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Innovating Climate Impact Investing: An Invitation to Join the Gigaton Coalition

Today, I am proud to extend a special invitation to become a part of the Gigaton Coalition.


We firmly believe that this unique platform is poised to reimagine, reshape, and reinforce the critically important area of climate impact investing. And nothing would delight us more than being able to embark on this important journey together.

In today’s ARCUS, we will delve into the challenges that investors often encounter when seeking to achieve Climate Impact at Scale and with Integrity. We believe it is a pivotal moment in our shared journey towards a sustainable future, and the Gigaton Coalition is our visionary solution. As a start, we uniquely propose using carefully selected public equity investments as a possible way to achieve climate impact. Strategies seeking to effect meaningful climate impact via public markets are surprisingly thin on the ground, especially in Asia, our initial target region. Over time, through progressive phases of influence and contribution, we expect the Gigaton Coalition to pave the way for substantial climate impact through purposeful investments across a wider geographical footprint and across a variety of additional asset classes.



Challenge #1 – Our Time is Running Out


According to the Global Carbon Budget [1], even if current CO2 emissions levels persist (not increase), the remaining carbon budget for a 50% chance to limit warming to 1.5°C could be used up in 7 years, and in 15 years for 1.7°C. Returning global temperatures below these thresholds after they have been crossed would require a massive scale-up of carbon dioxide removal. This would be an even bigger ask and one that will be based on hope of technological solutions such as carbon capture and storage. Hope is never a good strategy, especially when there is a challenge to humanity.


It is obvious that we need to start conserving our Global Carbon Budget. While fossil CO2 emissions growth has been decelerating in the last decade, it is still not on a downward trajectory [2]. There is no sign of the rapid decrease in global emissions that is needed to tackle climate change. Reaching Net Zero CO2 emissions by 2050 requires total anthropogenic CO2 emissions to decrease on average by 1.5 GtCO2e per year [3]… not increase.



GIGATON COALITION – Carbon Savings Commitment 


We need to contribute to prolonging the Global Carbon Budget. The Gigaton Coalition should do that in progressive phases, by leveraging the climate solutions identified by the Coalition to help drive emissions reductions for investment portfolios. In Phase 1, the Coalition will aim to help listed companies in Asia Pacific first reduce, and then save at least a cumulative 1 GtCO2e over the next decade. The investee companies delivering on this Gigaton target will be from Panarchy Partners’ Asian Gigaton Fund (AGF). With the help of the Coalition, these savings will be achieved by portfolio companies through the reduction of their Scope 1, 2 and 3 emissions.



Given the ongoing evolution of climate challenges and solutions, we expect the Coalition to take a measured approach at first. But we very much expect the Coalition’s scope to expand over time. For example, we envisage the Gigaton Coalition expanding its geographical footprint beyond Asia. Phases 2 and 3 of the Coalition’s evolution would also see its solutions and expertise implemented across a broader set of investments and asset classes, including those managed by Coalition members. Over time, the Coalition’s impact would far exceed the initial 1 GtCO2e cumulative savings target set just for AGF. This is what we mean by impact at scale. A potential roadmap is shown below:



Challenge #2 – The “How” is Missing in Climate Initiatives


The market is awash in a multitude of investor climate initiatives with varying calls to action. However, investors lack platforms that solve the “how” to enable investee companies (and portfolios) to achieve these climate initiatives. Institutional Investors generally lack the experience or opportunity for genuine climate dialogues with investee companies. Institutional Investors need realistic solutions for the practical challenges of decarbonization faced by their investments.



GIGATON COALITION – A Climate Solution Platform


The Gigaton Coalition is an Investor-Investee led platform, not an initiative, that brings together climate solution providers and investees with a view to identify and implement custom decarbonization solutions for the latter group. A win-win for all involved. 


Coalition members constituting Investors, Investees and Climate Solution Providers (technology & service companies, policy makers, regulators, academia, industry lobby groups, etc.) will tackle decarbonization challenges such as financial constraints, technological limitations, infrastructure development, behavioral change, industrial policy, climate governance, etc.   


