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Hundreds of investment firms unite in climate change push

Hundreds of investment firms unite in climate change push

More than 450 investment firms have signed a letter urging governments around the globe to improve climate-related regulation.

The group, including Aberdeen Standard Investments, LGIM and UBS Asset Management, warned governments that their ability to properly allocate the trillions of dollars needed to support the transition to net-zero was being hampered by a gap between commitments and actual reduction in emissions.

The letter warned “these gaps – in climate ambition, policy action and risk disclosure - need to be addressed with urgency.”

The letter was sent ahead of Cop26, the 2021 United Nations climate change conference in Glasgow in November, and the G7 meeting in Cornwall last weekend (June 11-13), and outlines five courses of action governments should take to aid the investment industry to tackle climate change.

These include strengthening their nationally determined contributions to ensure a planned transition to net-zero emissions in 2050, as outlined in the Paris agreement, as well as outlining a pathway to include clear decarbonisation roadmaps for each sector that is carbon intensive. 

Furthermore, governments should implement domestic policies to achieve these targets, including removal of fossil fuel subsidies by set deadline and phasing out thermal coal-based electricity generation.

The letter also asks governments to ensure Covid-19 economic recovery plans support the transition to net-zero carbon emissions.

Finally, governments should commit to implementing mandatory climate risk disclosure requirements aligned with the task force on climate-related financial disclosures.

The group added there may be negative consequences for countries who do not commit to these plans.

It said: “While we recognise the differentiated responsibilities and respective capabilities of countries, we believe that those who set ambitious targets in line with achieving net-zero emissions, and implement consistent national climate policies in the short-to-medium term, will become increasingly attractive investment destinations. 

“Countries that fail to do so will find themselves at a competitive disadvantage.”

The statement was coordinated by the founding partners of The Investor Agenda, and the signatories represent more than $41trn (£29trn) in assets.

Jessica Camus, head of Europe and chief corporate affairs officer at Diginex Solutions, said now was the time for advisers to expand their ESG knowledge.

“If financial advisers were not considering ESG options in the market, they are now.

"A real challenge for advisers will be understanding the sustainability efforts of businesses and educating clients accordingly. The ability to access reliable and qualitative data on ESG and climate-specific indicators are critical for achieving this transition. 

"Not only will it help give the clarity needed by investors and nations, but it will allow companies with sustainable activities to attract significant amounts of funding.”

The letter comes after the UK government announced it was creating a working group aimed at implementing a new green taxonomy.

The Green Technical Advisory Group (GTAG) will oversee the delivery of the green taxonomy in the UK, giving advice to the government on developing the framework, supporting investors, consumers and businesses to make green financial decisions and will clamp down on greenwashing.