Global investors urge G20 leaders to stand by climate change pact

10 May 2017   Category: News, Asia, China, USA   By Natalie Leung

Global institutional investors representing more than US$15 trillion in assets are calling on world leaders to stand by their commitments to the Paris Climate Agreement (Paris Agreement).

More than 200 global investors sent a letter to leaders of the Group of Seven (G7) leading industrialised countries and Group of 20 (G20) advanced and developing economies, urging them to make implementing the Paris accord a priority. Almost 200 countries signed the agreement to address climate change issues in December 2015.

“As long-term institutional investors, we believe that the mitigation of climate change is essential for the safeguarding of our investments,” the investors say in the May 6 letter. “We reiterate our call for governments to continue to support and fully implement the agreement.”

They express concern over the omission of references to climate change, climate finance and climate adaptation in the G20 finance chiefs’ communiqué in March, and hope leaders will ensure climate change is “explicitly acknowledged” at the leaders’ summit in July.  

Impact on Asia

Sagarika Chatterjee, associate director, policy and research at Principles for Responsible Investment (PRI), tells Asia Asset Management that a key challenge for countries in the Asia Pacific region implementing the Paris Agreement is cost. She says it is estimated that developing economies in Asia will have to spend $300 billion a year until 2050 to meet targets set by the Paris climate deal. Also, the Asian Development Bank (ADB) said the economic returns of spending on the Paris climate targets far outweighed the costs in the developing region – one of the most vulnerable to climate change and disasters like typhoons and flooding. 

“One way to offset these costs is by more investment in renewable power, carbon capture and storage, and smart grids. Countries in Asia also have access to climate funding through the Green Climate Fund. Collaboration between policymakers and institutional investors is needed to ensure investment opportunities exist in the right areas to meet government requirements related to country plans (nationally determined contributions) and are suitable to meet investors needs (both green and performance),” explains Ms. Chatterjee.

She points out that this includes green investments such as green bonds, which have proven successful in attracting institutional investment; but supply of green bonds needs to be scaled up and governments need to guard against green washing. China, India and Singapore are all active in the green bonds space 

US dragging its heels

“Investors are sending a powerful signal today that climate change action must be an urgent priority in the G20 countries, especially the US, whose commitment is in question,” Mindy Lubber, chief executive officer and president of the Boston-based sustainability non-profit organisation Ceres, says in a May 8 statement.

“Global investors are eager to open their wallets to a low-carbon future, but it won’t happen without clear, stable policy signals from countries worldwide – in particular, the US government whose waffling on the Paris Agreement is hugely troubling.”

US President Donald Trump signed an order in March to dismantle climate change regulations introduced by his predecessor President Barack Obama. The regulations are considered key for the US to meet its commitments in the Paris Agreement.

Asian initiatives

However, China said it is still committed to the Paris accord. “We still uphold that all sides should move with the times, grasp the opportunities, fulfil their promises and earnestly take proactive steps to jointly push the enforcement of this agreement,” Chinese Foreign Ministry spokesman Lu Kang said at a news briefing in March, according to Reuters.

“No matter how other countries' policies on climate change, as a responsible large developing country, China's resolve, aims and policy moves in dealing with climate change will not change,” Mr. Lu stated.

According to Ms. Chatterjee, countries in Asia have demonstrated strong commitment to the Paris Agreement. While many countries in Asia and the Pacific still rely on fossil fuels, a large number have committed to reduce emissions, including Bangladesh, Bhutan, Indonesia, Kazakhstan, Philippines, Tajikistan, Thailand, Malaysia and Vietnam. 

She also highlights the point that China, as one of the world’s largest emitters, has a critical role to play in terms of leadership on the world stage and providing an example for other emerging market economies on setting a more sustainable path for growth.

“When China and the US took the lead last year in ratifying the Paris Agreement, it sent a strong signal to other countries of the inevitable shift towards a low carbon environment. China has also been ramping up its green finance initiatives as a way to mitigate longstanding environmental issues such as air pollution,” Ms. Chatterjee says.