Investors controlling $41tn (GBP29tn) in assets have called for governments around the world to end support for fossil fuels and set targets for rapid reductions in carbon emissions to limit the damage from global heating.
The 457 investors, who hold almost a third of world’s assets under management, signed a joint statement calling for governments to “significantly strengthen” their plans to cut carbon emissions in the next decade and to bring in detailed targets for net zero emissions by 2050 or sooner.
Among the signatories were the largest British asset managers, including Aviva, HSBC Asset Management, Legal and General Investment Management and M&G. Other major supporters included Allianz Global Investors, Amundi, Axa, BNP Paribas and Nomura Asset Management.
It is believed to represent the largest group of investors by assets ever to join a concerted call for climate action. Measures should be in line with scientists’ estimates of what is needed to limit global heating to 1.5 degrees above pre-industrial levels – the target to avoid the worst impacts of the climate crisis.
The joint letter, published on Thursday, came ahead of the meeting of leaders of the rich G7 economies in Cornwall this week, and the Cop26 United Nations climate conference, to be hosted in November in Glasgow. Climate action is expected to form a significant part of the G7 talks, alongside the recovery from Covid-19 and the taxation of multinational businesses.
In the letter investors called for “sustainable Covid-19 economic recovery efforts” and measures to reduce the burning of fossil fuels such as a ban on new coal plants, and set deadlines to phase out coal and other fossil fuels.
“We stand at the beginning of a pivotal decade in which institutional investors and government leaders worldwide have the power to raise ambition and accelerate action to tackle the climate crisis,” the letter said. “If we do not meet this challenge and change course immediately, the world could heat in excess of 3C this century – far beyond the goal of the Paris agreement.”
A separate study published on Thursday suggests that there is a very long way to go for the world’s largest companies to decarbonise. Research for the Science-Based Targets Initiative, which verifies corporate decarbonisation plans, said none of the G7’s biggest stock market indices were on a path towards the necessary carbon cuts.
That included the UK’s FTSE 100 and the US’s S&P 500. Companies in those indices on average have stated plans for emissions consistent with 3 degrees of global heating – a level that scientists believe would cause catastrophic changes to the climate.
US and UK stock markets have heavy exposure to oil, gas and coal companies, many of which intend to keep drilling despite warnings from the likes of the International Energy Agency that extraction must stop this year to reach net zero by 2050.
Investors have faced criticism from activists for failing to back up their rhetoric on the climate crisis with action, although a series of climate rebellions by large oil company shareholders last month prompted optimism that a “turning point” is approaching.
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Despite some laggards – particularly outside Europe – many in the investment community have come to view assessments of climate risks as a fundamental requirement for choosing companies.
“Climate change is one of the greatest systemic risks we face today and achieving net zero by 2050 will be crucial to help steer the world towards a more sustainable future,” said Michelle Scrimgeour, Legal & General Investment Management’s chief executive and a business adviser to the UK government on Cop26. “We will need to see substantial change across industry and society globally to achieve this goal.”
There were some notable exceptions that did not sign the letter, which was coordinated by the Institutional Investors Group on Climate Change, a European membership body. They included the world’s largest investor, BlackRock, and its closest rival, Vanguard. However, State Street Global Advisors, the third of the “big three” most powerful providers of index-tracking funds, did sign it.
Other notable absences were some US banking groups with large asset management arms, including JP Morgan, Goldman Sachs and BNY Mellon. Nevertheless, the US investment industry 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.