23 November 2015

COP blog: investors raise their voices on climate change

With so much time and energy focused on COP21, stakeholders might be forgiven for thinking that Paris is the endgame.

Fiona ReynoldsBut this is far from the case. Climate negotiations do not end post-Paris. Regardless of whether an agreement is reached, climate policies will continue to move forward.

And for the cynics who say that if an agreement is not reached, we will be facing another Copenhagen, the difference this year is that the investor voice and appetite for change has grown significantly since 2009.

Few organisations would deny that climate change is increasingly affecting their operations, with companies embedding environmental, social and governance (ESG) considerations as a differentiator to identify risks as well as opportunities. And investors, keenly aware of the materiality of climate change and the impact on their investments, are now demanding greater transparency and disclosure on how companies are tackling the transition to a low-carbon environment so that that they can make better informed decisions about their investments.

When it comes to climate change, investors are making their views known in variety of ways. Some are choosing to allocate more of their investments into low-carbon alternatives while others are ramping up efforts to engage and influence corporate behaviour and policymakers.

The investor voice and appetite for change has grown significantly since Copenhagen

In the last 12-18 months, we have seen investors worldwide pressing policymakers for action on climate change. The Global Investor Statement on Climate Change, developed by the PRI and a number of climate groups—IIGCC, IGCC, Ceres, UNEP FI and the Asia Investors Group on Climate Change – has now been signed by 387 investors representing more than $24 trillion in assets under management.

The statement, the largest of its kind by global investors on climate change, was signed by leading investors, including BlackRock, CalPERS, PensionDanmark, Deutsche Bank, South African GEPF, Australian CFSGAM and Cathay Financial Holdings.

Another recent example of how investors have been proactive with policymakers is a letter to G7 finance ministers, which was organised by the PRI, Investor Network on Climate Risk, Investor Group on Climate Change and the Asia Investor Group on Climate Change. The letter has been signed by more than 120 institutional investors from across the globe.

It called on the finance ministers of Canada, France, Germany, Italy, Japan, the UK and the US to support an agreement for a long-term, emissions-reduction goal. That goal aims to limit the average global temperature increase to 2°C by 2040.

In addition to communication with policymakers, investors have also been working with energy companies and using their voting rights.

It is clear that investors have begun to find their voice

In April this year, we saw an overwhelming majority of shareholders back a resolution forcing BP to come clean about the impact that climate change will have on its operations. This means that BP will now have to tell investors how its portfolio will show resilience to the stronger climate action envisaged by the International Energy Agency.

Following on the heels of BP, a majority of shareholders at the annual general meetings (AGMs) of Royal Dutch Shell and Statoil voted for resolutions calling for more disclosure on performance related to climate change.

It is clear that investors have begun to find their voice and use their considerable financial power to ensure that both companies and policymakers take a long-term view not just on climate change in terms of the impact on corporate reputation and performance.

The global investor community has seen some success in recent months in terms of gaining momentum around action on climate. But they must not rest on their laurels. It is vital that investors continue using their influence to encourage the private and public sectors to take decisive action not just in Paris but throughout 2016.

Fiona Reynolds is managing director of the Principles for Responsible Investment