BLOG: Eric Usher explains the false dichotomy in choosing between industry or government action on sustainability

22 October 2021

Earlier this week I wrote about the progress being made by the signatories to the UN Principles for Responsible Banking as they work to put sustainability front and centre of their businesses. I described the shift in the industry from taking a uniquely risk-based approach to sustainability integration, to one that is more focused on aligning with the needs of society, including particularly the climate emergency. In this second blog, I will focus on some of the pushback that these banks and other financial institutions are seeing as they scale up their sustainability engagements.


With COP26 just over a week away, the pressure for action is rising along with the temperature. And some of the pressure is focused inwards, a civil war of sorts whereby some in the climate community are highly critical of the actions being taking by a number of financial institutions – from the green products that they are bringing to market to the sustainability commitments they are making. The critics are asking whether their actions will help deliver real outcomes at the pace and scale required? Or rather if they are just sheep’s clothing with the aim of greenwashing business-as-usual approaches.

Three recent examples are the SEC and BAFIN investigations into ESG greenwashing at DWS, the accusatory blog from Tariq Fancy of his former employer Blackrock, and civil society criticism of Mark Carney and the Glasgow Financial Alliance for Net Zero (GFANZ).

I would like to focus on one aspect which underpins all of them – the relationship between the financial sector and government. The criticism centers on the tenet that voluntary action on the part of the private finance sector, for instance in ESG labelling or committing to net-zero emissions, is an alternative to government resolving these issues through regulation. Put on a show of action to put off government forcing your hand.

At UNEP FI we see this as a false dichotomy, and I will try to explain why voluntary action from the financial sector is so important and actually crucial to spur changes in government policy. UNEP FI as a global partnership between the UN and 430 leading financial institutions has been working for many years to help integrate sustainability considerations into financial practice. In 2004 then UNEP FI Head Paul Clements-Hunt, James Gifford and a few others first coined the term ESG (Environmental, Social and Governance) and worked with early leaders in the responsible investment industry and the UN Global Compact to establish with Kofi Annan the Principles for Responsible Investment. Euromoney provides a nice look back at that heady period. Six years later a group of insurance underwriters convened by UNEP FI launched the Principles for Sustainable Insurance. And most recently, in 2019, we saw the launch with 132 founding banks and Antonio Guterres of the UN Principles for Responsible Banking.

These sustainable finance frameworks have helped spawn, and today host, many of the more targeted initiatives, including three Net-Zero Alliances that are part of GFANZ. UNEP FI convenes the banking and insurance alliances, co-convenes the asset owner alliance with PRI, and PRI themselves are also co-convenors of the asset managers initiative. These frameworks and alliances are all voluntary in nature and therefore are open to the same sort of criticism as mentioned above.

In earlier days of the environmental movement, the relationship between public and private actors was simpler, somewhat idealistic, with environmental externalities expected to be simply priced in by government. Of course, we’ve learned through the failures of the Kyoto Protocol and the early days of the European Union Emissions Trading System that getting pricing right and even getting the political ambition to do so is not easy. Clearly the model that the private sector should wait to be regulated into action is somewhat flawed. And, of course, expecting that voluntary action on its own is enough is also often wishful thinking. The plethora of ESG approaches which lack comparability are a case in point and this could become the case for net-zero commitments as well.

What we firmly believe at UNEP FI is that voluntary action from the finance industry, the so-called leaning in or change-making ambition of leading banks, insurers and investors, is not a replacement for regulatory action but rather an expected pre-cursor or core ingredient in it. The relationship between private and public sectors is less a step-function – financiers waiting for a price on carbon to start engaging – and more of a dance whereby each party makes a move that then signals the other to respond, building trust and the ratcheting of ambition that the Paris Agreement was designed to foster. Christiana Figueres gave a great Ted talk shortly after COP21’s signing that described how the many stakeholders involved managed to create this kind of positive ambition-building dynamic. Six years on, this approach is still working and at UNEP FI we believe it’s the only way forward.

