Landmark Paris agreement toasted by investors

Channels: Carbon, Investment, Markets, Policy, COP

Companies: Baker & McKenzie, HSBC, International Emissions Trading Association

People: Martijn Wilder, James Hulse, Jeff Swartz,

Investors were celebrating today after a "historic" climate change agreement was hammered out in Paris, marking a new dawn for clean technologies and low-carbon investors.

Following two weeks of tense negotiations, the first global climate change agreement was agreed at the UN summit on Saturday, in a move widely welcomed by many in the business and financial communities.

"We think the adopted agreement is a historic milestone that signals a global commitment to transition towards a low-carbon economy and embeds resilience to the consequences of climate change," said analysts at HSBC's climate change centre of excellence in a report. "We think the Paris Agreement represents a clear signal that nations take the threat of climate change seriously, taking steps to address the problem."

The agreement, which comes after more than two decades of failed negotiations, was greeted by tears from many at the Le Bourget site, followed by celebrations.

"Champagne sold out in many central Paris bars on Saturday night," one market player told Environmental Finance.

The key points of the deal are:

  • It aims to restrict global temperature rises to "well below" 2°C above pre-industrial levels, and to pursue efforts to restrict them to 1.5°C
  • Countries will need to update their current pollution-reduction pledges by 2020 and then do so again every five years.
  • The agreement left the door open to carbon trading, mentioning international co-operative efforts and a new mechanism that will support sustainable development at the same time as generating carbon offsets.
  • It sets the aim of providing 'climate finance' from rich to poor countries of at least $100 billion.

The deal did not cover the maritime or aviation industries, and there were criticisms that current pledges are not drastic enough – the national targets submitted ahead of the summit leave the world on course for global warming of 2.7°C.

But most commentators were happy with the outcome, because it set a level of ambition unprecedented at climate summits, despite being vague about the pathway to achieving that ambition.

Martijn Wilder, Sydney-based head of the global environmental practice at law firm Baker & McKenzie, said: "It's a pretty remarkable achievement. The reason this is so important is that we didn't have another Copenhagen. This maintains the international momentum and desire to move forward."

James Hulse, head of investor initiatives at CDP, said the agreement was in many ways better than had been hoped for.

"We have been waiting 23 years for an agreement and we finally got one.  There was a huge risk of it all falling apart at the last minute but that didn't happen.

"It sends a strong message that there's only one direction the world is travelling in and that's towards a low-carbon economy."

He added that the agreement will begin to filter into the valuations of companies as countries implement their national plans, but this may take six to 12 months to filter through.

Jeff Swartz, a Geneva-based international policy director at the International Emissions Trading Association, said the deal is important because it will encourage the creation and linkage of more carbon markets, and it will allow countries to buy offsets from overseas.

"We think it's a huge win for carbon markets," he said. "It kickstarts a new era of cooperation between governments, businesses and civil society on carbon."

Peter Cripps