. From our perspective, we've been really pleased to see the uh the emergence of uh that disclosure regime. And uh we're really excited about um about the uh the first rounds of reporting that are coming out.
Dan Leverignton:Sushila, how is this changing the the landscape that that you're currently seeing?
Susheela Peres da Costa:It's it's certainly brought a lot more attention to the to the uses to which useful reporting can be put. I think we're gonna see a period over the next couple of years where there's going to be a rapid capability building in digesting what that information means. Because of course, reporting is one thing, but making meaning out of that reporting is another altogether. And quite rightly, Duncan has pointed out the job that the market needs to do, but there's many nuances between what gets reported by a company and what um, you know, what an investor will do with that information. So, for example, a scope three emission or a scope even scope two emission doesn't actually tell you how easy it is for that company to reduce that relative to another company that might have an identical emission. It doesn't tell you how costly it is or what opportunities there are that are profitable. There's lots of analytical work that needs to be done, very integrated with the rest of the way that you understand a company. And that is both on the risk side and on the impact side. So the companies that face the highest risk aren't necessarily those with the highest emissions because some of those are going to be protected. For example, regulators aren't going to allow people to go without power in the Australian context. There's going to be different types of protection and in market positioning that different types of companies have. But also on the impact side, right? The very same amount of coal can go into making steel to build a wind turpine as can go to powering energy that you, you know, you could otherwise use a solar panel for. So all of those nuances are really important. The reporting is a great starting point, but the proof will be in the pudding. You know, we fully expect that investors will be starting to analyze, digest, and price that information over the next few years.
Liz Courtney:So that's a really interesting point that you brought up about nuances. And I want to continue that conversation with you about why clarifying language and definitions of responsible investment itself is critical for the industry's success. Because we know just in even the vernacular of climate change and parts per million and tipping points and global boundaries, we have so many different ways of saying similar things. So I'd love to get your take on that.
Susheela Peres da Costa:Well, this one's very close to my heart because I um had a role in some of the definitions in responsible investment that have recently been adopted by the Principles for Responsible Investment, the CFA Institutes, and the Global Sustainable Investment Alliance. One of the most critical of the dis among the distinctions within responsible investment, if we're talking about something like climate change or indeed any of the other real-world problems that we are trying to solve for, is the distinction between impact and relative sustainability performance. And the difference between each of those and risk, that's something that is not very well understood by the community at large. Very often, a lot of what has come about as a result of, for example, the task force for climate-related financial disclosures, the orientation of that information has been about identifying the risk to the entity. So the reporting entity, making sure investors and other stakeholders have good solid information about climate-related risk to that company. That is not about what risk might look like in your portfolio if you choose to own that company versus another. So that's a relative sustainability performance kind of lens. And that's the one that is most commonly used in responsible investment. Many of the products that have a sustainable investment emphasis will be about choosing companies that perform better, either because they're in better, you know, better industries or because within their peer group in that industry, they have better, better adapted operations to whatever the particular problem we're solving for is. That is, though, an entirely different lens to impact, which isn't just about managing how well you're doing relative to peers, but what your absolute contribution is, is it positive or negative? And that's a really important nuance. And I think it's one that the definitions for clarifying the language is helping to establish, but it's not the only thing that we're going to need in a massive public education campaign.
Liz Courtney:Yeah, I couldn't agree more because that whole nuance of is that really impacting what our overall targets are, say for Australia, or our overall targets for 2035 or 2050. You've got the company, but you've got the people, the place, and the country, right? I love what you're saying, and I agree that we do need a much bigger education programme on that. Duncan, do you have a commentary on that as well?
