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Investors Managing $32 Trillion Demand Climate Action

Amy Brown headshotWords by Amy Brown
Investment & Markets
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If world leaders leave the COP24 global climate negotiations this week in Katowice, Poland without putting teeth into the goals of the Paris Agreement, a record 415 investors managing $32 trillion are among those predicting dire consequences. Investors are increasingly worried not only about the state of the planet but of the global economy if climate action continues to move at a glacial pace.  

Among the demands outlined in the 2018 Global Investor Statement to Governments on Climate Change is to phase out thermal coal, set a price on carbon emissions and end fossil-fuel subsidies. If no action is taken, and the world warms by 4 degrees Celsius (7.2 degrees Fahrenheit), the outcome would be $23 trillion in global economic losses over the next 80 years, investors warned.

“This is permanent economic damage three or four times the scale of the impacts of the 2008 Global Financial Crisis, while continuing to escalate,” the group said in the statement. “Much more needs to be done by governments to accelerate the low-carbon transition.”

Pressure is on in Poland

The Paris Agreement, signed in 2015 by 195 countries, calls for holding the increase in the global average temperature to well below 2°C above pre- industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels.

It was the first-ever universal, legally binding climate deal. The Trump administration announced last summer that the U.S. would leave the agreement, although that will take some years to be fully in effect.

The 24th Conference of the Parties (COP24) to the United Nations Framework Convention on Climate Change (UNFCCC) is the deadline agreed by countries to decide how they will implement the Paris Agreement.

“Without success in Katowice there is no success of Paris,” said Poland Secretary of State H.E. Michal Kurtyka and President of COP24 as the event opened.  

Uncertain prospects for success

Yet the prospect of achieving that goal seems to be diminishing for every passing day as the negotiations near their conclusion this Friday. And among those most worried are investors.

“We are concerned that the implementation of the Paris Agreement is currently falling short of its agreed goal,” the group of investors, including Allianz SE, HSBC Global Asset Management and Schroders Plc said in the statement. “There is an ambition gap . . . [that] would lead to an unacceptably high temperature increase that would cause substantial negative economic impacts.”

Climate change, they insisted, needs to be addressed “with urgency. It is vital for our long-term planning and asset allocation decisions that governments work closely with investors to incorporate Paris-aligned climate scenarios into their policy frameworks and energy transition pathways.”

And the investors underscored a point they’ve made before, as reported by TriplePundit: they need companies to report reliable climate-related financial information to price climate-related risks and opportunities most effectively.

Create value instead of inviting disaster

“The reality is that the long-term nature of the challenge has, in our view, met a zombie-like response by many,” Chris Newton, Executive Director Responsible Investment of IFM Investors said in the statement. “This is a recipe for disaster as the impacts of climate change can be sudden, severe and catastrophic.”

Investors would clearly not like to see $26 trillion in economic benefits slip away if negotiations in Katowice fail to rally world leaders to act. That’s the figure that emerged earlier this year from the Global Commission on the Economy and Climate, outlining the economic benefits of a global shift to a low-carbon economy.

“The transition to a low-carbon economy presents numerous opportunities to create value, and investors who ignore the changing world do so at their own peril,” said New York State Comptroller Thomas P. DiNapoli. The comptroller represents the ​New York State Common Retirement Fund,​​ which manages $207 billion in assets - and is one such fund joining the 415 investors urging more forceful action.

Image credit: UNFCCC/Flickr

Amy Brown headshotAmy Brown

Based in southwest Florida, Amy has written about sustainability and the Triple Bottom Line for over 20 years, specializing in sustainability reporting, policy papers and research reports for multinational clients in pharmaceuticals, consumer goods, ICT, tourism and other sectors. She also writes for Ethical Corporation and is a contributor to Creating a Culture of Integrity: Business Ethics for the 21st Century. Connect with Amy on LinkedIn.

Read more stories by Amy Brown