The process by which the Gigaton Coalition will operate is kept simple yet impactful. Initially in Phase 1, the Coalition will aim to help investee companies in AGF decarbonize at a faster pace and by a larger amount than expected. Through its Asian Gigaton Fund process, the Panarchy team has already identified potential carbon impactful companies in Asia Pacific, that can deliver on the stated 1 GtCO2e ambition. Guided by AGF’s Theory of Change and Impact Management System, the Panarchy team will conduct the necessary carbon impact assessments and reviews before calling on the Gigaton Coalition to start collaborating with investee companies. The collaboration process should unfold as follows;     

  1. Decarbonization Challenge Identification. Leveraging Panarchy Partners’ proprietary Carbon Databases, the team has categorized potential AGF investee companies by their impact potential [4], i.e., Scope 3 Champions, Scope 1 & 2 Champions and Potential Carbon Champions. These categorizations are important in establishing expected impact and possible challenges that need addressing. Our curated, investee-specific Carbon Questionnaire, Scorecard and engagement helps Coalition members identify specific decarbonization solutions to those challenges.

  2. Decarbonization Solution Partner Selection. As the challenges identified in Step 1 above will come in different shapes and forms, relevant solution partners within the Coalition will be identified. These partners will be best equipped to provide specific solutions to each investee company’s unique decarbonization challenge.

  3. Decarbonization Dialogues will be held between the Coalition’s founding investors, solution partners, and investee company management teams. The dialogues will ensure that investors and investee management understand and appreciate the climate solutions available. Adoption of those solutions will be at the investee companies’ discretion with investors now capable of holding management accountable for their climate actions.  




Challenge #3 – Climate Impact at Scale With Integrity


Currently, investors seeking genuine climate impact through investments are typically confined to small scale opportunities. Many climate impact investments are focused on the private space often involving unproven technological solutions that may or may not deliver impact at scale at some point in the future. But true climate impact requires proactive carbon reduction and mitigation today. And in this respect investors have been ignoring or avoiding the elephant in the room, namely their portfolio of listed companies.



* For corporates, we have taken their disclosed Scope 1, 2 and 3 GHG emissions figures


GIGATON COALITION – Asian Gigaton Fund Process & Outcomes


Impact at Scale: Over time, as shared below, we would expect the Coalition’s scope of influence to expand to other investments in different asset classes. However, given the need to act now and at scale, the Gigaton Coalition will in Phase 1 address and solve real-world decarbonization challenges of listed companies in AGF via active engagement, as outlined above.


Why focus on listed companies in Phase 1? To illustrate the impact scale of listed companies, in 2022 AGF’s investable universe of c1,500 companies had cumulative annual Scope 1+2 emissions of 3.9 GtCO2e and Scope 3 emissions of 15.6 GtCO2e  The collective annual Scope 1, 2 and 3 emissions of these 1,500 companies in Asia Pacific accounts for c45% of annual Global emissions. Potential impact scale is significant. 


Impact with Integrity: At our 2023 Global Panvest Forum, “Climate Investing – Biggest Opportunity of Our Lifetime?”, our distinction between Climate Conscious vs. Climate Focused investments resonated with many investors. Increasingly, investors are becoming aware of the need for impact investment strategies that are genuine and built on well-established impact principles. Investors now seek impact investing with integrity.


Unfortunately, while impact investing is well practiced in the private space, it is more limited in the listed equities space. The dearth of true impact strategies in the listed equities space is not for a lack of impact potential (as shared above), but rather a lack of investor expertise. Impact Investors face many requirements. The most important and difficult of which is the ability to credibly demonstrate their own contribution in helping investee companies reach their sustainability goals. This question of “additionality” in listed equities impact strategies is where most investors give up. We believe Gigaton Coalition has an important role to play in our and other investor’s Impact Management System, as it helps delivers enhanced contribution and additionality from investments. 




GIGATON COALITION – Why Panarchy Partners?


The Gigaton Coalition is a natural manifestation of our firm’s purpose, “Together with capital owners and users, we aim for a better future for the world”, our Panvesting philosophy and our Partnership approach. As Panvestors we analyze companies for how they deliver returns and progress on all (Pan) forms of capital, especially environmental. While most investors focus on the negative impact of climate change on their investments, our job has always been to see how our investments positively impact and addressing climate change.


Our climate and sustainability specialists, three of whom (including our CIO) have MSc degrees in Environmental Management, are embedded in our investment team. It is this seamless integration of environmental and financial capital specialists that makes Panarchy Partners unique and best equipped to organize the Gigaton Coalition efforts.