Duncan Paterson:It's worth mentioning that one of the key things that our members are currently worrying about is the implications of disclosure regulation on investors. There are very real risks for investors that are accused of greenwashing. The language and definitions around responsible investment in that context are really important. One of the things that a lot of our members have spent time on in the last couple of years is really tightening up the language that's being used to describe action on climate and the way that the the risks of climate are being described. And they're very careful to ensure that there's a strong scientific understanding or a scientific underpinning of the risks and opportunities that arise from a transitioning economy. And I think this is really critical. One of the key risks the sector faces more broadly is that consumers, the ultimate consumer, whether that's the member of a superannuation fund, whether that's the client of an asset manager, whether that's the client of a financial advisor, that the the ultimate consumer has confidence that investors are acting in a way which is consistent with their disclosures and that they are doing the best that they're able to do in the in the context of taking action on climate. So lots of uh challenges there, because of course one of the key things you want to be able to preserve is the ability for an investor to make statements of ambition on climate. They want to be able to say we we want our portfolio to head in this direction, we want our portfolio to be contributing to a some two-degree warming world, we want to make sure that the um the our beneficiaries can retire into a world that's worth living in. But then how do you balance some of those disclosures with some of the the more rigorous requirements from regulators around the the need to justify everything that's said with a with a fact-based statement? So there's there's sometimes quite a fine line that needs to be walked there. I mean it's a it's a matter of um a lot of work that's being done on the money in the industry.
Dan Leverignton:Building on that, one of the areas that we sometimes hear is investors' hands are tied because they have a legal duty to their beneficiaries. And so they have to take that into account when they're making their investment decisions, which is absolutely accurate. But I'm just wondering how you see that legal duty can be used to drive this transition across the entire market.
Duncan Paterson:I think it's worth sitting back and looking at what and looking at what is actually meant by fiduciary duty and the implications of that. Institutional investors have a responsibility to care for the financial futures of their clients and their members. So this means that they're not able to make decisions based on biases, on political whim. There's a very strong body of regulatory and legal precedents here that requires investors to make sure that they're always acting in the best interests of their beneficiaries. This means that they're really focused on finding the correct and true information in a given situation. So this is, I think, one of the reasons why investors have stayed so committed to action on climate change, despite the political winds of change blowing hither and thither over the last decade or so. Because the investment community has this strong focus on reliable and actionable data and and operating in a way which is based in real in the real world. They have a bit of a responsibility to ensure that they are utilizing that power and influence that they have through that through that work to drive positive action. Um but perhaps more importantly, in particular in the Australian and New Zealand context, investors looking after people's retirement assets have longer time horizons. And this is, I think, what what really comes through here. This pulls them out of the short-term focus of uh company management and of aspects of the finance sector that are also short-term focused. And their role as a fiduciary drives them to take climate into account, even if it's not going to impact day-to-day market fluctuations, although we are increasingly seeing that happening as well. So an investor, uh, particularly with a superannuation fund investor, is looking at beneficiaries who may be retiring in 20, 30, 40 years' time. And that that really builds some of that longer term thinking um into the investment decisions they make. And that's why they're able to play a positive role in terms of uh thinking about what the the real implications of climate are going to be.
Liz Courtney:Hmm. How do you see that collective action of that responsible and institutional investor actually being a powerful force on the broader sort of Oz economy? Where do you see it playing that role and where can it play it better?
Susheela Peres da Costa:We often get very focused on things that make headlines, and that's often like public shares. So the shares of big Australian companies. I think some of that really exciting work is actually happening and has always happened in parts that are not the share market, where the transactions occur much less frequently and the assets are on a bat on the balance sheet of an investor for a much longer time. For example, an infrastructure asset, a building, a wind installation, all of those kinds of things are built for the long term. One of the highest potential areas, I think, that investors have been reasonably good at investing in early is unloved, high potential sectors, exactly like that kind of wind installation, but long before anyone was doing it. So when they're prepared to take a little bit extra risk for that extra return, knowing that they can wait for that return to arrive in something they say is an inevitability, the decarbonization of economies, that's a really high potential area for investors who are able to take that long-term view. Of course, that depends a lot on the nature of the investor, right? So if we're talking about an investment manager that is only working with public equities, for example, they're a more constrained kind of investor than one that has access to a whole range of asset classes. So it really very much depends on the investor. And within within the units that they are able to identify opportunities and so on, each one of them has comparatively higher potential and lower potential opportunities to invest in disruption. Because that's what we need right now. What we can think about as our current economy is a business as usual economy, right? It's a very emissions-intensive economy. And it's the disruptions away from business as usual that are really going to make the difference. That may or may not occur within the portfolio. It might be after you've sold that wind farm that that, you know, that comes to be the tipping point in a particular energy grid's dynamics. But being able to be early to those opportunities is one of the important features of the really big investors, particularly our superannuation sector.
Dan Leverignton:And I I suppose an example of that could be allocating capital away from fossil fuels. How do you see investors thinking about this and the outcomes that that could have from a self-reinforcing feedback loop that makes clean energy more attractive from an investment investment perspective?
