The $2.3 Trillion pledge – Funds commit to fight Climate Change
The financial industry is on the move. It wants to be at the center stage. Fighting climate change takes money, $2.3 Tillion, according to various funds and pension funds. A solid start, for now.
This year, the United Nations Climate Summit, an event that transpired included 16 year old Greta Thunberg’s speech, as well as various large international insurers and pension fund managers announcing their commitment for their portfolios to be carbon neutral by 2050.
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German insurer Allianz, the California Public Employees’ Retirement System (CalPERS), and Swedish pension fund Alecta were among the “Net Zero Asset Owner Alliance” launched at the UN summit. The coalition was organized by groups including the Geneva-based United Nations Environment Finance Initiative and Mission2020.
With certain scientists claiming global temperature is en route to rising over 3 degrees Celsius by the end of the century, the financial sector and “asset holders” (A type of company that includes those that hold or invest in savings and insurance premiums) are facing increased pressure to help turn the global economy into a more sustainable one.
The members of the new agreement have pledged to meet the goals outlined in the 2015 Paris Agreement, among which is limiting global temperature increase to 1.5 degrees Celsius. Alongside reaching the 2050 target of a carbon neutral portfolio, targets for 2025, 2030, and 2040 have been announced as well with public reporting to be made available.
The members hope this will push other big pension funds, insurers, and high-carbon companies towards more sustainable economic activities. They also stated they might also have to divest from heavily polluting industries if they refused to adopt new business practices so they no longer pose a danger to the stability of the climate.
Heatwaves, wildfires, receding coastlines, as well as habitat and ecosystem devastation are only some of the consequences that can impact human life down the line. While a few degrees change may not seem like much, the NASA website uses the example that, “at the end of the last ice age, when the Northeast United States was covered by more than 3,000 feet of ice, average temperatures were only 5 to 9 degrees cooler than today.”
Mitigating climate change is the challenge of our lifetime. Politics, business and societies across the globe need to act as one to rapidly reduce climate emissions
Oliver Baete, Chief Executive of Allianz
Michael Sabia, chief executive of Caisse de dépôt et placement du Québec (CDPQ), one of Canada’s biggest pension funds, spoke on the topic of transition to clean energy to Reuters.
Telling Reuters, “There’s a lot of people who don’t get it, but I do think it’s moving – the issue is whether it’s moving fast enough. It’s speed that matters here.”