Global investment groups demand climate action. And they have $50 trillion

Sometimes it seems that anyone with any clout around here is asleep at the climate change wheel, especially when you look at our government, but there's a lot more going on than you might think

We actually have some very very powerful allies working for us. Our allies are an apparently unassuming bunch of Pitt Street types in suits who manage our superannuation - trillions of dollars of it. To be more precise, half of all global investment funds.

For context, as individual investors and funds managers have become more focused on the integrity of where their funds are invested, the investment community has become more organised as it seeks out responsible global investment opportunity and at the same time evaluates the credentials of the investments it has, for good governance.

You might be a member of an investment fund like CBUS, VicSuper, AXA, Australian Ethical Super. These funds are in turn members of Investor Group on Climate Change, who's charter it is to 'educate, advocate and promote the steps that investors are taking to tackle climate change through their investment policies and practices'.  Investor Group on Climate Change has 71 members representing AUD$2 trillion and they are in turn a member of the global group, The Investor Agenda. This collaborative group together has AUD$50 trillion assets under management. (For perspective, the entire USA GDP is around AUD$25.5 trillion and Australia is $1.5 trillion.)

If you've managed to climb to the top of that ladder of power, you'll realise that with that kind of money to invest, it's not surprising that The Investor Agenda, globally and  Investor Group on Climate Change locally, might have some sway with governments. 

Last December, The Investor Agenda, at the time representing 414 global investors, staged an intervention. Yep, an intervention just like the one the family did on Aunty Nora before they shipped her off to rehab for her drinking.

The intervention in this case was targeting climate action, and the aunties were the world leaders at 24th Conference of the Parties to the United Nations Framework Convention on Climate Change in Poland. 

The intervention came in in the form of a Global Investor Statement signed by the The Investor Agenda and handed to world leaders. The statement was in response to the UN report confirming that lack of government action now meant that nations must triple their efforts to meet their commitments under the Paris Agreement in late 2018. The Global Investor Statement requested that governments “phase out thermal coal power”, “put a meaningful price on carbon” and “phase out fossil fuel subsidies.” 

Now you might think that a statement is just a statement, but it's important to bear in mind that the group are institutional investors, representing millions of people around the world and who's word is binding. 

The Investor Agenda have since tightened their resolve. With now 477 global investors under the 7 groups, they released an open letter to governments around the world ahead of the G20 in Tokyo. 

The Open Letter has been replicated below and you can read if for yourself, and see that the mood of the investors, and presumably their money, is shortening, as they stressed the urgency of decisive action and made it clear that their investment funds would follow that 'decisive action'. 

In an interview with ABC Radio National, the Chairman of Investor Group on Climate Change, Stephen Dunne, foreshadowed the Open Letter's intention:

"I HOPE THAT GOVERNMENTS ARE LISTENING. THIS IS A CALL FOR ACTION THAT IS BACKED BY A SIGNIFICANT AMOUNT OF FUNDING. INVESTORS ARE KEEN TO INVEST IN OPPORTUNITIES THAT SEE US SHIFT TO A LOW CARBON ECONOMY.

WE ARE VERY CONCERNED THAT IF WE DON'T START ACTING NOW, THE IMPACT ON ECONOMIC ACTIVITY, THE IMPACT ON OUR ABILITY TO GIVE A RETURN TO MILLIONS OF AUSTRALIAN'S SUPERANNUATION IS HARDER. 

THIS IS A PLEDGE TO WORK WITH GOVERNMENTS TO COME UP WITH POLICIES AND PLANS THAT WE CAN DEPLOY MONEY TO HELP THE GLOBAL ECONOMY MOVE TO A LOW CARBON BASIS. IT'S NOT A THREAT. BUT WE NEED GOVERNMENTS TO STEP UP THEIR AMBITIONS AT A GREATER RATE."

Open letter to Governments of the world

Last year a record number of investors signed the 2018 Global Investor Statement to Governments on Climate Change in which investors declare their strong support for the Paris Agreement and the implementation of its goals. The statement is now signed by 477 investors representing over US$34 trillion in assets – just under half the world’s assets under management.

In 2018, we – the CEOs of the seven partner organizations of The Investor Agenda – strongly welcomed the Intergovernmental Panel on Climate Change’s (IPCC) Special Report on 1.5°C which emphasised the urgency required to successfully tackle climate change and the need for average annual sustainable energy investments of up to US $830 billion to transition to a zero-carbon and climate resilient global economy. We especially underline the IPCC report's finding that to achieve no or limited overshoot of 1.5°C, global net  emissions need to decline by 45% by 2030 and reach net zero emissions around 2050. In parallel, we note that even in limiting warming to 1.5°C, the IPCC reportstill finds that climate-related risks and impacts will increase, requiring adaptation and resilience measures.

This year, in response to this accelerating climate threat and to lend our strong support to the aims of the upcoming UN Secretary General’s Climate Action Summit in September, we are restating to world governments the urgency of decisive action to achieve the goals of the Paris Agreement and highlighting three outstanding policies from the 2018 statement which we urge you to enact by 2020, a key milestone in the global negotiations to implement the Paris Agreement, in order to unlock private sector capital in addressing this challenge.

In particular, we ask world governments to strengthen their Nationally Determined Contributions (NDCs) to be in line with the objectives of the Paris Agreement by 2020.

Current NDCs would lead to an unacceptably high temperature increase, potentially in the range of 2.9 to 3.4°C relative to pre-industrial levels. Enhancement is essential to close the current ambition gap and send a strong, positive signal to investors.

Part of this enhancement should entail a clearly defined role for private finance. This includes clear timelines for the phase-out of fossil fuel subsidies and thermal coal power, and for the introduction of appropriate carbon pricing by 2020, as well as implementation of the Task Force for Climate-related Financial Disclosure (TCFD) recommendations by 2020.

Raising ambition has a direct read-across to raising finance: those countries who adopt strong, ambitious NDCs will send the signals necessary to attract the trillions of capital necessary to support the low-carbon and climate resilient transition.

We also underscore our support for a Just Transition for workers and communities, as called for in the Paris Agreement. Investors have a key role to play, in partnership with government, to direct their stewardship of their assets, their allocation of capital and their voice in public policy to back a transition that leads to inclusive, sustainable development.

The Global Investor Statement to Governments on Climate Change remains open for signature, and updates will be published at the United Nations Secretary General’s Climate Change Summit in September as well as at COP25 in December.

This statement was drafted through a collaboration among our seven organisations – AIGCC, CDP, Ceres, IGCC, IIGCC, PRI and UNEP-FI – that are the founding partners of The Investor Agenda. The statement is published at www.theinvestoragenda.org.

We would welcome further engagement with your staff to discuss the policy asks presented in the attached statement. We believe institutional investors, given their universal ownership, long-term horizon and ability to engage with corporations globally, represent a unique political ally on decarbonisation and the implementation of the Paris Agreement. We therefore remain at your disposal for further partnership and support.

Kind regards,

On behalf of the seven partner organisations

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