Update: Investor Summits on Climate Risk: Advancing the Clean Trillion

Key players in the financial world came together in 2016 to learn how to invest trillions of dollars in the fight against global warming. The “2016 Investor Summit on Climate Risk: Advancing the Clean Trillion” was billed as the first major event on climate change for investors and businesses since the international climate talks in Paris. The 2016 Investor Summit on Climate Risk was held at the United Nations (UN) in New York City in January, 2016.

One co-host of the Summit was Ceres,[1] a large Boston, Massachusetts-based non-profit organization with an investor network that includes over 180 institutions that manage over $30 trillion in assets. It mobilizes institutional investors and corporations in tackling climate change. It works to address climate change at all levels of business and investment planning and operations. A significant focus for Ceres is advocacy for robust climate disclosure in financial filings and sustainability metrics. Other Summit co-hosts are the United Nations Foundation that informs the business community on how to fight climate change and the United Nations Office for Partnerships.[2] The 1-day event hosted hundreds of attendees from around the world to discuss how to put the goals of the COP21’s Paris Agreement into action.

Important topics discussed at the Summit included types of capital available that help meet global climate goals as well as how to invest in clean energy in developed countries. Ceres said that “in order to limit global warming to 2° Celsius and avoid the worst effects of climate change, the world needs to invest an additional $44 trillion in clean energy—more than $1 trillion per year for the next 36 years.”

Keynote speakers included Ban Ki-moon, former UN Secretary-General; Christiana Figueres, Executive Secretary of the UN Framework Convention on Climate Change (UNFCC); and Michael Bloomberg, founder of Bloomberg L.P. and Bloomberg Philanthropies, and three-term Mayor of New York City. At this time, Mayor Bloomberg was the United Nations Secretary-General’s Special Envoy for Climate Ambition and Solutions.

Also scheduled to address the Investor Summit was Al Gore, former Vice President of the United States (US), and co-founder and chairman of Generation Investment Management, and chairman of the Climate Reality Project,[3] a non-profit organization he founded that focuses on solutions for climate change. Christiana Figueres, then Executive Secretary of the UNFCC, spoke, along with French Environment Minister Ségolène Royal, and Mindy Lubber, the President of Ceres, along with Bank of America CEO Brian Moynihan, and leading investors from ABP, AXA, BlackRock, CalSTRS, and the New York State Common Retirement Fund.

At the time of the first Investors Summit, some initial positive steps had been taken in the investment world. New York State Comptroller Thomas DiNapoli put $2 billion into the state’s public employee pension fund, a fund created by Goldman Sachs made up of companies with smaller carbon footprints. The state’s fund also invested about $1.5 billion over its already-invested $500 million in its Green Strategic Investment Program.[4] This program was for companies operating with the new emissions goals of COP21. Low-carbon funds that started with seed money from the UN have surfaced under well-known asset managers such as Black Rock, State Street, and Mellon Capital in the US, and Amundi Asset Management and Northern Trust in Europe.

The Ceres-sponsored UN Investor Summit on Climate Risk has been followed by a set of similar convocations focused on the private sector’s role in climate change action. It convened again in 2018, with more than 450 institutional investors, corporate leaders, state pension fund managers, and major non-profits in attendance. The meeting was deemed a great success. Awareness of the need for and urgency of significant public and private financing was heightened. Attendees heard the estimate of the Organisation for Economic Cooperation and Development (OECD) that US$6.3 trillion was needed annually until 2030 to meet the infrastructure needs that climate change would impose.

At the 2018 Investors Summit, several new initiatives were added to existing ones to facilitate, coordinate, and support efforts to promote bigger stakes in renewables and clean energy infrastructure so as to align their investments with the Paris Agreement goals. For example, the new Investor Agenda built on the Climate Action 100+ begun in Paris. It joins 225 financial institutions controlling $26 trillion in assets to exert pressure on major greenhouse gas (GHG) emitters—and themselves as asset owners and managers—to report their climate-related risks. These efforts have borne fruit with investors increasing interest in the stocks of companies, mutual funds, and exchange-traded funds (ETFs) that score well on performance ratings of Environmental, Social, and Governance measures (ESG).