A simple example is climate risk disclosure which has probably been the most important development for the private sector since the Paris Agreement was signed. The Taskforce on Climate-related Financial Disclosures (TCFD) was established by Mark Carney in his role as Chair of the G20 Financial Stability Board, who asked Michael Bloomberg to pull together the best minds from industry to recommend how a corporate or financial institution should transparently disclose the climate risks in their business or on their balance sheet. Here the public sector, rather than directly regulating climate disclosures, was mandating the private sector to develop the framework and to start reporting voluntarily. The approach was well received by industry and today most major corporates and financiers’ issue TCFD reports annually. UNEP FI has worked extensively with our membership to get started with their reporting and to develop common approaches that others may follow. Essentially there is a lot of work going on within the financial community to build the skills and approaches for disclosing effectively. However, although the breadth of disclosures has really grown, there is the increasing realization that the depth, and particularly the comparability of disclosures is somewhat lacking. And that regulators must start to weigh in, which they are now doing in many jurisdictions, starting in New Zealand, the UK, EU and beyond. The Central Banks and Supervisors’ Network for Greening the Financial System made up of the majority of financial regulators globally is providing important inputs to this process.

Building on the learning from TCFD, we at UNEP FI have been pleased to be working with UNDP, WWF and Global Canopy to launch the Taskforce on Nature-related Financial Disclosures (TNFD) which we expect may follow a similar trajectory – it will challenge industry leaders to get started but keep regulators aware of developments and ready to step in, if and when needed.

Alongside the public-private developments on TCFD and TNFD, there’s another important dance happening in defining which business activities are truly sustainable –  through taxonomies. The EU and China were the first here but have been followed by many other regions and efforts to start linking them up. The International Platform on Sustainable Finance is particularly focused on ratcheting this sort of public-private dance and the recently launched five-year roadmap of the G20 Sustainable Finance Working Group, convened by our sister agency UNDP, is as well.

The public-private progress being made on climate risk disclosure and sustainability taxonomies will, we hope, help ratchet ESG ambitions to a new level of activity, comparability and credibility. With this, the private finance community can credibly lean in to the challenges – becoming the proverbial change makers – and know that their voluntary leadership will not only position them for sustainability transitions but also help catalyze governments to join the dance and create the conditions where the laggards have no choice but to also join the fray. Public and private action, both credible and ambitious – this is what the world needs today, both in Glasgow and beyond.

In part three of my pre-COP blog, I will come back to the net-zero ambition and what is needed to make the dance moves most credible there.

Read my blog assessing how banks are translating talk into action.

Net-Zero Asset Owner Alliance members to cut portfolio emissions 25-30% by 2025

20 October 2021

Less than two weeks away from COP26, the UN-Convened Net Zero Asset Owner Alliance launches its inaugural, biennial Progress Report, highlighting that 29 of its member investors have committed to reducing portfolio emissions by 25-30% by 2025 across three asset classes. This range is higher than the targets set by the inaugural Target Setting Protocol, published in January (-16 to -29% by 2025).

The Alliance also welcomes six new members for a total of 56: Japan’s Nippon Life, Sumitomo Life, and Meiji Yasuda Life Insurance announced membership on 15th October 2021, while the Netherlands’ Pensioenfonds Detailhandel, Germany’s SparkassenVersicherung, and Austria’s UNIQA announced today. The Alliance has grown in just two years from 12 members managing US$2.4 trillion to a membership of 56 investors, collectively managing US$9.3 trillion in assets. With further new members in the pipeline, it is on track to reach US$10 trillion assets under management (AUM) by COP26.

The three new Japanese insurance companies joining the Alliance come after Dai-ichi Life Insurance Company joined in March, marking a significant expansion into Japan. The Alliance welcomed its first Africa-based member last month, when African Risk Capacity Ltd, a specialized agency of the African Union, joined.

