50: PRI's Nathan Fabian - Climate Risk Pricing


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Nathan Fabian is Chief Responsible Investment Officer with the Principles for Responsible Investment (PRI). The PRI believes that financial markets today have not adequately priced-in the likely near-term policy response to climate change. In this podcast, we talk about the release of the Inevitable Policy Response, a project that aims to prepare investors for the associated portfolio risks. Overview of Nathan Fabian, PRI, podcast: 1:30 You were an advisor to Senator Penny Wong. What was that about? 2:00 What does a Chief Responsible Investment Officer do? 4:30 The PRI recently launched its Inevitable Policy Response. What is inevitable about it? 6:00 It can be hard, sitting in Australia, to see how political neutral climate is as an issue in most countries in the world. 9:00 Coal: “Institutional Investors broadly have already made a judgement on coal.” 11:00 Coal: “We are really just exiting a legacy industry at this point.” 13:00 Stranded assets: “A fire sale of assets is not going to be in the interest of institutional investors.” 14:30 How do you translate the uncertainties of climate risk into a valuation model? Is it possible? 16:00 Give your best estimate and adjust your valuation along the way. You can’t just ignore it. 17:00 We did some asset level modeling to get estimates. 18:45 Australia is still considered in the policy paper as a country that will phase out coal in an early stage. Why? 20:00 Is there a danger that the message will get lost in the turmoil of the pandemic? 20:30 “Will the support packages under the pandemic prolong the life of companies that were already struggling? That certainly is a risk” 22:30 “Are we accelerating the energy transition, or are we propping up companies that we are going to have to unwind anyway in the future? We are at important crossroads.” 24:30 “There is this myth around the green transition that you have to come up with unproven technologies that are going to radically transition our economies. But most of the opportunities are there and they exist in all sectors of the economy.” 26:00 “We think land use has been overlooked. But we expect a lot of change in this sector.” 27:30 So what are the next steps with the policy paper?

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