Investor groups reaffirm climate goals despite bleak UN verdict on 1.5C

    Engagement and lobbying in focus ahead of Finance Day at COP27.


    The Principles for Responsible Investment (PRI), climate engagement coalition CA100+, the Institutional Investors Group on Climate Change (IIGCC) and financial sector initiative GFANZ have doubled down on climate after a UN report suggested the global 1.5C temperature target is currently unfeasible.

    According to a UN assessment issued last month, there is “no credible pathway to 1.5C in place” and ongoing climate efforts have been “woefully inadequate”. If global economies decarbonise by 2050 – considered an almost universal red line – global temperature would still rise by 1.8C, but the UN said even this is unlikely.

    The world is currently headed for a global temperature rise of about 2.5C based on current national targets.

    Scientists say there is a world of difference between the physical impacts of climate change at a difference of just 0.5C of warming. It is estimated that 2C of warming could expose tens of millions more people worldwide to life-threatening heat waves, water shortages and coastal flooding, compared to 1.5C.

    PRI chief sustainable office Shelagh Whitley said the prospect of failing to hit the 1.5C goal should be a spur to ramp up efforts to cut emissions.

    “These challenges are real and growing, but this should not be a cue for investors to step away from climate commitments,” she said. “It is also important to distinguish between the feasibility of a 1.5C target, taken as a global aggregate, and individual net zero by 2050 commitments, set on an individual company, country, or investor basis.”

    ‘Clear path ahead’

    According to Whitley, there is still “a clear path ahead” – but that will require developed markets to move first and ensure net-zero commitments are in place, which in turn will accelerate the transition and create new investable opportunities.

    IIGCC CEO Stephanie Pfeifer said she did not expect the group’s priority focus to change and noted the importance of investor engagement on government action.

    “This is why we work with our members through initiatives such as the Global Investor Statement 2022 to engage policy makers and regulators in order to create a conducive and supporting environment,” she said.

    “At the same time, we expect to see investors increase their focus on physical climate risk and resilience, including the potential to build climate resilience at an asset, portfolio and wider societal level. With a fiduciary duty to protect their clients’ and beneficiaries’ investments, it is clear that the threats posed by physical climate risk cannot be ignored by investors.”

    For CA100+ representative Kirsten Spalding, transparency on lobbying and political expenditure is key to ambitious climate policy.

    “Alignment between corporate action, investor demands and policy actions is key to achieving 1.5C but the latest research from Ceres shows that corporate lobbying is not yet aligned with corporate ambition and transition plans,” she said. “We anticipate that there will be heightened focus on corporate lobbying in the upcoming proxy season.”

    Spalding, who is vice-president and senior program director of the Ceres Investor Network, hailed the “remarkable investor engagement” in the US over new climate disclosure rules proposed by the Securities and Exchange Commission and green policies under the Inflation Reduction Act.

    GFANZ, the Mark Carney-led initiative which is coordinating net-zero ambitions across the financial sector, said the UN analysis “reaffirms that our window of opportunity to act is rapidly closing”.

    “Change depends on governments, business and finance charting ambitious emissions-reduction paths in unison,” a spokesperson said. “All must undertake net-zero transition planning, assess progress regularly to identify gaps, and act to close them.

    “The financial sector can fund the necessary investments, and through its own planning, which is already underway, identify where the gaps are, and where public policy needs to do more. But finance will not drive the net-zero transition in isolation. Finance is a catalyst that can speed what governments and companies initiate.”