Nordic pension investors have backed a new initiative seeking government action on effective carbon pricing ahead of the postponed COP26.

“Call on Carbon” is a joint initiative of Nordic groups Climate Leadership Coalition, Haga Initiative, and Skift Business Climate Leaders, with the support of Corporate Leaders Group Europe, BCSD Portugal and CER – Sustainable Business Network Slovenia.

Signatories include major Nordic pension investors Folksam Group, Ilmarinen, KLP, and Varma. Some of these are members of Climate Leadership Coalition.

The carbon pricing initiative is looking for signatories to back a call on countries to “back their net-zero targets with Paris Agreement-consistent effective, robust, reliable and fit-for-purpose carbon pricing instruments which will facilitate a cost-efficient investment path to reach net zero”.

The petition also calls on countries to align carbon pricing instruments between them, where appropriate, and for governments to agree the final rulebook “for the international market mechanism under Article 6 of the Paris Agreement”. The Madrid 2019 climate summit ended without a decision on this point of the Paris accord.

The “Call on Carbon” initiative organisers are urging action on effective carbon pricing this year, saying this would support the UN climate change conference in Glasgow later this year “and make it a true game changer”.

At Finland’s Ilmarinen, head of responsible investment Karoliina Lindroos said that when emissions are priced, market participants can include this in their decision-making, which encourages emissions reductions.

Ilmarinen, a pensions insurance company, is aiming for its investments to be carbon neutral by the end of 2035. It uses scenario models to study the potential effects on its investments of evolving carbon pricing.

Academics writing on the Principles for Responsible Investment (PRI) website last year said they found no evidence that carbon taxes – one of the ways a price can be put on carbon emissions – had adverse effects on GDP growth or total employment. They did, however, reduce emissions, according to the academics.

’ESG-innovation disconnect’

In a more recent blog on the PRI website, another group of academics said they found that oil, gas and energy-producing firms – firms that were often excluded from ESG funds’ investment universe – produced more, and significantly higher quality, green innovation.

The academics also found that energy sector firms were being proactive in providing substantial investment to support alternative energy projects, and that there was no evidence that energy companies were restricting others from innovating in specific product areas.

Their findings, the academics wrote, “raise important questions as to whether the current exclusions of many ESG-focused policies – along with the increasing incidence of explicit divestiture campaigns – are optimal, or whether reward-based incentives would lead to more efficient innovative outcomes”.

Property action key for Oxbridge net-zero commitment

Trinity College Cambridge has committed to net-zero carbon emissions before 2050 for its £1.5bn (€1.7bn) endowment, with action focussed on its property portfolio to follow divestment from all fossil fuel investments in public equities by the end of this year.

Announcing the changes today, the institution said the endowment would now have a dual mandate: to continue delivering sustainable income growth and to commit to a significant, lasting and positive impact on improving its environmental footprint and achieving net zero before 2050.

The commitment to full fossil-fuel divestment follows years of public campaigning.

“Action to reduce emissions within Trinity’s property portfolio offers significant opportunities to invest in ways that will have a positive impact on the environment”

In its statement today, however, the college said that to achieve net zero before 2050, the endowment would need to go “far beyond divestment”, which affected around 1% of the college’s total investments.

Trinity’s property portfolio accounts for 60% of the endowment, and action to reduce emissions within it “will be vital”, it said. It quoted senior bursar Richard Turnill as saying such action “offers significant opportunities to invest in ways that will have a positive impact on the environment”.

In addition to the public equity fossil fuel exit, Trinity will shed private equity fossil fuel exposure within a five to 10 year period, it said. These holdings represent less than 5% of total fossil fuel exposure in the current holdings.

The endowment has said that by the end of August it will “build a roadmap to net zero”, on the basis of a to-be-commissioned baseline study of its existing carbon footprint.

By the end of 2021 the endowment will set five and 10-year science-based targets to be reported on alongside its financial performance.

John Shakeshaft, one of four alumni on Trinity’s investment committee, is quoted as saying: “The college has thoughtfully revised its investment policy to ensure that the endowment can contribute meaningfully to understanding climate change, promoting carbon zero through the portfolio and sustain the real income of the college for the accomplishment of its purposes.”

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