Guardians of Our Galaxy: Climate Change and How Investors Can Promote Intergenerational Fairness and Protect Children’s Rights

“We do not inherit the earth from our ancestors, we borrow it from our children.” As so often, indigenous wisdom has much to teach us about how we can best steward our planet towards a sustainable footing. As temporary custodians of Earth, we should heed this Native American proverb before handing it on to future generations.

The multifarious crises that humanity has created for itself, and the way in which they interact, are a failure of our moral duty to look after the planet for all its current and future inhabitants. There is deep intergenerational unfairness embedded in the climate crisis, which sees a child born today with an eight times smaller carbon budget than their grandparents if we are to achieve the goal of limiting global warming to 1.5°C. There is also a deep inter-country injustice, which sees the average child born in the USA using a 15 times larger budget than one born in India. There are species that we take for granted that our grandchildren may never see, and if we do not course correct who knows what future we might bequeath to them.

For those unmoved by such moral pleas for action, there is a clear business case to do so as well. Growing consumer awareness and pressure on companies to demonstrate values throughout their business model, including their supply chains, is driving change. This means, more so than ever, financial institutions need to understand where they are investing customers’ money.

To make this possible, we need a step-change across business operations. It requires better due diligence procedures for financial institutions. It also demands better supply chain and operational due diligence and practices, as well as disclosure, from the companies that financial institutions invest in and lend to. This should raise standards across the board and the more end investors call for this from their banks, pension funds, and insurers, the sooner those standards will rise.

There are also risks for investors and companies attached to failing to meet the developing web of rules and norms connected to protecting human rights, including those of children specifically.

Under the Sustainable Finance Disclosure Regulation (or SFDR), EU investors will have to disclose details of indicators of their “principal adverse sustainability impacts.” This includes the share of investments in companies exposed to significant risk of child labour. It will also require disclosure of alignment with key standards like the International Labour Organization Conventions and the UN Guiding Principles on Business and Human Rights. These norms are being hard-wired into legislation such as the EU taxonomy, and have also been used to set standards expected of corporate behaviour in climate litigation, such as in the judgment in the Dutch case of Milieudefensie versus Shell.

The rise of climate litigation and its inclusion within the liability pillar of the Task-Force on Climate-related Financial Disclosures (TCFD) framework means that investors are increasingly aware of the risks that may pose to portfolios. Climate litigation has spearheaded the consideration of the rights of children, ensuring future generations play an increasingly prominent role in legal rulings as children turn to the courts to protect their future. In Germany, the successful challenge to the national climate target was founded in part on the unfairness of allowing “one generation […] to consume large portions of the CO₂ budget while bearing a relatively minor share of the reduction effort, if this would involve leaving subsequent generations with a drastic reduction burden and expose their lives to serious losses of freedom.” The German constitutional court ruled that it was necessary to increase the climate law’s ambition to preserve the natural foundations of life in such a way that they are still sufficient for future generations.

In Australia, although the government successfully appealed a ruling that the environment minister should owe future generations a duty of care to protect them from climate change, the judgement of the first instance court was still damning:

“It is difficult to characterise in a single phrase the devastation that the plausible evidence presented in this proceeding forecasts for the Children. As Australian adults know their country, Australia will be lost and the World as we know it gone as well. The physical environment will be harsher, far more extreme and devastatingly brutal when angry. As for the human experience – quality of life, opportunities to partake in nature’s treasures, the capacity to grow and prosper – all will be greatly diminished. Lives will be cut short. Trauma will be far more common and good health harder to hold and maintain. None of this will be the fault of nature itself. It will largely be inflicted by the inaction of this generation of adults, in what might fairly be described as the greatest inter-generational injustice ever inflicted by one generation of humans upon the next.”

What is Aviva, a company with a 325-year history, to do in the face of such intergenerational injustice. We want not only to make sure that we uphold the values behind the Children’s Rights and Business Principles, as well as other human rights norms and principles which we have embedded in our human rights policy, but we want to help to build a better, fairer, and ultimately more sustainable financial system. This includes calling for better human rights due diligence within legal and regulatory frameworks, including for the rights of children.

As well as seeking to act as good stewards of the investment we make on behalf of our customers, we want to be stewards of the system into which we invest our customers’ money. We call this ‘macro stewardship,’ and it involves engaging with regulators, policymakers, and other key influencers to correct the market failures and systemic risks that threaten all our futures and those of generations to come.

Most people saving for their future imagine providing for their children and grandchildren with the hard-earned money that they entrust to us to invest for them, and they don’t realise that their investments could in fact be undermining that future. We all owe it to the children of today and to future generations to build a more sustainable financial system. After all, we only have the planet on loan from them.