Investors with more than $ 41 trillion in assets are urging world leaders to step up their climate game immediately if they don’t want to miss a wave of clean energy investment.
More than 450 large investors signed a letter released Thursday urging governments to establish more ambitious emission reduction targets, detail “clear” road maps for decarbonize polluting industries and implement mandatory climate risk disclosure requirements.
The letter, signed by Fidelity, State Street and other influential asset management firms, marks the strongest appeal to date from investors urging governments around the world to take bolder action to combat the climate crisis. And it comes just when the leaders of G7 countries meet in UK to discuss the Covid-19 pandemic, climate change and other major global issues.
“These gaps – in climate ambition, political action and risk disclosure – need to be addressed urgently,” the signatories wrote in the letter.
The not-so-subtle warning is that countries that drag their feet risk being left behind as investors send their money elsewhere.
“Those who set ambitious goals in line with achieving net zero emissions and implement coherent national climate policies in the short to medium term will become increasingly attractive investment destinations,” the letter said. “Countries that don’t will find themselves at a competitive disadvantage. “
New York State Comptroller Thomas DiNapoli, who signed the letter, told CNN Business that governments around the world must adopt policies to protect the planet.
“We are in the same boat,” DiNapoli said in an email. “Investors cannot face the climate emergency alone, but governments cannot find climate solutions without investors. “
Bolder goals are needed
The investor coalition called on world leaders to “dramatically strengthen” their Nationally Determined Contributions (NDCs) to tackle climate change by 2030 and to “ensure a planned transition to net zero emissions” of by 2050 or earlier.
In April, President Joe Biden announced that the United States would aim to reduce greenhouse gas emissions by 50 to 52% below 2005 levels by 2030.
However, the investor group, which also includes Allianz Global Investors and the California Public Employees Retirement System (CalPERS), warned that “all governments” must accelerate these targets to limit the rise in global temperature.
“Our ability to properly allocate the trillions of dollars needed to support the net zero transition is constrained by the ambition gap between current government commitments,” the letter says, “and the emission reductions needed to limit the increase in global average temperature to 1.5 degrees Celsius. “
The signatories added, “If we don’t rise to this challenge and change course immediately, the world could heat up to over 3 degrees Celsius this century. “
DiNapoli said the goals of the NDC as defined by Biden are “strong, but we need more information on how we are going to achieve them.”
“We are looking for tangible investments in the infrastructure bill and other proposals that will provide a roadmap,” he said.
Mandatory climate disclosures coming soon?
In a separate letter from 180 investors with $ 2.7 trillion in assets, dozens of nonprofits and 155 companies, including Apple, Uber and Salesforce, called on the Securities and Exchange Commission to demand climate disclosures . The group argued that businesses and investors need access to consistent, comparable and reliable information to assess the risks posed to the economy and to specific businesses.
“While there is a cost to complying with the SEC’s climate disclosure rules,” the letter said, “it is much cheaper for companies and their investors than ignoring the risk.”
Gary Gensler, Chairman of the Securities and Exchange Commission, recently told Congress it plans to introduce new rules for corporate climate information disclosures later this year.
Last month the US Chamber of Commerce opposes bill this would require the SEC to establish climate risk disclosure measures and public companies to disclose their financial and business risks related to climate change.
“Disclosures should be used to protect investors and should not be used as a means to achieve political objectives outside the scope of federal securities laws,” the House wrote in a letter.
“Our house is on fire”
The debate on how to respond to the climate crisis comes as the public, business leaders and regulators are increasingly aware of the consequences of climate change.
Federal Reserve Chairman Jerome Powell said last week “there is no doubt” that the climate crisis poses “profound challenges to the global economy and certainly to the financial system”.
European Central Bank President Christine Lagarde urged her fellow central bankers to recognize how the climate crisis could cause “financial instability” and complicate central bank management of the economy.
“Our house is on fire,” Lagarde said at the Green Swan conference.
Tobias Adrian, director of the IMF’s Monetary and Capital Markets Department, told CNN Business that The climate crisis could “absolutely” trigger a financial crisis.
Mindy Lubber, CEO of Ceres, a sustainability nonprofit that helped organize the letter to investors, said investors are aware of the substantial risks of good climate policy.
“Investors know the impacts of the climate crisis are systemic financial risks,” Lubber said in a statement, “and will get worse if left unchecked”.