MCAF COP28 update Part II: Putting Human mobility on the Stewardship agenda

This is part 2 of our 3-part review of MCAF’s COP28 webinar. To celebrate the coming together of global investors for the COP28 in December, MCAF hosted a webinar on 5 December 2023: ‘The future of human capital in a hotter world.’ New York and London-based institutional investors and human rights and technology experts came together to share ideas on how investors can better understand the potential for human mobility to impact on capital allocation across different regions and industries. Webinar speakers included Sudip Hazra, Director of the First Sentier MUFG Sustainable Investing Institute; Marcela Pinilla, Director of Sustainable Investing at Zevin Asset Management; and Lucie Audibert, a lawyer and legal officer working with Privacy International. This blog focuses on thematic research and stewardship opportunities at the intersection of migration, climate change and social equity. It draws on remarks by Marcela Pinilla at Zevin Asset Management.

Bringing a climate & racial equity lens to human mobility research and stewardship 

As part of a longer conversation on Zevin’s approach to stewardship and engagement with companies on human rights risk, Pinilla explained how Zevin, a US-based assetmanager, brings an intersectional racial equity and climate change lens into their security selection and active ownership/engagement processes. As climate change and migration, both within countries and across international borders increase in profile, Zevin is looking at how megatrends interact to effect portfolio outcomes, and to locate companies to engage with to enable safe, stable climate adaptation processes in the United States and beyond.

Climate change as an investment risk multiplier for US investors

Pinilla highlighted that as a US investor, migration policy and the treatment of refugees, asylum seekers and immigrants is material across multiple issues. It matters for the state of infrastructure and climate adaptation, as regional mobility will be key to adaptation efforts across the continental US [1]. It also matters for key sectors of the economy including healthcare, education, agri-food,  and construction, as the US has one of the highest rates foreign born workers in the workforce, at around 18% in 2022 [2]. These socioeconomic risks can be identified at different levels, at the county, state and regional levels, which investors need to start assessing in a more systematic manner. 

The future of labor markets and the ability for workers to support their families and a resilient US economy is a unifying question for investors. Bringing a human mobility lens into the analysis of US labor market dynamics, and what this means for key industries, is an area of particular interest to Zevin. According to Pinilla, every investor should be interested in how the interaction of climate-related extreme weather and migration policy shape the future of important regional economic growth and for the workforce of the future.

Figure: Labor mobility defines the US economy and key industries, including housing, finance, and healthcare. Climate impacts, environmental risk factors, and international migration patterns add layers of complexity that investors seeking to build resilient portfolios need to understand. Map via: https://storymaps.arcgis.com/stories/33d4ca0a837948feae27a0d5c73f2155 

Mobility as a response to a range of social and environmental pressures

Drilling down into the interaction of environmental risk and human mobility, Pinilla explained that the Ogallala aquifer, which provides water to one third of the middle third of the country [3],  has been drawn down by 60%.  This creates major risks for water intensive agri-business and other manufacturing industries across the region. As aquifer depletion continues, large-scale out migration may become the only viable response, and this can be an orderly transition or disorderly abandonment of a large water stressed region of the US. Investors have a unique role in speaking up for medium term risks and sharing potential solutions to enable resettlement and adaptation to environmental risks for people and the economy. 

Beyond acute water risks that may accelerate internal migration patterns, heat wave and power system-related fires are also disrupting power supplies. Heat wave risk and power system failures can interact to create larger risks to both human life and economic output [4]. Pinilla highlighted research indicating millions of people in the US are at risk of power interruptions from a combination of climate impacts and failure to maintain and upgrade local and regional grid systems [5]. Upgrading the US power grid and investing in infrastructure updates and more climate resilience cities is a major opportunity. Immigrant labor and upskilling and retraining or large segments of the workforce can enable this. But labor mobility and safe migration pathways must be enabled for this to be possible. Pinilla flagged the central role investors can play in ensuring that US climate adaptation processes and the clean energy and infrastructure buildout happen with racial and gender equity as core organising principles. 

Investors need to map new environmental risk drivers of human mobility

In order to better understand the future shape of US and continental labor markets, investors need to look more closely at the interaction of environmental risks with migration-related decision making. To illustrate this, Pinilla shared a story of a Mexican family dealing with extended drought and the loss of predictable rainfall, obliging them to relocate. This simple example illustrates the complex interaction of environmental and economic drivers of household migration. She also shared new research from the Climate and Migration Coalition describing how mobility patterns are evolving in large markets, including Mexico, the Philippines, and Pakistan [6]. Lessons learned from across the US on the interaction of migration policy and economic resilience are ready for investors to apply in their engagement dialogues with companies. Investors who want to learn more and inform their engagements with new research on human mobility can join the MCAF Stewardship Track.

This is part two of a three-part recap of the MCAF COP28 webinar. See part 1 to learn more about work at the MCAF Research Track.

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References

[1] Maxim, A. & Grubert, E. (2021) 'Effects of climate migration on town-to-city transitions in the United States: proactive investments in civil infrastructure for resilience and sustainability:'  https://iopscience.iop.org/article/10.1088/2634-4505/ac33ef 

[2] US Bureau of Labor Statistics (2023) 'Foreign-born workers were a record high 18.1 percent of the U.S. civilian labor force in 2022:'  https://www.bls.gov/opub/ted/2023/foreign-born-workers-were-a-record-high-18-1-percent-of-the-u-s-civilian-labor-force-in-2022.htm# 

[3] Sustainalytics (2022) 'Water Risks, the Great Plains, and the Packaged Food Industry:' https://connect.sustainalytics.com/inv-esg-water-risks-great-plains-packaged-food-2022; HBR (2022) 'From Droughts to Floods, Water Risk Is an Urgent Business Issue:' https://hbr.org/2022/11/from-droughts-to-floods-water-risk-is-an-urgent-business-issue# 

[4] Stone et al (2021) 'Compound Climate and Infrastructure Events: How Electrical Grid Failure Alters Heat Wave Risk:'   https://pubmed.ncbi.nlm.nih.gov/33930272/ 

[5] 'Surging Power Outages and Climate Change:'  https://assets.ctfassets.net/cxgxgstp8r5d/73igUswSfOhdo7DUDVLwK7/bb0a4e95e1d04457e56106355a1f74b9/2022PowerOutages.pdf 

[6] 'The Climate and Migration Coalition:' https://climatemigration.org.uk