Susheela Peres da Costa:So this is an excellent question, Dan, and probably one that's going to um ignite a wonderful debate that'll be interesting to the listeners. So funnily enough, disruption doesn't happen as easily when you take money away from a company as when you first give money to a company. So if you're investing in a company that doesn't have the capital to say build a wind farm or a battery or anything else, you're actually the enabler of that activity. If what you're doing is selling your shares in a fossil fuel company, actually what's happening for the fossil fuel company is just a change in ownership. They don't even notice that you've sold those shares. And even if half of its shareholders were to sell on the same day, or three quarters of its shareholders were to sell on the same day, all that happens is the share price drops. It's not a transaction with the company. So it doesn't change the capital that they have access to to invest, particularly not for mature companies. They earn their capital from selling stuff. So if if the kind of boycott, if you like, is the theory of change, then you've got to boycott the revenues, not buy the stuff from those companies. It shares are really like more like second-hand shops, right? It doesn't change the profitability of the company that's, you know, making those clothes.
Duncan Paterson:I think um I'm not sure there's a particular causal relationship between allocating capital away from fossil fuels that um uh creates a feedback loop towards clean energy. I just I don't think there's a nexus necessarily in the way the question's been framed. Allocating capital away from fossil fuels is a great way of signaling intent when it comes to climate. A number of our members have concluded that various elements of the fossil fuel sector pose financial risks through things like stranded assets, through things like shrinking consumer base and so forth. And they don't want their don't want to be investing uh exposing the members to those um those financial risks, particularly for longer-term investors. So um there are there are reasons um for for not investing in fossil fuels. If an investor's approach is to focus on a stewardship approach, um, they may choose to hold on to fossil fuels and and try and change the company through engagement and things like that. Um it's it's much more complex than just saying um divesting from capital here means that capital flows somewhere else. It doesn't it doesn't necessarily happen that way. Broadly speaking, though, most scenarios that get us to a sub-two-degree uh warming future envisage a considerably reduced role for fossil fuels over time. I think the really encouraging thing here is that clean energy is now at a stage where it's ready to step in and take on that role. Clean energy is cheaper than fossil fuels in most markets around the world. Indeed, in some of the most hostile markets to ESG action, like like Texas and the States, they're the fastest jurisdiction in the world to be installing renewables. So they're not ri they're not installing renewables in Texas because they feel warm and fuzzy and green about about things. They're they're installing renewables because it's cheaper and it's the most effective way of producing reliable energy for the grid when it's backed up by appropriate storage. The concept of pulling money out of fossil fuels and instead of investing it in in clean energy, I don't think the nexus is necessarily there. But I don't think it needs to be there anymore. I think I I think I think I think the um I think the economic case has been made. What we need to do is to turn that question on its head and perhaps stop subsidizing fossil fuels quite as heavily as we do, and think more about uh uh what's uh what's an effective way of uh using policy and investment and corporate ingenuity together to solve the climate crisis.
Liz Courtney:Duncan, where where is the smart money flowing in Australia right now? Is it in renewables, electrification, regenerative agriculture, or somewhere else, or is there some sleeper that Sishala's gonna tell us about? But like, where's it flowing?
Duncan Paterson:I'm gonna jump in ahead of Sashila and to do her the quick favour of saying we don't know anyone's personal financial circumstances. There's nothing we can say can be taken as financial advice. Um uh and and I will certainly acknowledge that my money is absolutely not smart money, so I wouldn't take my advice on anything anyway. One point I will make is that action on climate is not about one sector. Climate is about the entire economy. If we're gonna solve the climate crisis, if we're gonna keep to below two degrees and avoid the catastrophic, catastrophic social and environmental outcomes of warming above two degrees, then the whole economy is gonna have to transition. It's gonna have to do it quickly, and that's gonna have implications for all sectors of the economy. Some will be benefiting from within different sectors, there'll be winners, there'll be losers. Um, there are gonna be completely new industries emerging from this transition that'll be taking advantage of that. One thing we've learned over the last decade, we've seen we've seen tech booms come and go, we're seeing AI. We know that companies come and go, we know that industries come and go. Climate is going to be no different in terms of a transformative force on the economy. If I was to tip anything, I would be saying, number one, look to those existing companies which have got a really strong transition story to tell. And number two, look to emerging industries which are solving broad-based system-wide issues in the economy. And much as I'm old enough to be able to declare I'm an AI um uh Luddite, um, I do think in some of those technical areas where technology is going to be connecting different sectors of the economy, bringing new solutions to bear on different problems, um, I think there's gonna be um um a lot of opportunity there. So Sheila, I'm gonna hand it over to you.
