The Monetary Sector Can Do Extra To Take on Local weather Trade. It is Time To Step Up

A coal-fired power station in the UK. Pressure is growing on investors not to finance new coal projects as part of efforts to tackle climate change. 

</div> </div> <p>As the eastern seaboard of the U.S. prepares for Hurricane Florence, whose intensity was likely strengthened by climate change, the importance of tackling the problem could not be more starkly illustrated.</p> <p>In the fight against climate change, the focus is mostly – and rightly – on heavy emitters of greenhouse gases, such as power generators, makers of products such as steel, cement and glass, and transportation.</p> <p>But none of these sectors can operate without financial backing, and investors and other parts of the financial services sector are taking action, too – with consequences that are starting to be felt in high-carbon sectors and companies.</p> <p> </p> <p>The global fossil fuel divestment movement has this year reached more than $6 trillion, 120 times as much as four years ago, a new <a href="https://www.divestinvest.org/global-fossil-fuel-divestment-movement-reaches-6-24-trillion/" target="_blank" rel="nofollow noopener noreferrer" data-ga-track="ExternalLink:https://www.divestinvest.org/global-fossil-fuel-divestment-movement-reaches-6-24-trillion/">report</a> says, with campaigners hoping to reach $10 trillion by 2020. Companies like Shell are starting to take notice&nbsp;<span>companies and declaring divestment a material threat to their business.&nbsp;Firms such as BP, Total and Eni have stepped up their investments in renewable energy and electric vehicle infrastructure.</span></p> <p>The movement, which encourages investors to sell their shares in fossil fuel companies, is driven as much by simple risk assessment as by a desire to tackle climate change. “Divestment is increasingly being driven by large asset owners like insurance companies and pension funds that are moving their money out of an industry increasingly beset by financial and regulatory challenges,” says Divestinvest, which published the report. “When coupled with the new wave of climate lawsuits targeting the industry around the world, the pressure on fiduciaries to divest continues to mount.”</p>

