Investors with $34 trillion demand urgent climate change action

Staff walk outside the venue of the G20 Summit at the International Exhibition Center in Osaka, Japan, 26 June 2019. [EPA-EFE/KIMIMASA MAYAMA]

Investors managing more than $34 trillion in assets, nearly half the world’s invested capital, are demanding urgent action from governments on climate change, piling pressure on leaders of the world’s 20 biggest economies meeting this week.

In an open letter to the “governments of the world” seen by Reuters, groups representing 477 investors stressed “the urgency of decisive action” on climate change to achieve the Paris Agreement target.

Almost 200 nations agreed in Paris in 2015 to limit the global average temperature rise to well below 2 degrees Celsius above pre-industrial times. Current policies put the world on track for at least a 3C rise by the end of the century.

The letter comes ahead of a June 28-29 G20 summit in Japan and as United Nations Secretary-General Antonio Guterres urges countries to back more ambitious climate goals.

“There is an ambition gap… This ambition gap is of great concern to investors and needs to be addressed, with urgency,” a statement from the investors accompanying the letter said.

Macron’s climate change “red line” at G20

Guterres has urged the European Union to ratchet up its carbon reduction target, saying a 55% emissions cut is needed by 2030 for Europe to stay in line with the Paris Agreement. The EU currently plans to cut emissions by 40% compared with 1990.

Meanwhile, France said it will not accept a final G20 communique that does not mention the Paris climate change agreement, as President Emmanuel Macron hardened his position on climate change ahead of the G20 meeting.

“I have one red line. If we don’t talk about the Paris Agreement and if we don’t get an agreement on it amongst the 20 members in the room, we are no longer capable of defending our climate change goals, and France will not be part of this, it’s as simple as that,” Macron said.

18 EU countries now support 2050 carbon neutrality goal

Germany, Greece, Italy and Slovenia have added their names to a growing list of EU countries supporting a carbon neutrality objective for 2050, increasing the chances that a deal will be struck at an EU summit later this week, according to documents seen by EURACTIV.

Strengthening Paris targets

The investor group has urged G20 governments to strengthen their Paris Agreement targets by 2020, phase out thermal coal power and fossil fuel subsidies by set deadlines, set a robust global carbon price by 2020 and improve climate-related financial reporting.

“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,” the statement said.

The investor letter was signed by the chief executives of the seven founding partners of The Investor Agenda, including the Institutional Investors Group on Climate Change and the United Nations-backed Principles for Responsible Investment.

Large investors signing the statement included Legal & General Investment Management and the California Public Employees’ Retirement System (CalPERS), although the world’s two biggest asset managers, BlackRock and Vanguard, did not.

A UN-backed panel of scientists has said limiting global warming to 1.5C would cost at least $830 billion a year but the cost of inaction is thought to be much higher.

Tackling climate change will require 'transforming the whole economy', financiers warn

The global economy has to prepare for a profound transformation in the coming decades as the impact of climate change becomes more tangible, Zurich insurance experts told EURACTIV.com.

Divesting drive

A number of institutional investors have already started to divest from fossil fuel companies due to the risk their assets will become stranded as the cost of renewable energy falls.

Last month, the UN’s Guterres urged countries to end approval for new coal-fired power plants beyond 2020, as well as fossil fuel subsidies.

Carola van Lamoen, Head of Active Ownership at global asset manager Robeco, said: “As investors, in our view the development of new coal power plants after 2020 puts at risk both the return on investment and the world’s chance of limiting global warming in line with the goals of the Paris Agreement.”

However, some countries argue that they need to keep using fossil fuels to power their economic development.

Report: Net-zero targets now cover one-sixth of global economy

Almost a sixth of the entire global Gross Domestic Product (GDP) is now covered by net zero carbon emissions targets, according to a report. EURACTIV’s media partner edie.net reports.

A report by researchers which tracks countries’ progress toward limiting global warming showed that only five out of 32 nations have targets in line with a 2C limit.

A report by the Overseas Development Institute think tank said on Tuesday that G20 governments boosted backing for coal-fired power plants, particularly in poorer nations, from $17 billion to $47 billion a year from 2014 to 2017.

Japan, as host of the G20 summit in Osaka this week, has been criticised for its plans to continue using coal. It backs the use of carbon capture and storage to trap emissions, but the technology is costly and not yet commercial.

EU governments must drive investors’ money where their mouth is

There is a big risk that the European Commission’s proposals on sustainable finance will be watered down when EU member states examine the draft legislation, warn Lis Cunha, Sebastien Godinot and Rachel Owens.

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