Investors Are Pushing Big Business to Get in Line With the Paris Agreement

Investors managing more than US $26.3 trillion announced this week they are going to insist the world’s 100 largest corporate greenhouse gas emitters do their part in the transition to a low-carbon economy to meet climate change targets set by the Paris Agreement. These investors manage more than small countries: The US economy, by comparison, is $19 trillion.

This initiative, known as Climate Action 100+, involves 225 pension funds and other institutional investors from around the world, and was launched this week at the One Planet Summit in Paris. It’s a five-year effort to get the 100 largest carbon polluting companies, including those in the coal, oil and gas, cement, mining, and transportation industries, to curb their emissions and disclose their climate risks.

“These investors are the largest owners of companies and they see climate change as a serious threat to their investments and the global economy,” said Mindy Lubber, CEO and President of Ceres, a sustainability nonprofit working with the most influential investors. Ceres is one of five partner organizations leading the initiative. “They believe it is imperative these companies move away from high-carbon emitting activities,” Lubber told me.

Every country in the world, including Syria, has signed the 2015 Paris climate agreement to keep global warming well below 2℃. While the Trump administration said it will pull America out, that can only happen after November 2020 under the terms of the agreement.

Meanwhile, if the companies targeted by Climate Action 100+ fail to act to reduce their carbon footprint and align their business plans with the Paris climate targets, then shareholders will move their money elsewhere. “Such companies are unlikely to have economic success” in failing to adjust their business model to the reality of climate change, Lubber said.

To make the top polluter list, companies’ total emissions were assessed, including emissions associated with the use of their products. This means fossil fuel companies with large reserves of oil, gas, or coal will have to leave most of those reserves in the ground. The Climate Action 100+ initiative, in partnership with researchers, will issue an annual report on the progress of the companies in their transition to low-carbon enterprises.

Royal Dutch Shell, one of the top 100, has already announced that it will invest $2 billion in green energy, and halve the carbon footprint of the energy it sells by 2050.

“We’ve all witnessed the costly impacts of climate change. Just this year, three hurricanes cost the US more than $100 billion,” Lubber said. A study published earlier this year estimated US economic losses in the coming decade from extreme weather, combined with the health costs of air pollution, amounting to at least $360 billion annually, which has the potential to cripple US economic growth.

“[Investors] want to send an unequivocal signal—directly to companies—that they will be holding them accountable in order to secure nothing less than bold corporate action to improve governance, curb emissions, and increase disclosure to swiftly address the greatest challenge of our time,” said Andrew Gray, senior manager of investments governance at Australian Super, an Australian pension fund with more than two million members, in a statement.

Climate Action 100+ is just one of several significant announcements this week at the One Planet Summit. The World Bank Group said it will stop investing in upstream oil and gas by 2019. (The Bank invested around a billion dollars in fossil fuel exploration in 2016.) It also made another dozen announcements to support efforts to meet the Paris goals.

The 23 largest national and regional development banks that are part of the International Development Finance Club (IDFC) also agreed to align their finance with the Paris Agreement. The IDFC represents over 69 countries and holds assets of more than US $4 trillion.

At the Summit last Tuesday, Dutch bank ING said it will stop funding any utility company that relies on coal for more than 5 percent of its energy. National Australia Bank announced it will stop all lending for new thermal coal projects. AXA, one of the world’s biggest financial and insurance companies, said it would quadruple its investment in environmentally friendly projects by 2020 to $10.6 billion and move a further $4 billion of investments out of coal, oil sands and pipelines.

AXA CEO Thomas Buberl said a "+4℃ world is not insurable."

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