<p>Another emerging trend is that insurance companies are not only divesting their investment portfolios from fossil fuels, but also taking steps to stop insuring fossil fuel projects.</p> <p>But some observers think that the industry could do a lot better. The Insure Our Future campaign is pressuring the insurance industry to stop insuring and investing in coal and tar sands projects and companies.</p> <p>Insurers were among the earliest voices warning about the risks of climate change, and since 2015, 17 large international insurers have divested about $30 billion from coal companies. Five, including Allianz, Axa, Zurich and Swiss Re have stopped or limited insuring the coal industry.</p> <p>But the U.S. industry is lagging behind – the 40 largest U.S. insurers hold over $450 billion in coal, oil, gas and electric utility stocks and bonds, a higher proportion than average index funds, Insure Our Future points out. “Insurance companies are supposed to protect us from catastrophic risks. Yet when it comes to the largest threat to humanity – climate change – insurers are fuelling dangerous global warming by perpetuating our dependence on dirty fossil fuels,” the campaign says.</p> <p>Meanwhile, the Asset Owners Disclosure Project, which rates and ranks the world’s largest institutional investors and assesses their response to climate-related risks and opportunities – and crucially, makes those ratings public, providing transparency for beneficiaries, clients, investors and stakeholders, has just released its latest report, looking at the performance of public pension funds on tackling climate risks.</p> <p>The report shows that more than 60% of the world’s largest public pension funds have little or no strategy on climate change, which could put them in danger of breaching their legal duties. Fewer than 1% of assets of the world’s largest 100 pension funds are invested in low-carbon solutions, and only 10% of assessed pension funds have a policy to exclude coal from their investment portfolio, it adds.</p> <p>“A handful of public pension funds, mostly based in Europe, are showing true leadership on climate change, demonstrating robust approaches to aligning their investments with the low-carbon transition,” the report says. Five funds in each of Sweden and the Netherlands achieved a leading rating, with California- and New York-based funds leading U.S. pension funds, in spite of weak national climate regulation.</p> <p>The top-ranked pension funds were Sweden’s AP4, Fonds de R&eacute;serve pour les Retraites (FRR) of France, the New York State Common Retirement Fund (NYSCRF), and the Dutch fund ABP. The three largest UK funds lag relative to the rest of Europe.</p> <p>AODP says that pension funds, which accounts for one third of all asset owners’ investments globally, need to drive the transition to a low-carbon economy by moving away from fossil fuel investments and stepping up investment in low-carbon fields such as renewable energy and electric vehicle technology.</p> <p>However, the group calculates that the world’s 100 largest public pension funds are investing just $90 billion in low-carbon technology, representing less than 1% of their combined assets and dramatically shy of the IPCC’s recommended annual investment of $1.1trillion per year. These lacklustre investment figures are exacerbated by the fact that only 10% of assessed pension funds have introduced policies to exclude coal from their investment portfolio, despite it being the most polluting fossil fuel.</p> <p>Felix Nagrawala, AODP Analyst, said: “AODP is turning up the heat on public pension funds who fail to address climate change in their investments. Our comprehensive review of the climate-competence of the industry exposes those funds who are all talk and no action, and those showing real climate innovation. Pension funds have a duty to serve the long-term interest of their members, which isn’t being met if the money they invest is depleted along with the health of the planet. It’s high time the industry takes action.&quot;</p> <p>New York State Comptroller Thomas P. DiNapoli, trustee of the New York State Common Retirement Fund, said: “Climate risk poses a major threat to long-term value, but mitigating that risk presents investment opportunities and is key to our decision-making and our engagement with portfolio companies.”</p> <p>Chris Fox, Senior Director, International Investor Engagement at Ceres, says: “AODP’s research clearly highlights the need for deeper action towards aligning pension investments with the &lt;2C goal. We hope the ranking will be a wake-up call, alerting funds not just to the risks associated with climate change but also the far-reaching opportunities associated with the low-carbon economy.”</p>”>

A coal-fired energy station in the United Kingdom. Power is rising on traders to not finance new coal initiatives as a part of efforts to take on weather trade. 

Because the japanese seaboard of the U.S. prepares for Storm Florence, whose depth was once most likely reinforced via weather trade, the significance of tackling the issue may just now not be extra starkly illustrated.

Within the struggle towards weather trade, the point of interest is most commonly – and rightly – on heavy emitters of greenhouse gases, corresponding to energy turbines, makers of goods corresponding to metal, cement and glass, and transportation.

However none of those sectors can function with out monetary backing, and traders and different portions of the monetary products and services sector are taking motion, too – with penalties which might be beginning to be felt in high-carbon sectors and corporations.

The worldwide fossil gasoline divestment motion has this yr reached greater than $6 trillion, 120 occasions up to 4 years in the past, a brand new document says, with campaigners hoping to succeed in $10 trillion via 2020. Corporations like Shell are beginning to take understand corporations and stating divestment a subject material risk to their trade. Companies corresponding to BP, General and Eni have stepped up their investments in renewable power and electrical car infrastructure.

The motion, which inspires traders to promote their stocks in fossil gasoline corporations, is pushed as a lot via easy possibility evaluate as via a need to take on weather trade. “Divestment is increasingly more being pushed via huge asset homeowners like insurance coverage corporations and pension price range which might be shifting their cash out of an business increasingly more beset via monetary and regulatory demanding situations,” says Divestinvest, which printed the document. “When coupled with the brand new wave of weather proceedings focused on the business world wide, the power on fiduciaries to divest continues to mount.”

Any other rising development is that insurance coverage corporations aren’t most effective divesting their funding portfolios from fossil fuels, but in addition taking steps to prevent insuring fossil gasoline initiatives.

However some observers suppose that the business may just do much better. The Insure Our Long run marketing campaign is pressuring the insurance coverage business to prevent insuring and making an investment in coal and tar sands initiatives and corporations.

