As leaders of the world’s largest economies prepare to attend the upcoming G20 meeting in Hangzhou, China from September 4–5, 130 investors (with over US$13 trillion in AUM) from a coalition of six organisations have written to the G20 heads of state, urging them to ratify the Paris Climate Agreement (Paris Agreement) this year and calling on G20 nations to double global investment in clean energy, tighten-up climate disclosure mandates, develop carbon pricing and phase out fossil-fuel subsidies.
“The Paris Agreement provides a clear signal to investors that the transition to the low-carbon, clean-energy economy is inevitable and already underway,” says Stephanie Pfeifer, chief executive officer (CEO) of the IIGCC (Institutional Investors Group on Climate Change). “Governments must ratify the Paris Agreement swiftly and have a responsibility to implement policies that drive better disclosure of climate risk, curb fossil-fuel subsidies and put in place strong pricing signals sufficient to catalyse the significant private-sector investment in low-carbon solutions required to realise the [Paris] Agreement’s goals.”
Investors also called on the G20 leaders to prioritise rulemaking by national financial regulators to require stronger disclosure of “material” climate risks.
“Financial regulators, like the SEC [US Securities and Exchange Commission], should step up attention to improve the quality of corporate climate disclosures, which are broadly lagging when considering wide-ranging and escalating climate risks,” says Mindy Lubber, president of the US NGO (non-governmental organisation) Ceres and director of the INCR (Investor Network on Climate Risk). “Improving the quality of climate-related financial disclosure, and aligning it between different jurisdictions, is vital to spurring broad capital market action on this issue.”
“In the wake of the Paris Agreement, we have already seen positive changes, but the swifter nations act to ratify the agreement, the better positioned we will be,” notes New York State Comptroller Thomas P. DiNapoli. “There is no debate that the future global economy will be a lower-carbon economy. From an investor perspective, the first step must be greater climate-risk disclosure to help us fulfil the promise of [the] Paris [Agreement].”
Ms. Lubber points out that the investor groups are fully engaged with the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). She says she applauds this initiative and encourages G20 nations to consider the TCFD’s forthcoming recommendations as key inputs to their national disclosure rules.
Investors urge the G20 to support a doubling of global investment in clean energy by 2020, as called for by the UN (United Nations) Secretary-General in January 2016 at the Investor Summit on Climate Risk at the UN.
“While the private sector can provide much of this vital investment, policy signals must also support climate goals in the clearest possible manner,” says Emma Herd, CEO of the IGCC (Investor Group on Climate Change). “Maintaining strong growth in clean-energy investment is key to tackling climate change. We strongly encourage G20 nations to ratify [the] Paris [Agreement] and help drive trillions of dollars into new clean-energy investment opportunities.”
The letter also welcomes the work of the G20 Green Finance Study Group, which aims to enhance the contribution of institutional investors to the greening of mainstream financial flows. Fiona Reynolds, managing director of PRI (Principles for Responsible Investment), says: “Investors signing this letter understand that the study group’s conclusions will be presented at the G20 Leaders’ Summit in 2016. We therefore ask for the green-finance agenda to be taken forward by the German and other future G20 presidencies. In order for green financing to reach its potential, the G20 must encourage the public and private sectors to work more closely together on issues such as stronger environmental protection and implementation of regulation. Incentives and policy frameworks must also be in place so that private capital flows more freely into green investments.”
Commenting further, Paul Simpson, CEO of data provider CDP, adds: “Investors also highlight the recommendations made to world leaders a year ago in the 2015 Global Investor Statement on Climate Change and renew their calls for the G20 to support both the development of carbon pricing and the prompt phase-out of fossil-fuel subsidies.”
Finally, investors also use the letter to urge the G20 to both prioritise implementation of their nationally-determined contributions and to prepare to strengthen them with the goal of ensuring all G20 nations meet their commitments and raise their climate ambitions during 2018 to achieve the Paris Agreement’s goals.
