Investors controlling $ 41 billion (£ 29 billion) in assets have called on governments around the world to end support for fossil fuels and set targets for rapid reductions in carbon emissions to limit the damage caused by global warming.
The 457 investors, who hold nearly a third of global assets under management, signed a joint statement calling on governments to “dramatically step up” their plans to cut carbon emissions over the next decade and set detailed targets for net zero emissions by 2050 or earlier.
Signatories included the UK’s largest asset managers, including Aviva, HSBC Asset Management, Legal and General Investment Management and M&G. Other major backers included Allianz Global Investors, Amundi, Axa, BNP Paribas and Nomura Asset Management.
It is believed to represent the largest group of investors in terms of assets to ever join a concerted call for climate action. The measures should be in line with scientists’ estimates of what is needed to limit global warming to 1.5 degrees above pre-industrial levels – the goal to avoid the worst impacts of the climate crisis.
The joint letter, released Thursday, preceded the meeting of leaders of the wealthy G7 economies in Cornwall this week and the UN climate conference Cop26, to be held in Glasgow in November. Climate action is expected to be an important part of the G7 talks, alongside recovery from Covid-19 and taxation of multinational companies.
In the letter, investors called for “Covid-19’s sustainable economic stimulus efforts” and measures to reduce fossil fuel combustion, such as a ban on new coal-fired power plants, and set deadlines to phase out gradually coal and other fossil fuels.
“We are at the start of a pivotal decade in which institutional investors and government leaders around the world have the power to raise their ambitions and accelerate action to tackle the climate crisis,” the letter reads. . “If we don’t rise to this challenge and change course immediately, the world could heat up to over 3 ° C this century – well beyond the goal of the Paris Agreement.”
A separate study released Thursday suggests there is still a very long way to go for the world’s largest companies to decarbonize. Research for the Science-Based Targets Initiative, which verifies companies’ decarbonization plans, said none of the biggest G7 stock indexes were on track for needed carbon cuts.
This included the UK’s FTSE 100 and the US S&P 500. The companies in these indexes on average declared emissions plans consistent with 3 degrees of global warming – a level that scientists say would cause catastrophic climate change.
The US and UK stock markets are heavily exposed to oil, gas and coal companies, many of whom intend to continue drilling despite warnings from the International Energy Agency that mining must stop this year to reach net zero by 2050.
Investors have been criticized by activists for failing to back up their rhetoric on the climate crisis with actions, although a spate of climate rebellions by shareholders of major oil companies last month has sparked optimism over the approaching a “turning point”.
Despite a few laggards – especially outside of Europe – many investors have come to view climate risk assessment as a fundamental requirement for business choice.
“Climate change is one of the biggest systemic risks we face today and achieving net zero by 2050 will be crucial in helping to steer the world towards a more sustainable future,” said Michelle Scrimgeour, Director General of Legal & General Investment Management and Commercial Advisor to the UK Government on Cop26. “We will need to see substantial changes in industry and society globally to achieve this goal.”
There were a few notable exceptions who did not sign the letter, which was coordinated by the Institutional Investors Group on Climate Change, a European body. They included the world’s largest investor, BlackRock, and its closest rival, Vanguard. However, State Street Global Advisors, the third of the most powerful “big three” index fund providers, signed on.
Other notable absences were a few US banking groups with large asset management branches including JP Morgan, Goldman Sachs and BNY Mellon. Nevertheless, the US investment sector was also well represented, with Fidelity International, bond investor Pimco and massive pension funds such as CalPERS and the California State Teachers Retirement System among the signatories.