Climate change is the biggest challenge facing humanity. Rising sea levels will displace millions of people, and the economic consequences will be catastrophic unless something is done. We can’t leave saving the planet to future generations: we must act now.
In the last two years climate change has become increasingly important to investors’ investment policies and this is set to continue.
The issue has brought some memorable quotes from people who in some cases have dedicated their life or work to try to combat it. While it is the politicians that hold the real power in being able to enact measures that can tackle global warming, others can be just as influential.
Take Sir David Attenborough, for example. The 94-year-old naturalist and broadcaster had dedicated a seven-decade working career to highlighting ‘Life on Earth’ (as his seminal work suggests) and the fragility of it. His moving documentary, ‘A Life on our Planet’, outlines how humans have caused immense destruction to the planet. It produced a memorable warning shot to mankind:
“Never before have we had such an awareness of what we are doing to the planet, and never before have we had the power to do something about that… The future of humanity and indeed, all life on earth, now depends on us.”
With nine of the ten hottest years on record occurring in the last decade, the effects of climate change are now impossible for anyone to ignore. As former US President Barack Obama said:
“We are the first generation to feel the effect of climate change and the last generation who can do something about it.”
This is both a challenge and an opportunity, as new President Joe Biden said when taking the US back into the Paris Agreement in January 2021. His policies if enacted by Congress would invest USD 2.2 trillion in combatting global warming, saying:
“Climate change is the existential threat to humanity. Unchecked, it is going to actually bake this planet. This is not hyperbole. It’s real. And we have a moral obligation.”
“It’s also going to create millions of jobs. We can’t be cavalier about the impact it’s going to have on how we’re going to transition to do all this. But I just think it’s a gigantic opportunity; a gigantic opportunity to create really good jobs.”
Virtually everyone agrees that the action needed to stop greenhouse gases from entering the atmosphere is decarbonization. This requires international cooperation and treaties to universally – rather than unilaterally – agree to decarbonizing the industries we take for granted, such as fossil fuel. German Chancellor Angela Merkel’s clarion call reflected the urgent need to move beyond words alone:
“We must now agree on a binding review mechanism under international law so that this century can credibly be called a century of decarbonization.”
At Robeco, we believe we are also part of the solution by investing in companies that make a difference. And as our CEO Gilbert Van Hassel makes clear, this is our top priority:
“It is clear from scientific reports about climate change and carbon emissions that society has to act now. We cannot solve big problems such as climate change and the rapid decline of biodiversity on our own.”
“But what we can do is set a clear example for the broader industry, work together and encourage other financial institutions such as asset managers to follow suit. We have set this ambition with the conviction that investing is not only about creating wealth but also about contributing to well-being.”
The 1.5°C pathways all have in common a reduction of CO2 emissions to net zero, the phasing out of unabated coal use by 2050, and a reliance on renewables for most of the energy supply.
Four archetypal model pathways are highlighted in the chart: P1 is the most disruptive, with a rapid reduction in emissions towards net zero based on a fast reduction in demand for carbon-intensive products.
P2 meets the emissions target in a way that maximizes the contribution to the SDGs; like P1, it is ambitious in terms of changing consumer patterns.
The P3 pathway is a sort of middle-of-the-road scenario, with limited change in social and economic trends and a high reliance on carbon-reduction techniques such as bioenergy with carbon capture and storage. The riskiest of the four archetypes is P4: it delays the most and results in overshoot, and therefore requires aggressive compensatory action to bring emissions within target.
Governments have woken up to the urgency of tackling climate change. But we’re not yet on track to meet the Paris Agreement unless more urgent action is taken – and that is where investor initiatives can help.
So, are we on track to meet the Paris Agreement? “No, we’re not,” says Lucian Peppelenbos, climate change strategist at Robeco. “If we use the traffic light system of red, amber, and green, I would now give it an amber light, although a year ago, I would have given it a red.”
“The step-up to amber is due to the recent policy commitments in Asia, China, Japan and South Korea, but also because everybody knows now what the US will do, now that it has rejoined the Paris Agreement."
"With all this in place, the countries responsible for 63% of global emissions will be in line with the net zero ambition.”
“If we can actually deliver on our promises by 2050, the world will be on track to limit global warming to 2.1 degrees Celsius; previously we were heading for 3 degrees. This recent wave of commitments is now more ambitious than ever.”
Moving from amber to green is going to take much more collaboration, Peppelenbos says. “I like the term ‘distributed leadership’ that was coined by the architect of the Paris Agreement, Christiana Figueres,” he says
“In the real economy, you need policy frameworks, and you need the consumers and technology to be onside. All of these pieces need to come together. As investors, we can redirect capital towards the green, circular, low-carbon economy… and that's vital. But we critically depend on other pieces of the puzzle to move as well.”
EU Action Plan on Sustainable Finance
A major policy objective by the European Union which aims to promote sustainable investment across the 27-nation bloc.
The Institutional Investors Group on Climate Change
A collaboration of 270 investors taking action to decarbonize their EUR 35 trillion of assets under management.
Net Zero Asset Managers initiative
A group of global asset managers including the IIGCC committed to net zero carbon emissions in their investment portfolios by 2050.
Climate Action 100+
An investor engagement group that targets the 100+ companies that have the highest greenhouse gas emissions.
Partnership for Carbon Accounting Financials
A global partnership founded by a group of Dutch banks to standardize carbon accounting for the financial sector.
Task Force for Climate-Related Financial Disclosures
An organization launched by the Financial Stability Board to improve and increase reporting of climate-related financial information.
Transition Pathway Initiative
A global asset-owner led initiative that assesses companies’ preparedness for the transition to a low-carbon economy.
Dutch Climate Accord
A set of measures by the Dutch government to reduce the country’s CO2 emissions by 49% by 2030 compared to 1990 levels.
(The Hague, 2019)
Finance for Biodiversity Pledge
A group of 37 financial institutions calling for governments to protect threatened biodiversity.
Powering Past Coal Alliance
A coalition of 104 countries, cities, businesses and organizations working to accelerate the transition from coal power generation to clean energy.
Masja Zandbergen-Albers - Head of Sustainability Integration
The Climate Action Tracker monitors governments’ efforts to reduce their emissions and measures them against the Paris Agreement goal of limiting global warming to below 20C by 2100, and to pursue efforts to keep the temperature rise to 1.50C.
The tracker is a collaboration between the climate science and policy institute Climate Analytics and the research group New Climate Institute. It quantifies and evaluates climate change mitigation commitments, and then assesses whether countries are on track to meet them.
It then aggregates country action to the global level, determining the likely temperature increase by the end of the century. A thermometer is used to make visualization easier. Users can see how their own country is doing on a number of metrics on the interactive parts of the tracker’s website.