Only asset owners that commit to achieving net-zero portfolios by 2050, and that establish intermediate targets every five years in line with the Paris Agreement’s goal of limiting warming to 1.5°C, can participate in the Alliance. This represents a rapid growth in asset owners leading by example, and not asking of real economy companies what they aren’t already asking of themselves.

Members’ first ever short-term decarbonization targets

The Progress Report, to be launched later today at the Net Zero Future: Credible Ambition and Solutions roundtable with Selwin Hart and UN Climate Envoy Michael Bloomberg, outlines the intermediate emissions reductions targets set by investors as part of the 2025 Alliance Target Setting Protocol. The Protocol guides how individual members will set science-based emission reduction targets, achievable in the next five years, informed by IPCC 1.5°C no and low overshoot pathways.

These interim targets have been submitted by 29 Alliance members, as newly joined members in the last 12 months are yet to record their targets. Members have 12 months from joining the Alliance to set their interim targets, with the cut-off point for inclusion in the Progress Report being 30 June 2021.

Günther Thallinger – Allianz SE Board Member & Chair UN-Convened Net-Zero Asset Owner Alliance said:

“The Alliance was formed because we believe asset owners have a unique role in the global economy and financial systems. We want to signal that we are ready to work on the development of assets. We are willing to bring sustainability targets at the level of financial targets and are ready to work on the long-term transformation of the economy. We also want to show that we are prepared to lead the way by first changing ourselves and then reaching out to others to join us. We encourage all asset owners to join us in our commitment to align our portfolios with a 1.5°C no/low overshoot trajectory, to set interim targets, and to work together towards a sustainable future.”

Inger Andersen Executive Director of the United Nations Environment Programme (UNEP) said:

“Today, 61% of the world’s countries and one-fifth of major corporations have some kind of net-zero commitment. This signals a real appetite for change from both private and public sectors. But now, the ask is for us to move to 100% net-zero and translate commitments into immediate actions thereby delivering actual, measurable decarbonization and economy-side transformations. Asset owners are in a strategic position to make that happen by scaling up finance solutions, engaging with corporates and policymakers and shifting capital towards the sustainable solutions of tomorrow. This report provides a clear framework for how asset owners can play their part in the urgent challenges in front of us. I look forward to the actions that arise from it.”

Fiona Reynolds, CEO at the Principles for Responsible Investment, said:

“As COP26 rapidly approaches, increased investor commitment and action in the race to net zero is critical. The release of the Asset Owner Alliances’ progress report highlights the initiative’s continued growth. Members are not just calling on others to act but are starting to pave the way, by aligning their own portfolios and practices with net-zero – including by publishing 2025 interim targets. This focus on near-term goals is vital in driving timely action on net-zero and ensuring targets are hit by 2050. This work can serve as a clear example of emerging good practice and is well placed to provide a blueprint for firms across the investment landscape on how to effectively report their progress. However, we need to go further faster, and hope the momentum of the Asset Owner Alliance will help to inspire greater action from investors as well as businesses and governments at COP26.”

Michael R. Bloomberg, UN Secretary General’s Special Envoy for Climate Ambition and Solutions and Founder of Bloomberg LP and Bloomberg Philanthropies, said:

“Just days away from the G20 Summit and COP26, more major investors are stepping up to set bold short-term targets and accelerate the urgently needed transition to clean energy. The Asset Owner Alliance is growing because firms recognize that building strong economies and fighting climate change really do go hand in hand. And the more that nations collaborate with the private sector in raising their climate ambitions, the faster the world can achieve both the economic and health benefits of net-zero emissions.”

The 29 out of 56 Alliance members have committed to:

• Reducing emissions by 25-30% by 2025 across all listed equities, corporate bonds, and real estate, all three asset classes currently covered in the Alliance’s sub-portfolio target methodologies.
• Reducing emissions by an average of 24% for real estate when set as a stand-alone target on the asset class or in line with what is required by the national grid using CRREM pathways, which is sometimes less than required by global average reductions depending on the efficiency of the grid, etc.