Susheela Peres da Costa:My thinking is that companies and industries with very high potential at this moment in history are those who are capable of designing out waste in all of its forms, whether that's energy in its supply chain, whether that's materials in its supply chain. And I think of waste very, very broadly when I think of this. So you can think of um, you know, transport industries as having involved a wastefulness of fuel use that is designed out by the use of video conferencing. You can think of the rise of companies that allow you to buy and sell secondhand goods to other members of the community as designing out a level of material waste. That meant markets for secondhand goods couldn't actually find each other. Those kinds of information-rich materials poor interventions, disruptions, I think are very high potential. That is absolutely not financial advice, but it seems like the logical consequence of a world which is going to have to get smarter about how we use and abuse stuff.
Liz Courtney:It also makes us think that our whole design system needs to be thinking about where we need to make things in a circular fashion so that we know one thing becomes something else. And so all the rubbish that they've got in Singapore at the moment, much of it is being turned into feeding pellets for chickens and for fish farms and other bits that become a new type of plastic that they're using for cling wrap. You have to think waste becomes a resource. So I really enjoyed that last commentary that you made. It's a new way of thinking. And I think the next generation already coming on to thinking in that direction, and probably the older industries are still getting into that new thought process. When we're looking at this whole transition, what are the risks for companies that delay investing in transition strategies?
Duncan Paterson:Thanks, Liz. It does depend on the sector, and climate risks are going to present themselves in a range of different ways. So the first thing to think about is whole economy and climate risks. So physical risk and resilience is a critical issue right now. We are, based on all the available evidence, anticipating a major increase in the potential risks that companies and investors are going to have to be managing in terms of flood, fire, drought. There are those acute climate issues, which are quite obvious. Depending on the sector you're in, there are issues like stranded assets, if you're involved in utilities and so forth. There are issues around consumer awareness. If if your company is perceived as being a lag out on climate and is targeted by activists and is getting a bad reputation, you're going to lose customers. You're going to find it harder to employ the best talent that comes onto the market. So there's opportunities for companies to frame the work they do in a range of different ways here. And then stepping back again and thinking about from a financial point of view, longer term, certain sectors and certain activities are going to find they have shrinking access to capital, as uh Sashila touched on before. Capital comes not just in the form of trading of securities, but it also comes in the form of projects that need financing. It comes in the form of the ability to access loans for ongoing business operations, companies that are particularly exposed to climate risk going to start to becoming um identified as um uh bad risks for some of those transactions. Access to capital is one. Another one is access to global markets. Whilst we're currently seeing some pushback against uh ESG in the States, we're absolutely seeing a doubling down of enthusiasm for action in other markets around the world. Um given Australia is an economy that's based on um exporting a lot of our uh raw materials and produce, um, we may find ourselves competing with other markets around the world where action is being taken on climate in a in a more um in a more um nimble way. Corporations might find that their uh their global market access is is um tightened. There's a whole bunch of factors here which are going to be coming into play and which responsible companies are going to be thinking about and building into their um planning and strategies.
Dan Leverignton:So, Sheila, so we're big fans of Christiana Figueres on The Green Fix. She was quoted recently saying the new global economy is rising, powered by clean energy and green industry. Prime Minister Albanese now has the chance to show the Pacific and the world that Australia is ready to lead at COP 31 and beyond. What do you believe it's going to take for Australia to embrace this and take advantage of the opportunities that we've been presented in a timeframe that will make us highly competitive in an increasingly volatile world, as Duncan was just referring to?
