What investors want from sustainable engineering
That was the takeaway from the first plenary panel on day one of Engineers Australia Climate Smart Engineering conference.
Moderated by Brett Mitsch MIEAust, Managing Director at Steam Plains Capital, the panel offered attendees a rare opportunity to pick the brains of those at the intersection of engineering and finance.
Former Arup consultant and now Director of Sustainable Finance at ANZ, Tania Smith joined Global Head of Responsible Investment at Cbus Super Fund, Nicole Bradford and ESG Advisor at GHD, Mike Atkinson for a fascinating discussion on how engineers can assist the growing interest in sustainable investments from markets.
A shift to sustainable thinking
Bradford opened the session by noting that more organisations understand the business sense behind sustainability which is driving a growing interest in environmental, social, and governance (ESG) investments.
“Bloomberg estimates by 2025 a third of the world’s capital will be under some kind of ESG approach,” she said.
“That’s (US)$53 trillion more in investments.”
This is mirrored in consumer behaviour, Bradford said, as Cbus has seen positive reactions from members when they moved to responsible investment.
However, she warned that it wasn’t enough for organisations to merely decarbonise their portfolios, they also need to hold each other to account to achieve real change.
“There's increasing scrutiny on us, and we're under increasing pressure to justify our investments… so it's going to become harder for officials to invest in companies that don't have realistic timeframes and objectives that align towards net zero emissions,” Bradford said.
Her sentiments were echoed by Smith, who explained how ANZ had created sustainability-linked products that encouraged customers and investors to set targets that relate to decarbonisation or increasing renewable energies.
“The margin of their loan is tied to those targets. And if they hit their targets, then they get a discount on their loan,” she explained.
Coming from an engineering consultancy, Atkinson was able to explain how changes in attitudes by big banks and superfunds directly impacts the engineering profession.
“[In] 2016 there was a real kick off in Australia of renewable energy projects and investors looking to dedicate money and support those renewable energy projects,” he said.
“Organisations [were looking] to allocate more money towards sustainable or responsible investments and renewable energy is clearly an easy sector to focus on. Each of those renewable energy projects inevitably has a range of technical engineering requirements.”
Global frameworks leading the way
International initiatives such as the Sustainable Development Goals (SDG) set by the United Nations and the Taskforce on Climate-Related Financial Disclosures (TCFD) have sped up global interest in climate friendly investing.
However, Mitsch was keen to hear from the panel on how the TCFD-inspired ‘Taskforce on Nature-related Financial Disclosures (TNFD)’ was changing the game for engineers.
“I think the role that engineers can play is to help people understand what TNFD is,” said Smith.
“Make sure that it is in our normal vernacular and to help others report and measure [its impact], and to work on the methodologies for that.”
Since the TCFD and TNFD aim to improve transparency from investors, some clients are asking to see risk assessment completed in line with IPCC predictions, said Atkinson.
“We're actually finding that some organisations are looking at a more rapid pathway to net zero,” he said.
“So, starting at 2050 and then asking us to run scenarios at a much more rapid pace. We've done work recently for organisations [with the aim of] getting to net zero by 2030.”
This is where the real opportunity lies for engineers, explained Atkinson. As the expert who can bridge the gap between what must happen to address climate change and what can be done.
New pathways for engineers
The panel’s conversation also turned to the new opportunities engineers have in non-traditional sectors such as finance.
Both Mitsch and Smith have technical degrees (engineering and environmental science respectively) but found themselves drawn to the finance side of things.
There is a great overlap between the two industries, explained Smith, because investors appreciate hearing the business case when considering engineering projects.
“If you can strongly articulate the financial or economic case for certain design elements, whether that be using low embodied carbon materials and how that can lead to cost savings, [or], be able to talk about both the economic and financial side… that really appeals to the financial world,” she said.
As sustainability becomes a focus of organisations, more places are looking to hire engineers in non-engineering roles, said Bradford. They want to capitalise on their unique skills and insights.
“I'm just going to do a call to arms and encourage engineers to, whilst keeping up the great solutions for climate change and other sustainable development goals, please think about finance as well,” she said.