Could polluting companies be forced to pay a climate tax? | Pendal Group
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Could polluting companies be forced to pay a climate tax?

Some say big-polluting companies should be forced to compensate the community for climate change. Pendal Credit ESG analyst MURRAY ACKMAN explains what that means for investors

YOU might have missed it, but last week in Egypt there was a big meeting discussing the future of the world.

Amid war, floods and endless news from China, the 27th UN Climate Change Conference of the Parties (or “COP27”) didn’t get the same headlines as last year’s COP26.

So what was decided at COP27 – and does it matter for investors?

The big announcement was a fund to help developing nations respond to the loss and damage associated with climate change. This has taken three decades to agree to.

Bigger polluters – rich countries and potentially China and oil-producing countries – will compensate poorer countries that pollute less.

Countries that are net exporters of carbon – including Australia – are asked to use some of the money they’ve gained to help those most affected.

Some are calling for this logic to be applied to companies as well as countries.

Heavy emitters, such as fossil fuel companies, could be forced by policy-makers to channel revenue into mitigation efforts.

There are three options for high-emitting companies:

  1. Give profits back to shareholders and let them decide whether or not to invest those returns in climate change solutions. As net zero gets closer, these companies phase down activity.
  2. Heavy emitters invest in transitioning into green companies.
  3. Policy makers take the decision out of company’s hands and apply a tax on emissions to fund a transition.

What does that mean for investors?

This has obvious implications for investors.

If the logic is high emitters bear responsibility for mitigating the impacts of climate change, this adds credit risk. Therefore investors need to be aware of the implications of policy changes.

Find out about

Regnan Credit Impact Trust


About Murray Ackman and Pendal’s Income and Fixed Interest boutique

Credit ESG analyst Murray Ackman joined Pendal’s Income and Fixed Interest team in 2020 to provide fundamental credit analysis and integrate Environmental, Social and Governance factors across credit funds.

Murray has worked as a consultant measuring ESG for family offices and private equity firms and was a Research Fellow at the Institute for Economics and Peace where he led research on the United Nations Sustainable Development Goals.

Pendal’s Income and Fixed Interest boutique is one of the most experienced and well-regarded fixed income teams in Australia.

The team’s awards include Lonsec’s Active Fixed Income Fund of the Year (2022) and Zenith’s Sustainable and Responsible Investments — Income award (2023).

Regnan Credit Impact Trust is an investment strategy that puts capital to work for positive change.

Pendal Sustainable Australian Fixed Interest Fund is an Aussie bond fund that aims to outperform its benchmark while targeting environmental and social outcomes via a portion of its holdings.


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