Investors up their influence over major greenhouse gas emitters

A new initiative to increase engagement between investors and large multi-national corporations with regards to their contribution to climate change is likely to have a major impact in 2018.

Around the two-year anniversary of the Paris Agreement, some 225 heavy-hitting investors, with a total of USD$26.3 trillion of assets under management, have launched the Climate Action 100+ initiative. It will see the influential investors becoming more involved and engaged with some of the companies around the world that emit significant amounts of greenhouse gas. 

Officially revealed at the One Planet Summit in France earlier this month, the five-year plan is that corporations will now take quicker action to make changes that will reduce emissions and that it will also lead to franker financial disclosures where relevant to climate change.

The initiative reflects a general move towards investors being less willing to invest with corporations that contribute to climate change as this is seen increasingly as a risk within an investment portfolio. Emma Herd, the CEO of the Investor Group on Climate Change, explained in her recent article on the initiative: “Climate change is one of the most potent threats to financial returns over the coming years.”

She went on to add: “While the human impact of a warming world has very slowly gathered the attention of the those that are in a position to effect change, the worlds biggest investors, including AustralianSuper, HSBC, CalPERS, Northern Trust, Allianz, PIMCO and AXA for example, have been quick to identify both the risk and the potentials of a decarbonised economy.”

She makes it clear that money is now being directed away from carbon-intensive industries and towards renewables and sustainable energy solutions. There’s no doubt that forestry investors are ahead of the curve on this one as investing in sustainably managed forestry helps to boost the renewable energy sector while increasing carbon absorption.

A recent Euromoney article outlined a number of forestry investment options that have come about in response to this clear move towards more environmentally responsible and lower risk investments. One such option is the Forest Resilience Bonds in the US, which will direct money towards improving the resilience of US forests against forest fires, such as the ones that devastated parts of California recently. The investors will receive returns with interest from the money that the US Forest Service and various utility firms save.

GWD Canada’s James Barrett welcomed the Climate Action 100+ initiative, saying that the more influence environmentally conscious investors can have on big business, the better. He added: “In an increasingly low-carbon economy, it makes financial sense for many traditional investors to be diversifying into carbon-neutral investments and sustainable forestry investment funds offer a means through which to do this.”

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