COP Blog #2: Five reasons why fighting climate change is like parenting

The importance of COP26 to the future of the investment industry is becoming clear. As I wrote in my last blog, tackling climate change will present the industry with huge opportunities over the coming decades, but it will also bring new challenges and responsibilities.

EY continues to analyze the detailed implications of COP26 and produce guidance for wealth and asset managers. These are valuable insights, but there is a lot to process! Industry leaders wouldn’t be human if they didn’t feel a little daunted by the task ahead. Yet, CEOs also know that they can’t afford to delay decarbonization: to stand still is to fall behind. The problem is knowing where to start. How can firms make meaningful progress when so many questions remain unanswered?

The challenges of decarbonization have some parallels with another huge responsibility – the raising of children. All of us have gone through this as a recipient of the process (child), and for some, also as the provider (parent). It’s a vital mission, as well as being a complex, long-term challenge that’s inherently unpredictable. And while it calls for ambition and vision, what it requires above all is a willingness to get started and forge steadily ahead, despite not knowing the ultimate destination.

The analogy has obvious limitations, but I hope you can forgive them because I think there are some real similarities, too. After all, fighting climate change is not so much a finite project as a lifetime commitment. Here are five lessons we can learn either as parents, or from our own parents, that, in many respects parallel the challenges of addressing decarbonization:

1. Engage proactively. As with many of life’s bigger challenges, overcoming significant hurdles begins with proactive engagement. Starting begets progress, progress derives success and success accelerates further positive action as we navigate to the ultimate solution.
2. Learn on the job. A key benefit of getting started is that it gives us the opportunity to try things, to “fail small,” to learn from our mistakes and to improve with experience. We don’t need to be decarbonization experts on day one.
3. Focus on good behavior. Targets are vital but achieving them is all about culture and behavior. Establishing the proper incentives is crucial to continuing progress, breaking through barriers and sustaining momentum along a road with an imprecise end goal.
4. Don’t aim for perfection. Targeting perfection can be distracting, and even damaging, especially when so much data is inconsistent, not reliable or non-existent. Aim for progress, not perfection, and learn to “move forward with uncertainty.” It may feel uncomfortable, but COVID-19 has given us plenty of practice.
5. Communicate clearly. Transparent, frequent communication is vital to managing expectations, ensuring that all stakeholders are on the same page and avoiding the risks of greenwashing and inauthenticity.

If these thoughts have a defining theme, it’s that the journey is as important as the destination, especially when the journey might take decades. It’s also because starting the journey as soon as possible is critical to achieving the best outcome.

Starting early allows us to learn from any potential mistakes, and it increases our chances of getting things right in the long term. As when saving for retirement, it also allows the magic of compounding to get to work – a much safer bet than pinning all of our hopes on a last minute surge for the line. And, psychologically, starting early builds confidence and momentum among clients, staff and other stakeholders.

So, as we move into a new year, wealth and asset managers should keep 2050 in mind, but focus on 2022. Accept that the future is uncertain, that there will be forks in the road and that missteps will be made – and start anyway.

I’ll leave you with some further reading on how the financial services industry can fund the transition to a more sustainable future.

?The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.