Insurers had been a few of the earliest voices caution concerning the dangers of weather trade, and because 2015, 17 huge global insurers have divested about $30 billion from coal corporations. 5, together with Allianz, Axa, Zurich and Swiss Re have stopped or restricted insuring the coal business.

However the U.S. business is lagging in the back of – the 40 biggest U.S. insurers dangle over $450 billion in coal, oil, gasoline and electrical application shares and bonds, the next percentage than reasonable index price range, Insure Our Long run issues out. “Insurance coverage corporations are meant to give protection to us from catastrophic dangers. But in the case of the most important risk to humanity – weather trade – insurers are fuelling bad international warming via perpetuating our dependence on grimy fossil fuels,” the marketing campaign says.

In the meantime, the Asset Homeowners Disclosure Undertaking, which charges and ranks the arena’s biggest institutional traders and assesses their reaction to climate-related dangers and alternatives – and crucially, makes the ones rankings public, offering transparency for beneficiaries, purchasers, traders and stakeholders, has simply launched its newest document, having a look on the efficiency of public pension price range on tackling weather dangers.

The document presentations that greater than 60% of the arena’s biggest public pension price range have very little technique on weather trade, which might put them in peril of breaching their criminal tasks. Fewer than 1% of belongings of the arena’s biggest 100 pension price range are invested in low-carbon answers, and most effective 10% of assessed pension price range have a coverage to exclude coal from their funding portfolio, it provides.

“A handful of public pension price range, most commonly founded in Europe, are appearing true management on weather trade, demonstrating powerful approaches to aligning their investments with the low-carbon transition,” the document says. 5 price range in each and every of Sweden and the Netherlands completed a number one score, with California- and New York-based price range main U.S. pension price range, despite vulnerable nationwide weather law.

The highest-ranked pension price range had been Sweden’s AP4, Fonds de Réserve pour les Retraites (FRR) of France, the New York State Commonplace Retirement Fund (NYSCRF), and the Dutch fund ABP. The 3 biggest UK price range lag relative to the remainder of Europe.

AODP says that pension price range, which accounts for one 3rd of all asset homeowners’ investments globally, wish to power the transition to a low-carbon economic system via shifting clear of fossil gasoline investments and stepping up funding in low-carbon fields corresponding to renewable power and electrical car generation.

Then again, the crowd calculates that the arena’s 100 biggest public pension price range are making an investment simply $90 billion in low-carbon generation, representing not up to 1% in their mixed belongings and dramatically shy of the IPCC’s really useful annual funding of $1.1trillion in keeping with yr. Those lacklustre funding figures are exacerbated via the truth that most effective 10% of assessed pension price range have offered insurance policies to exclude coal from their funding portfolio, regardless of it being probably the most polluting fossil gasoline.

Felix Nagrawala, AODP Analyst, stated: “AODP is popping up the warmth on public pension price range who fail to deal with weather trade of their investments. Our complete assessment of the climate-competence of the business exposes the ones price range who’re all communicate and no motion, and the ones appearing actual weather innovation. Pension price range have an obligation to serve the long-term pastime in their participants, which isn’t being met if the cash they make investments is depleted together with the well being of the planet. It’s excessive time the business takes motion.”

New York State Comptroller Thomas P. DiNapoli, trustee of the New York State Commonplace Retirement Fund, stated: “Local weather possibility poses a big risk to long-term worth, however mitigating that possibility gifts funding alternatives and is essential to our decision-making and our engagement with portfolio corporations.”

Chris Fox, Senior Director, World Investor Engagement at Ceres, says: “AODP’s analysis obviously highlights the desire for deeper motion against aligning pension investments with the <2C function. We are hoping the rating will likely be a warning call, alerting price range now not simply to the hazards related to weather trade but in addition the far-reaching alternatives related to the low-carbon economic system.”

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