Institutional investors have been quick to trumpet responses to the alarming picture painted in the latest report from the world’s most authoritative body on climate science, saying the experts’ conclusion that climate change is “widespread, rapid, and intensifying” makes action from governments, industries and investors all the more urgent.
The first instalment of the Intergovernmental Panel on Climate Change’s (IPCC) Sixth Assessment Report, released today, shows scientists are observing changes in the Earth’s climate in every region and across the whole climate system, the panel said.
Many of the changes observed in the climate were unprecedented in thousands, if not hundreds of thousands of years, said the United Nations body for assessing the science related to climate change. Some of the changes seen, it said, such as continued sea level rise, were irreversible over hundreds to thousands of years.
“However, strong and sustained reductions in emissions of carbon dioxide and other greenhouse gases would limit climate change,” the IPCC said.
Lombard Odier’s Michael Urban and Christopher Kaminker said the report “unequivocally strengthens the scientific evidence on the risks as well as the opportunities associated with the climate transition.”
The report suggested that extreme climate-related events would become more severe and frequent, said the men, who are senior sustainability analyst and head of sustainable investments research and strategy at the firm, respectively.
“In the face of unequivocal scientific evidence and mounting pressures from civil society, consumers, and investors it seems highly likely that additional climate policy responses will follow,” they said.
Victoria Barron, head of sustainable investment at BT Pension Scheme Management, said: “If this report doesn’t convince all global investors that they need to take action on climate change, I don’t know what will.”
Only a fifth of the world’s 2,000 largest public companies had made net-zero commitments, she said, adding that “worse still”, those that there were all varied in quality.
Investors not only had to set their own net-zero targets, she said, but they also needed to use their collective influence to persuade all companies and governments to implement credible transition plans.
The BT Pension Scheme is the UK’s largest corporate pension fund and has a 2035 target for achieving net-zero emissions.
Inevitable Policy Response (IPR), a project aimed at preparing institutional investors for the risks and opportunities associated with acceleration in global climate policy – backed by asset management giants BlackRock, BNP Paribas Asset Management, Goldman Sachs Asset Management and others – said the report showed it was critical that institutional investors now considered physical climate risks and industry transition risk side by side, rather than seeing physical risks as less immediate.
“Whilst the worst of portfolio risks for investors from physical climate change may be longer term, they are potentially far greater and more pervasive in effect, as the report confirms,” said Julian Poulter, IPR’s head of investor relations.
The UN-convened Net-Zero Asset Owner Alliance, meanwhile, said the report showed climate-related risks – for both planet and communities – were increasing faster than expected, as the current trajectory in global carbon emissions was rapidly exceeding our estimated carbon budget.
“The delay for global action and fast transition of the economy is getting us farther from our objective of achieving net-zero emissions by 2050, in order to limit the increase in average world temperature to 1.5°C by the end of the century (2100),” the alliance said.
It said its members, who collectively manage almost $7trn, were urging investors, companies, and governments “to act definitively to limit temperature increase by adopting transformational measures that will rapidly reduce carbon emissions”.
Fiona Reynolds, chief executive officer at the Principles for Responsible Investment, said the new IPCC report was unequivocal in its findings. “It should serve as a massive wake-up call that we are not going to manage the climate crisis without decisive action,” she said.
“In response, governments and regulators need to provide near-term accountability for net-zero targets with robust policy frameworks and credible emission reduction plans for 2030,” Reynolds said.
Eoin Murray, head of investment at the international business of Federated Hermes, said there were several important findings in the report, including a closer linkage between extreme weather events and human activity, a hotter late decade than any period in the previous 125,000 years, and a narrowing of the range of likely climate outcomes.
“But the most important piece of the latest IPCC report must be that we are today in our last decade to take the necessary actions to avoid the horrors of predicted climate change, and that it is still within our gift to make the required changes,” he said.
With consensus achieved with all UN governments before the release of the report, Murray said no government had an excuse to duck their responsibilities now.
In the UK, the government said COP President Alok Sharma would meet scientists later today and encourage countries that had not already done so to urgently submit new or updated Nationally Determined Contributions (NDCs) with their plans for ambitious climate action ahead of the “vital” COP26 summit later this year in Glasgow.
He was particularly addressing the major economies of the G20, the government said in the announcement, which it said were responsible for over 80% of global emissions.