Climate-related business and investment decisions are shifting from risk to capturing new opportunities, according to former APRA executive board member Geoff Summerhayes.
Climate change is moving from an issue of a "hygiene factor" to a question of strategic advantage and value creation, Summerhayes said. Summerhayes, now an advisor to specialist climate change advisory and investment firm Pollination Group, addressed the Business Council of Co-operatives and Mutuals (BCCM) Global Mutual Leaders' Symposium: Mutuality, ESG and Investment
"We are facing into a massive industrial transformation on a scale that will exceed the industrial revolution, exceed the digitalisation of the economy, and is a life and death struggle for us as a civilisation," Summerhayes said. "It is also a huge opportunity if humanity grasps that opportunity."
Summerhayes noted that he believes that mutuals and co-operative business have a unique role to play in the transition to net zero as well as broader ESG issues because "mutuals are about members, they're about communities and they're about the long term success of those members. They're about aligning the purpose with members and communities and they're most importantly about trust."
The global economy is partway through a bigger transition as relating to net zero, Summerhayes noted, and said that to achieve those goals, investors and companies in Australia and globally are working to build capability across key areas including leadership, insight and risk, strategy and targets, opportunity, and engagement and disclosure.
In Pollination's experience, however, while institutions are improving their risk management, they are not yet effectively targeting opportunity or supporting system transition, Summerhayes said.
"We see institutions need to move to an enabling and influencing role in the transition to net zero," he said. "Not a reactive role, but what is our leadership role to climate and not just thinking about the risk to you as a firm."
This will see institutions move from external stakeholder management to building internal buy-in in a way that to can engage and inspire employees and internal leaders, move from following scenarios to setting pathways towards the net zero future, and moving from looking at company risk to system resilience and value.
"Scale is important, but you can achieve scale in a number of ways," he said.
Summerhayes has a track record of speaking to the challenges of climate change. In 2017 in his APRA role, he made a landmark speech in which he emphasised "[s]ome climate risks are distinctly 'financial' in nature. Many of these risks are foreseeable, material and actionable now."