Susheela Peres da Costa:If I think about what is really needed and we think about some of the ways in which we can see other jurisdictions around the world going in very much the wrong direction, it it is apparent that we need to invest in uh IP. We need to invest in innovation, we need to invest in basic science, we need to invest in our our national human resource pool to be able to deliver the new industrialized Australia that is going to be required to be competitive in a world where it's probably not going to cut it anymore to sell our raw materials, particularly given that so much of that production is fossil fuels to other countries. That's not that can't continue to underwrite our prosperity forever. To do that, we need to invest a lot more heavily in our, you know, research institutions, in our education systems. And there is sometimes in Australia a tendency to pit that kind of investment against the kind that immediately throws off profits, right? So the idea that corporate tax cuts versus the funding of universities. This is one of those moments where we actually need to be thinking and investing much more in Australia as a clever country. We've had that slogan for decades. And we're we're doing really well, but we could be doing a lot better, and we need to do a lot better because right now we're very dependent on what might look a lot like sunset industries in a few decades to come.
Liz Courtney:Do you think we actually need to encourage our government and our leaders to feel that they can have the courage to make some difficult decisions and they have um they have the voice of the people behind saying, actually, we want to be a great country in the future and we want to be a leader in the future. And the next generation are saying, we want this. So can we somehow rattle the can a bit and say, you have our permission? Your people really want this. You have our permission. Be more innovative, be courageous, like step up and live a legacy that you're gonna be really proud of in the in the future because we're dealing with the future right now, right here. And the next five years are gonna be absolutely critical to the sort of life we're gonna leave the next generations of Australians.
Susheela Peres da Costa:I don't think I could have said it any better myself. And I think we're starting to see it in pockets. You know, we're starting to see those voices emerge. I think our political classes are not yet re-accustomed to hearing it. So maybe it's more than just communicating that they have permission, it's communicating it louder.
Dan Leverignton:When did you first realize that business and investors had a role to play in being part of the climate solution?
Duncan Paterson:I've I've been working in the responsible investment space for 25 years now. 27 almost. My career has been based around working with investors, seeking to apply environmental, social, and governance factors to their investment processes with the intent ultimately of achieving improved returns and driving changes in company behaviour. What has happened certainly in the last decade or so, and something that I've become increasingly involved in in my career, is that the work that I've been doing has moved from operating in a subset of the finance sector where the objective is really to provide consumers with a choice about what sort of financial products they put into to make sure that the products are there that align with their values and to make sure that people are able to make the same sorts of consumption choices in their finance as they do in their normal day-to-day shopping. If they buy dolphin-free tuna or if they buy environmentally friendly washing detergent, they shouldn't be able to buy financial products which which match their their own views and values and so forth. And that's evolved in the last 10 years or so to recognize that specifically on the topic of climate, I would say the entire economy does have to change here. We're not talking about one section of the finance sector, we're not talking about one section of the um of the business community that's going to be impacted or changing. The entire economy is going to be dealing with the negative impacts we have already built into climate change and will be changing and transitioning. And it's no longer a niche, it's no longer a brand, it's no longer a subset of finance or business. It's it's going to be what is driving a lot of activity and decision making and capital allocation decisions over the next um 10, 20, 30, 40 years. And something I've been saying a bit recently, which is not necessarily the nicest thing to have to say, but I think it's true. Uh, we are actually going to achieve net zero one way or another. One of those ways of achieving net zero, you're not going to like. But um I would like to imagine that we would be able to achieve net zero in a way that most people can um can live with and accommodate. Um, because the alternative is um is really rather grim if you actually sit down and look at the science.
Dan Leverignton:That is a very, very good way of putting it. So, Sheila, how uh yeah, what what was your moment?
Susheela Peres da Costa:Well, so this is 2001, I'll take you back. And I was working in corporate. I knew things needed to be done in the world. I was aware of the things that needed to be done on the environment. And my world view was that corporate and environmental interests were at odds with each other. And in 2001, I read an article, and while I've been listening to it, I've found that it is still online called Natural Capitalism. And it was uh basically a kind of a distillation of the thinking of Amory Lovens, who wrote Natural Capitalism, probably a few years before um 2001 when I read it. And it blew my mind because I realized that business could not only deliberately harmonize its processes and its business strategies with the needs of the natural world and and the environment, including climate imperatives, but also that it could actually build its whole strategy around that and thrive in that context if only it was designed to do so. I I never really looked back from that. Two years later, I had a couple of kids, and that only kind of strengthened the resolve that I had to be part of making that happen. And really the rest is history. I love your story.
Liz Courtney:Thank you for sharing. We have been leaning a little bit into talking about the future and future generations. What advice would you give to next generations entering that finance business or entrepreneurial ship who want to drive meaningful change? What words of encouragement should we give them and encourage them to be part of the solution?
