COP21: Webinar report: “what the outcomes of the COP21 mean for investors?”

Institutional investors should scale up green financing ambitions to benefit from government partnerships.

Governments are going to be increasingly open to closer relationships with institutional investors in order to bridge the public-private climate finance gap outlined at the COP21 conference in Paris, according to leading speakers addressing a webinar last week on the subject of ‘what the outcomes of the COP21 mean for investors’. Speaking on the webinar, hosted by MSCI, were Sagarika Chatterjee, Associate Director at the Principles for Responsible Investment, Stephanie Pfeifer, Chief Executive of the Institutional Investors Group on Climate Change (IIGCC), Frédéric Samama, Deputy Global Head of Institutional & Sovereign Clients at Amundi, and Mark Campanale, Founder & Executive Director of Carbon Tracker. They discussed the role investors could play post COP, which, they said, had revealed the significant funding gap between country targets for C02 emissions reductions and corporate activity on emissions reductions to date. The speakers said institutional investors should be an integral part of the finance transition, but needed to scale up their financing ambitions if they are to benefit from the window of public-private partnership. They said investors should also increasingly help policy makers set the right market signals for carbon pricing.
Amundi’s Samama said COP21 meant both long-term and short-term climate issues were now crucial to investor strategy discussions, which he said was the ‘new normal’. The long-term angle, he said, came because carbon reduction goals were projected into the second half of the century, while the short-term angle he said was because national plans will be adjusted every 5 years to fit those long-term goals. Samama said the success of the Portfolio Decarbonisation Coalition (PDC), a grouping of asset owners committed to low carbon investment, was an indication of “history accelerating” around investor action: “The initiative was launched a year ago and had an extremely ambitious goal: get a commitment of $100 billion dollars from investors. Incredibly, it reached $600bn because actually the low-carbon economy is doable and scalable NOW.”
He pointed to specific examples such as French sovereign wealth fund CDC’s commitment to decarbonise its huge investment portfolio, starting with €55bn of internally managed assets, and Dutch pension giant ABP’s commitment to decrease by 25% its carbon footprint from 2015-2020. The PDC, he said, published its first report during COP21 looking at positioning, metrics and investment suitability for climate strategies, and Samama said regulation such as the new French law on carbon reporting for investors would like to develop into some form of European standard.Carbon Tracker’s Campanale said, however, that the outcome of COP21 would be meaningless for investors unless efforts are made to reach an alignment of country fossil fuel strategies with oil, coal and gas companies’ board strategies. To reach that alignment, investors should identify countries and companies aligned with the 2 degrees scenario and initiate discussion on relevant transparency, disclosure and testing against temperature rises: “This is key since the two degrees warming scenario implies that 80% of reserves will have to stay in the ground to become reality, which would mean that $2.2 trillion of investment planned to 2035 is at risk. It’s even more essential when we hear that BP is projecting a 43% increase in fossil fuel use by 2035. This is absolutely not following the line of the INDCs that advocate a decrease of fossil fuel of 30-40% in the same timeframe.”
He recommended that investors look at the work of Call to Action on Climate Finance that is categorising climate actions based on the country Intended Nationally Determined Contributions (INDCs), setting out the investable funding needs and opportunities and bringing together market participants and policy makers to promote transaction flows.
IIGCC’s Pfeiffer said the INDC’s should work as the necessary ratchet mechanism for climate finance, with the key now being implementation and the scale-up of ambition over time: “In this regard investors need to provide the right market signals and use their influence with policy makers to implement the accord country by country. She said investors also needed to look across all asset classes, including real estate and infrastructures, for climate risk issues and return opportunities.” The PRI’s Chatterjee said many of the investor entities in place before COP21 such as The Montreal Carbon Pledge would stay open, and accompany new campaigns such as the Paris Pledge for Action, for non-state actors to welcome the Paris Agreement on climate change and commit to its implementation, which has been signed by 120 investors, 400 companies, 150 cities and regions and endorsed by the Paris COP Presidency. In addition, a Green Infrastructure Coalition is being set up investors, and new guidance for Asset Owners on climate change being progressed via a pilot framework that has had substantial inputs already from about seven countries.
Link to webinar recording