Our team is already experienced in curating productive environmental discussions spanning investee companies, investors, climate solution providers and a broader universe of stakeholders. Over the years, our engagement with investee companies has covered in detail topics such as setting and delivery of science-based emissions targets, challenges faced by listed companies in mapping and then reducing Scope 3 emissions, acceptance and use of carbon offsets, product carbon footprint assessments, to name just a few. Furthermore, our team has organized cross industry discussions, such as methodologies for calculating avoided emissions. In 2023, our third Global Panvest Forum focused on challenges and opportunities around “Climate Investing – Opportunity of Our Lifetime?” We were fortunate to have representation from the Monetary Authority of Singapore (MAS), the World Bank, CDP, Client Earth, Terrascope, and other private/public impact investors, all contributing their climate knowledge for the greater good of investors and investees.  


We continue to develop engagement strategies that aim to improve our understanding and effectiveness in addressing climate-related challenges through a multi-stakeholder approach. Establishing the Gigaton Coalition is a novel yet pressing focus in our ever-expanding climate engagement initiatives. 


Deploying new and innovative investment and portfolio focused climate solutions is where the Panarchy team has truly excelled. Whether it be the Company & Portfolio Climate Mapping framework, portfolio wide Climate Goals and Guardrails, or the more focused Carbon Baseline Questionnaire and Carbon Impact Scorecard, the Panarchy team is well equipped to bridge the gap between investee climate challenges and Coalition solutions.


GIGATON COALITION – Who Should Join?


Since our inception in 2018, Panarchy Partners has been an active contributor to the sustainable and impact investing ecosystem in Singapore and the region. We have been honoured to have regional and global partners already assisting us with our Global Panvest Fund (GPF) and its climate conscious approach to investing. We expect many of our existing partners to become part of the Gigaton Coalition too. A non-exhaustive list of potential coalition partners would include: 


Investors

  • Investors in proposed AGF (SWF, Endowments, Foundations, Pension Funds, Family Offices, etc.)

  • Existing investors in GPF 

Investments

  • of AGF/GPF portfolio, (Phase 1)

  • of AGF/GPF investor portfolios (Phase 2)

  • of other Investors (Phase 3)

Solution Providers

  • Technology solutions

  • Climate software and applications 

  • Hardware for decarbonization

  • Climate Governance

  • Governance Initiatives

  • Climate Consultants

  • Policy Support

  • Climate Think Tanks

  • Climate policy players


GIGATON COALITION – Value Creation


For investors, the Gigaton Coalition offers the prospect of achieving climate impact at scale, learning best practice and being a leading voice in enhancing impact. It mitigates the risk of greenwashing portfolio impact claims and provides exclusive, practical, and tested climate solutions for the decarbonization of partner investment portfolios (i.e. beyond AGF). Furthermore, the Gigaton Coalition will provide investors tangible proof of impact outcomes through its collaborative activities, a must-have requirement by an increasing number of industry, stewardship and regulatory codes. As an example, the UK Stewardship Code requires investors demonstrate their value to their clients through their collaborative actions. 


Investee companies with climate strategies stand to gain patient financial capital from investors looking to discuss and understand the climate challenges they face. Their carbon reduction ambitions should also become more realizable through the tailored climate solutions suggested by the Coalition. There is also the prospect of growing investee customer bases via enhancing client climate solutions. Finally, investees successfully achieving their carbon ambitions will be recognized for their actions as change makers, potentially attracting more investors. 


Climate solution providers with varying incentives to participate should find willing and eager partners committed to decarbonization. Solution providers motivated by commercial gains could find new markets and opportunities, while not-for-profit solution providers (e.g., Think tanks, Academia, etc.) will gain from knowledge sharing and the impact they are creating. 


Society will benefit from financial capital being deployed at scale to tackle humanity’s climate challenge.  


GIGATON COALITION - Invitation


The Gigaton Coalition stands poised to revolutionize the landscape of climate impact investing. It aims to become a pioneering investor-investee led platform, supported by climate solution providers, delivering practical and financially feasible solutions for investments. Panarchy Partners is inspired by this ambitious opportunity, which will enable it to fully leverage its team’s expertise, Panvesting experience, and passion. As we tackle the climate challenge, the success of this Coalition will be guaranteed by the value it creates for not only investors and their investments, but also solution providers and society as a whole.


If you believe that you have a role to play in the Gigaton Coalition, we look forward to hearing from you.


Happy Panvesting, 


Munib Madni,


Founding Panvestor




[1] Global Carbon Budget Office

[2] Key Messages From the GCB 2023 and FAQ

[3] Friedlingstein et al 2023

[4] Panarchy Team carbon impact categorization method can be shared on request     


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