The world is rapidly approaching 1.5 degrees Celsius of warming, and investors are deeply concerned about the increasing physical risks this will bring to their assets.
According to the Intergovernmental Panel on Climate Change, for the world to remain below 1.5 degrees, global emissions in 2030 need to be 45 per cent lower than 2010 levels. Yet the UN’s latest synthesis of countries’ 2030 emissions reduction targets projects global emissions to be 16 per cent higher than 2010 levels in 2030.
Time is running out for countries to commit to more ambitious and effective climate change policies, and avoid catastrophic temperature rise.
While it is good news that many countries have increased their 2030 targets in the leadup to the Glasgow Climate Conference, unfortunately, hardly any countries’ targets are consistent with 1.5 degrees of warming, or even two degrees. Hardly any countries have adequate policies in place to achieve their targets. And some major emitters still have not committed to net zero emissions by mid-century.
Institutional investors want to be part of the solution to the climate crisis, but without the right policy signals, they cannot invest the trillions of dollars needed in adaptation, renewable energy and zero emissions infrastructure and technology.
Investors are now speaking up and using their influential voices to call for bolder action on the climate crisis.
733 investors from around the world, collectively managing more than US$52 trillion in assets (more than half of all global assets under management), have joined the 2021 Global Investor Statement to Governments on the Climate Crisis. The statement urges governments to:
- Strengthen their 2030 targets before COP26, to align with limiting warming to 1.5 degrees Celsius.
- Commit to a domestic mid-century, net zero emissions target.
- Implement domestic policies to deliver these targets, incentivize private investments in zero-emissions solutions and ensure ambitious pre-2030 action.
- Ensure COVID-19 economic recovery plans support the transition to net zero emissions and enhance resilience.
- Commit to implementing mandatory climate risk disclosure requirements aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) .
A climate policy report card released on 18 October by AIGCC, Ceres and IGCC found that most G20 countries do not have policies in line with these recommendations. These countries risk missing out on the enormous investment opportunities in tackling the climate crisis.
Countries which are progressive on climate policy – such as by implementing mandatory climate risk disclosure and building decarbonisation into their COVID-19 economic recovery – will attract the largest capital flows towards the net zero transition. In turn, investors can use capital allocation and stewardship to support sustainable activities that generate jobs and economic growth, shift away from carbon-intensive activities and increase resilience.
The 2021 Global Investor Statement to Governments on the Climate Crisis was coordinated by the founding partners of the Investor Agenda: AIGCC, CDP, Ceres, IGCC, IIGCC, PRI and UNEP FI. It sits alongside the Investor Agenda’s Investor Climate Action Plans (ICAPs) Expectations Ladder and Guidance, which calls on investors to engage with policymakers as a critical way for investors to help achieve a just transition to a climate-resilient, net zero economy by 2050 or sooner.
The enormous investor support for the 2021 Global Investor Statement is a positive sign of the increasing investor participation in climate policy advocacy.
Signatories include some of the world’s largest institutional investors and asset managers, including State Street Global Advisors, PIMCO, AMUNDI, Legal & General Investment Management, Franklin Templeton Investments, UBS Asset Management, Aegon NX, Insight Investment AXA Investment Managers, DWS Group, Schroders, Sumitomo Mitsui Trust Asset Management, Aberdeen Standard Investments, AllianceBernstein, Fidelity International, Aviva Plc, BNP Paribas Asset Management, MFS Investment Management, and Allianz Global Investors.
