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Global investors representing $41trn call on world leaders for bolder climate policies

Investment groups say lack of ambitious policies and company disclosures is holding them back from investing for a net-zero economy

A conglomerate of global investors has written to government leaders calling on them to urgently implement stronger climate policies to avoid global temperatures moving above 1.5 degrees Celsius, as they say their own climate ambitions are inhibited by government commitments to emissions reductions.

Ahead of the G7 starting today and COP26 in November, a letter coordinated by The Investor Agenda (the founding partners of which are Asia Investor Group on Climate Change, CDP, Ceres, Investor Group on Climate Change, Institutional Investors Group on Climate Change, Principles for Responsible Investment and UNEP Finance Initiative) the investors also said governments needs to take action to ensure companies are disclosing climate impact information correctly allowing asset allocators increased transparency and access.

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“We stand at the beginning of a pivotal decade in which institutional investors and government leaders worldwide have the power to raise ambition and accelerate action to tackle the climate crisis. If we do not meet this challenge and change course immediately, the world could heat in excess of 3-degrees Celsius this century – far beyond the goal of the Paris Agreement to limit the global average temperature rise to no more than 1.5-degrees Celsius,” the letter said.

Some 457 investment groups have signed the letter representing $41trn.

It added that investors and governments have a common goal to reduce net carbon dioxide emissions by 45% from 2010 levels by 2030, and reduce of all greenhouse gas emissions essential to reach the target of net-zero emissions by 2050 or sooner.

“In this shared global crisis, investors and governments each have a responsibility to act swiftly and boldly,” the letter continued. “Investors are taking climate action in line with The Investor Agenda, with more investors than ever before embedding net zero goals and strategies into their portfolio decisions, engaging companies to cut their emissions and calling on policymakers to deliver robust climate action.”

See also: – Third of world’s AUM now targeting net zero as support for asset manager framework grows

However, investors urged the government leaders to step up in their efforts.

“While we recognise the differentiated responsibilities and respective capabilities of countries, we believe that those who set ambitious targets in line with achieving net-zero emissions, and implement consistent national climate policies in the short-to-medium term, will become increasingly attractive investment destinations.

“Our ability to properly allocate the trillions of dollars needed to support the net-zero transition is limited by the ambition gap between current government commitments (as set out in the Nationally Determined Contributions (NDCs)) and the emission reductions needed to limit global average temperature rise to 1.5-degrees Celsius.

“In addition, as owners of (or those representing owners of) companies, we need access to adequate information on how these companies are assessing and managing the risks and opportunities presented by climate change. Government policy has a critical role to play in increasing our access to and affirmative disclosure of such information.”

See also: – Markets are not pricing in the consequences of climate change

The Investor Group called on leaders to address gaps in climate ambition, policy action and risk disclosure by carrying out the following:

  1. Strengthen country NDCs for 2030 before COP26, to align with limiting warming to 1.5-degrees Celsius and ensuring a planned transition to net-zero emissions by 2050 or sooner.
  2. Commit to a domestic mid-century, net-zero emissions target and outline a pathway with ambitious interim targets including clear decarbonisation roadmaps for each carbon-in­tensive sector.
  3. Implement domestic policies to deliver these targets, incentivise private investments in zero-emissions solutions and ensure ambitious pre-2030 action through: robust carbon pricing, the removal of fossil fuel subsidies by set deadlines, the phase out of thermal coal-based electricity generation by set deadlines, the avoidance of new carbon-intensive infrastructure, such as coal power plants, and the development of just transition plans for affected workers and communities.
  4. Ensure Covid-19 economic recovery plans support the transition to net-zero emissions and enhance resilience by facilitating investment in zero-emissions energy and transport infrastructure, avoiding public investment in new carbon-intensive infrastructure and requiring carbon-intensive companies that receive government support to enact climate change transition plans.
  5. Commit to implementing mandatory climate risk disclosure requirements aligned with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, ensuring comprehensive disclosures that are consistent, comparable, and decision-useful.

The investors said they are committed to working with governments to ensure policy mechanisms are developed and implemented in order to transition to a climate resilient net zero emissions economy by 2050 or sooner and said they are open to engagement with policymakers.

“We urge all governments to step up their collective response to the climate crisis,” it said.

They also highlighted full implementation of the Paris Agreement will create investment opportunities in clean technologies, green infrastructure and other assets, products and services needed in a greener economy.

The full list of investor signatories can be viewed here.

Eoin Fahy, head of responsible investing at KBI Global Investors, which is a signatory to the Investor Agenda, said: “Long-term investors are very aware that lack of action – or delayed action – on climate change will have dangerous consequences.  It is important that investors make clear to policymakers, ahead of COP26, that all countries should strengthen their commitment to ensure an orderly transition to net zero emissions by 2050, or sooner.  We are pleased to support the Global Investors Statement to Governments on the Climate Crisis.”

Michelle Scrimgeour, CEO at Legal & General Investment Management and co-chair of the UK Government’s COP26 Business Leaders Group, said: “Climate change is one of the greatest systemic risks we face today and achieving net-zero by 2050 will be crucial to help steer the world towards a more sustainable future. We will need to see substantial change across industry and society globally to achieve this goal.  As long term investors we play a pivotal role,  not only in decarbonising investment products on behalf of our clients but also influencing the real economy transition by engaging with and holding businesses accountable on their net-zero transition plans.

“As co-chair of the UK Government’s COP26 Business Leaders Group, I am encouraged by the progress we are already making, though there is still much to be done and we all need to play our part. Inaction is simply not an option.” 

Natalie Kenway

Natalie is global head of ESG insight for ESG Clarity. She won Editor of the Year at the Aviva Investors Sustainability Media Awards 2021. Winner of Aegon Asset Management's Institutional Journalist of...