Susheela Peres da Costa:Two pieces of advice. One is jump on board any way you can. And so your span of control might include spreadsheets that you are in charge of or something that seems like it's actually quite remote from some of the things that we've been talking about today or some of the things that you spend your non-work time thinking about and talking with people about. But there are always ways, even at the margin, and you might be surprised how many people around you are also thinking that way too, if you're active about it. The second is that it's quite easy to jump onto things and harder to figure out when it's time to jump off if it's heading in the wrong direction. And it's important to stay true to your core and be alert to the idea that sustainability for many parts of our economy is a profit opportunity just like any other. And that's not necessarily a bad thing, but when that starts to diverge from what you feel you need to be part of making happen, it's time to step off because somebody needs you more. I love that. Thank you.
Liz Courtney:Duncan, a word of wisdom from you?
Duncan Paterson:Um, I would emphasize that the number one, there's never been a better time to get involved in sustainability. At the moment, there are huge numbers of opportunities for people looking to get into work in this space. The number of roles in the area of um finance and accounting in particular around uh ESG is is is only going to increase. I would say, given that the whole of the economy is going to be changing, I would encourage people to think about connections. Think about think about what part of the roles they're looking at can can connect with other parts of the economy, can connect with other areas of their interest and and how that is going to be able to lead to new opportunities for them. There's going to be opportunities cropping up right across the economy in areas that we haven't thought about yet. I mean, I think about things like sports, I think about things like marine ecosystems, I think about areas that one of the big areas that I work in at the moment is in the area of um nature markets and how um we can use the power of markets to to drive positive change in how we're managing biodiversity in this country. The opportunity to address physical risk and resilience through new products in the insurance space, through new types of securities, it's a huge area of opportunity there for people to delve into. So have a look at the work that you're doing, seeing where it can make a difference, and don't be discouraged.
Dan Leverignton:So as our listener is probably aware of, we the largest area of investment for the GreenFix was the creation of the GreenFix magic wand. And so what that allows you to do is you get to decide in the next five years what you would love to see change. Duncan, would you like to go first?
Duncan Paterson:Gee, what I would like to see change. I would like to see a degree of integrity come into our information sphere. One of the big advantages that the Australian economy and the Australian community has is that there is still a degree of confidence in the institutions that we have in this country. And as an investor, being able to rely on the underlying conditions in the market, on the the reliability of information that comes from key information sources and so forth and so forth, that that's critically important for any kind of societal level change to happen without conflict and without all the negative associations with the disorderly climate transition. And one of the key things that I've observed over the last few years is the um emergence of disinformation, the emergence of misinformation. If I could wipe that off the uh the social media sphere, and uh if there was some way of enforcing uh the same degree of information property that is applied to broadcasters and and publishers on um operations of social media platforms, that'd be a really good thing, I reckon.
Dan Leverignton:I'd say that is a very good use of the magic wand. So Sheila, how how would you utilize the magic wand?
Susheela Peres da Costa:Um aside from in from thoroughly endorsing Duncan's analysis of what needs doing, which I do, but he's stolen that. So I think there's um there's a much more fundamental problem, which is that externalities, whether they're good or bad, are not priced. And rightly or wrongly, price is how our global economy works, our national economy works, every economy in between works. So I want every externality priced. Every piece of pollution, every piece of disinformation, which is information pollution. I want everyone who's doing something good in the world to be able to profit from it. And I think pricing externalities on the basis of the amount of good or the amount of harm they create would do that. And you said a magic wand, so I'm going for it.
Liz Courtney:I love that. I love that. It was amazing.
Dan Leverignton:Thank you so much. The whole reason why we wanted to do an episode from a financial and investment perspective is like I said at the top, like the there is a mystique around the investment markets when it comes to climate and sustainability that a lot of people just don't have access to. And so I I want to thank you both for just breaking it down in such easy to understand uh terms and themes. And and we know that it's such an important, it plays such an important role, both from an organizational perspective but also an individual perspective. So thank you very much for coming on the show to both of you. We've thoroughly enjoyed it.
Susheela Peres da Costa:Such a fun conversation. Thank you for having us.
Duncan Paterson:Thanks, Dan. Thanks, Liz. It was great.
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