500 Global Investors Managing Trillions Mobilize Action in Wake of Paris Climate Agreement
January 27, 2016 /3BL Media/ - On the heels of the historic international climate agreement in Paris, more than 500 global investors gathered today at the United Nations to begin mobilizing the trillions of dollars needed to catalyze the global clean energy transition.
Speaking just days after scientists confirmed that 2015 was the hottest year on record, UN Secretary-General Ban Ki-moon called on investors to help achieve a doubling in global clean energy investments by 2020. While those investments hit a record high of $329 billion in 2015, significant gaps remain in growing clean energy at the levels necessary to meet the Paris climate accord’s goal of limiting global temperature rise to below 2 degrees Celsius.
“Today, I call on the investor community to build on the strong momentum from Paris and seize the opportunities for clean energy growth. I challenge investors to double – at a minimum – their clean energy investments by 2020,” Ban told the crowd of financial leaders, who collectively represented more than $22 trillion in assets. “Sustainable, clean energy is growing, but not nearly fast enough to prevent excessive global warming that would trigger profound economic disruption and human suffering. The investor community is of critical importance if we are to move from aspirations to action.”
Organized by the nonprofit Ceres, the United Nations Foundation and the United Nations Office for Partnerships, the all-day meeting focused on catalyzing a shift in the global economy toward exponentially more clean energy and far less carbon – fast enough to meet the Paris climate accord’s long term objective of reducing net greenhouse gas emissions to zero in order to avoid dangerous climate warming.
“Investors are better positioned than ever before to address climate risks and seize the economic opportunities presented by clean energy,” said Mindy Lubber, president of Ceres and director of its Investor Network on Climate Risk (INCR), the U.S. network of pension funds and asset managers working to address the financial risks of climate change. “Ultimately, global investment portfolios need to shift far more capital to low-carbon business activity and away from risky high carbon sectors that may perform poorly in the years ahead.”
Lubber called on all investors globally to set ambitious clean energy investment commitments; establish clear goals for reducing carbon risk exposure in their portfolios; encourage regulators worldwide to implement mandatory climate risk disclosure requirements; and to continue advocating for policies such as economically meaningful carbon pricing and ending fossil fuel subsidies.
"Cities and businesses recognize the economic benefits that come with fighting climate change, and they're setting a great example by establishing clear goals and measuring the impact of their work," said Michael R. Bloomberg, founder of Bloomberg LP, three-term Mayor of New York City, United Nations Secretary General's Special Envoy for Cities and Climate Change, and chair of the Financial Stability Board's Task Force on Climate-related Financial Disclosures, who joined a discussion on climate risk disclosure. "The more reliable information investors have about climate change, the easier it is for them to make informed decisions, and that will help drive more financing to projects that reduce carbon pollution and promote sustainable economic growth."
While acknowledging that stronger, more comprehensive actions are needed, dozens of investors speaking at the Summit touched on progress they are making in these areas and innovative climate solutions already underway.
“Changes in the marketplace and the worldwide commitment to address global warming are creating enormous opportunities in low-carbon industries that can’t be ignored,” said New York State Comptroller Thomas P. DiNapoli, who last month launched a new $2 billion low-carbon index fund as part of a $5 billion commitment to sustainable investments. “The climate threat we all face puts our investments at risk and makes the creation of the low-carbon future critical to our environment, public health and the global economy.”
“On the heels of our 2014 commitments to double clean energy investments to 2 billion euro, we now want to raise the bar even further by quadrupling that increase, to 5 billion euro, by 2020,” said Erik van Houwelingen, board member of ABP, a major Dutch pension fund. “We’re also aiming to reduce the carbon footprint of our 100 billion euro listed equity portfolio by 25 percent and doubling our investments in high sustainable companies that deliver solutions to social and environmental issues like climate change. We encourage others to also set ambitious goals in contributing to the transition towards a low carbon economy.”
“We are committed to working to drive up corporate demand for clean energy by putting pressure on big listed corporations to set clear targets for switching away from fossil fuel dependent energy sources and towards 100% renewable electricity supplies,” added Philippe Desfossés, CEO of French public sector pension fund ERAFP. “ This kind of shift is fundamental and must be accelerated if we are to secure a future business model that fits within a 1.5C pathway. We have also measured the carbon footprint of our stocks portfolio since 2014, from which we know that last year our portfolio was 16% less carbon intensive than our own benchmark.”
A key focus of the Summit was exploring the types of capital flows necessary and increasingly available to actualize the carbon-reducing commitments made in Paris by 187 countries – commitments that the International Energy Agency estimates would require investments of $16.5 trillion by 2030. Last week, Standard & Poor’s predicted the global market for renewables and green finance – especially in countries like India and China – will accelerate dramatically in the next 15 years as investors respond to the dual incentives of a renewed focus on climate polices from national governments and the rapidly falling price of clean technologies.
Among the most significant investment opportunities in the coming years is the electric power sector which – according to a study released today by Ceres and Bloomberg New Energy Finance (Mapping the Gap) – presents a $12 trillion opportunity for renewable energy alone over the next 25 years, with the biggest opportunities being solar and wind power in emerging markets.
Michael Liebreich, chairman and founder of Bloomberg New Energy Finance, says the report makes clear that renewable energy such as wind and solar are poised for a takeoff due to declining costs that often make them fully competitive with fossil fuels, even without subsidies. “The clean energy industry could make a very significant contribution to achieving the lofty ambitions expressed by the Paris Agreement,” he said. “To do so, however, investment volume is going to need to more than double, and do so in the next three to five years. That sort of increase will not be delivered by business as usual; closing the gap is both a challenge and an opportunity for investors.”
The study details how the global renewable energy buildout in the power sector can be financed, and estimates that investment in new renewable energy projects in the electric sector are expected to surge in the next two decades by nearly $500 billion per year above current investment levels. The study also highlights near-term investment needs in clean energy – specifically, global clean energy investment in the electric sector should more than double from current levels by 2020 in order to achieve COP21’s temperature goals.
Ceres’ Investor Summit on Climate Risk builds on the growing momentum from the financial community, including dozens of investors attending the Paris climate talks to call for a strong climate agreement and 400 global investors calling last fall for a meaningful carbon price and the phasing out of fossil fuel subsidies.
About the 20126 Investor Summit on Climate Risk
Held biennially at the United Nations since 2003, the Investor Summit on Climate Risk is the preeminent forum for institutional investors to discuss the implications of climate change for capital markets and their portfolios. The 2016 event convenes investors, business leaders and others seeking to accelerate the shift to a clean energy future, and tackle the risks posed by climate change. Ceres, the United Nations Foundation, and the United Nations Office for Partnerships are co-hosting the Summit.
Ceres is a nonprofit sustainability organization mobilizing business leadership on climate change, water scarcity and other global sustainability challenges. Ceres has helped organize seven Climate Investor Summits at the UN, the first in 2003, and introduced the term “climate risk” into the financial lexicon in 2002. Ceres directs the Investor Network on Climate Risk (INCR), a network of more than 110 institutional investors with collective assets totaling more than $13 trillion. Ceres also directs BICEP, an advocacy coalition of 36 businesses committed to working with policy makers to pass meaningful energy and climate legislation. For more information, visit www.ceres.org or follow on Twitter @CeresNews.