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Investors warn of climate crash

Asset managers, including Schroders, said they had "a duty to our investors to act for the long term when others are clearly sidestepping the challenge”
Investors warn of climate crash

Global investors with $32 trillion (£25.5 trillion) of assets under management this week urged governments to step up their action against climate change, or risk economic impacts at least “three of four times the scale of the 2008 global financial crisis”.

Launching their plea midway through this year’s United Nations global climate change conference in Poland, 415 investors have called on governments to strengthen their pledges to limit global warming to well below two degrees and ensure the necessary transition to a low-carbon economy. The investors highlighted the “ambition gap” between government commitments made at Paris in 2015 and what is needed to successfully limit warming to so-called ‘safe levels’.

Schroders (SDR), one of the signatories to the statement, has calculated that long-run temperature increases are on course for a catastrophic four degrees of warming, and could bring $23 trillion of associated global economic losses over the next 80 years.

Within the statement to world leaders, investors including pension funds, insurance companies and the asset management arms of HSBC (HSBA), Aviva (AV) and Legal & General (LGEN) have put forward a series of policies. These include phasing out thermal coal power and fossil fuel subsidies “by set deadlines”, putting a meaningful price on carbon, and accelerating private sector investment into the low-carbon transition.

“Policies that support the attainment of the Paris Agreement’s goals will provide the private sector with greater certainty as to governments’ commitment to tackling climate change,” argues a policy briefing paper backed by the investors. “This will, in turn, affect investors’ ability to assess climate-related risks and opportunities, to measure and disclose portfolio exposure to the low-carbon transition and physical climate impacts, and to further invest in opportunities to support a low-carbon, more climate resilient, world.”

“The reality is that the long-term nature of the challenge has, in our view, met a zombie-like response by many,” added Chris Newton, executive director for responsible investment at IFM Investors, which has $80bn in assets under management. “We have a duty to our investors to act for the long term when others are clearly sidestepping the challenge.”