This slowly growing trend exploded in 2020, fueled by the growing awareness by small investors in the general public of a deteriorating climate and the need for action to slow those changes. A more unpredictable climate brings risks to companies who do not heed present and clearly foreseeable changes, as well as opportunities to those companies that recognize the risks and nimbly adjust their products, processes, and practices to exploit them.

Several entities made major commitments at the 2018 Summit, but “major” is a relative term. A $2 billion investment or divestment is not trivial, but it pales when the need is for trillions. The mechanisms fostered by Ceres and its partners at the Investor Summit ponied up billions, but the need is for over $6 trillion per year. So far, the commitments have never come anywhere near that goal. The lack of progress on approaching the Paris targets is stark evidence of the shortfall.

The principal achievement of the UN- and Ceres-sponsored Investor Summits and other such Summits is in raising awareness, not funds. Under capitalism, profit is the measure of success, and the time horizon of most business executives is measured quarterly, not annually or in decades, or longer. Sustainability remains a foreign concept to most capitalists. Their short-term focus blinds them to realities of climate change that scientists, academicians, and activists have no difficulty discerning. If you have spent your entire career trying to find more oil, drill more wells, produce more barrels of oil, sell more gasoline, and make more profit, it is very difficult for you to understand what Al Gore or Greta Thunberg is upset about.

It is to Ceres’ credit that it has worked diligently to chip away at that mentality, with some—if moderate—success. They have been aided by an obviously deteriorating climate, and by the efforts of activists like Ms. Thunberg. Revelations of the multibillion-dollar, multi-decade misinformation and disinformation campaigns funded by the coal and oil industries touting the benefits of the lifestyles enabled by fossil fuels while challenging, denying, and disparaging the validity of science warnings of dire environmental consequences helped too.

Slowly, more people have noticed that their climate is changing adversely, and they are coming to realize that the energy path they are on holds significant risks of getting worse and worse. As this awareness grows, people are actively confronting corporations for their indifference to the environment and the damage they have done and are doing to it. People are also urging institutions with which they are affiliated to divest from the fossil fuel industry. They have met with increasing success: in 2014, $52 billion had been divested; as of September 2020, the total was $14 trillion. People are also divesting their personal stakes in the stock of fossil fuel companies.

All in all, a great deal of progress has been made in raising awareness of both the facts of climate change and its causes in the private sector. However, relatively few corporations and the national governments to whom they provide taxes to have been willing to expend the capital on climate change that disrupting long-established arrangements would entail. Workers would lose jobs, communities would lose livelihoods, companies would go out of business, and nations would lose tax revenues needed to run the government, maintain the armed forces, and pay the politicians. Most politicians, like most corporate executives, have a short-term focus. Neither can easily see that it is in their long-term interest to address the looming climate catastrophe sooner rather than later.

Momentum, however, is building for private-sector action on climate change. The March 22–25 2021 Ceres Conference and the Climate Investment Summit in September 2021[5] are important venues for the expansion of corporate commitments. Day Two of President Biden’s Climate Ambition Summit on April 23–24, 2021 brought Bill Gates and corporate leaders together to up their climate change action pledges. The time for the private sector to fulfill their leadership role in climate is now.

Next Time for the Private Sector to Step Up: The 26^th Conference of the Parties of the UN Framework Convention on Climate Change in Glascow, UK, November, 2021.

[1] https://www.ceres.org/our-work/climate-change, Climate Crisis, Ceres.

[2] https://www.un.org/partnerships/, United Nations Office for Partnerships.

[3] https://www.climaterealityproject.org/, Climate Reality Project.

[4] https://www.osc.state.ny.us/files/about/pdf/green-strategic-investment-program.pdf, Green Strategic Investment Program Fact Sheet.

[5] https://www.climateinvestmentsummit.org/, Climate Investment Summit.