Financing change, engagement, and policy tracks
In addition, as part of the Alliance’s Financing Transition track, the Alliance requires members to report progress in the amount of financing they have provided to climate solutions. The Progress Report reveals asset owners are currently invested in climate solutions an average 4% of AUM.

The report also gauges progress against other tracks covered by the Alliance’s work:

• Within its Engagement track, asset owners plan to support an average of 34 collaborative engagements by 2025. Members also say they expect on average 123 of their investees to have an SBTi-approved target following their engagement or have committed to a 2050 net-zero goal.
• In a progress update on the Alliance’s Policy track, the Alliance has provided recommendations for governmental carbon pricing, suggesting current carbon prices need to almost treble by 2030 to achieve net-zero, while also considering the imperative of a just transition.
• As part of the Monitoring, Reporting, and Verification (MRV) track, the Alliance continues to advance its Target Setting Protocol on an annual basis by adding additional asset classes such as infrastructure and sovereign debt, achieving greater granularity in metrics and specification of approach to the asset classes already in scope. The Alliance is conducting until 29 October a public consultation on the Target Setting Protocol, bringing complete transparency to how the members set interim targets

To download a copy of the full report, please click here.

About the UN-convened Net-Zero Asset Owner Alliance

The 56 members of the UN-convened Net-Zero Asset Owner Alliance have committed i) to transitioning their investment portfolios to net-zero GHG emissions by 2050 consistent with a maximum temperature rise of 1.5°C above pre-industrial levels; ii) to establishing intermediate targets every five years, and iii) to regularly reporting on progress. The Alliance is convened by UNEP’s Finance Initiative and the Principles for Responsible Investment (PRI). The Alliance is supported by WWF and Global Optimism, an initiative led by Christiana Figueres, former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC).

About UNEP FI

United Nations Environment Programme Finance Initiative (UNEP FI) is a partnership between UNEP and the global financial sector to mobilize private sector finance for sustainable development. UNEP FI works with more than 400 members – banks, insurers, and investors – and over 100 supporting institutions – to help create a financial sector that serves people and the planet while delivering positive impacts. UNEP FI aims to inspire, inform and enable financial institutions to improve people’s quality of life without compromising that of future generations. By leveraging the UN’s role, UNEP FI accelerates sustainable finance.

About the UN Environment Programme (UNEP)

UNEP is the leading global voice on the environment. It provides leadership and encourages partnership in caring for the environment by inspiring, informing, and enabling nations and peoples to improve their quality of life without compromising that of future generations.

UNEP FI at COP26: Event line-up

31 October - 12 November 2021

Unsplash/Adam Marikar

The need to deliver on the commitment for a net-zero global emissions economy by 2050 is more urgent than ever. The 26th UN Climate Change Conference of the Parties (COP26) will be critical to raise climate ambition against the growing threats of climate change.  It will bring governments, civil society, and the private sector together to accelerate action towards the goals of the Paris Agreement and the UN Framework Convention on Climate Change (UNFCCC).

Throughout COP26, UNEP  will strive to ensure science is central, particularly in identifying any gaps between ambition and implementation, as already outlined in the UNEP Emissions Gap Report. UNEP FI’s work will focus on progressing the climate finance agenda through the three net-zero alliances which it convenes:

Find out what UNEP FI is doing at COP26 to bring the latest climate commitments made by UNEP FI members to the attention of policymakers. Members can attend many of the events online – check out the list below, which will be updated on a regular basis.

For more information on official COP26 announcements, accreditation, and official events, please visit the UNFCCC website or the UK COP26 website. Please note that UNEP FI is not able to help with accreditation to attend COP.


UNEP FI Events:

1-3 November 2021 | The Principles for Sustainable Insurance at COP26

During COP26, the UNEP FI’s Principles for Sustainable Insurance Initiative will take part and host a series of virtual events featuring the Net-Zero Insurance Alliance it convenes and addressing how insurers can decarbonise their underwriting portfolios.

Find out more

10 – 11 November 2021 | UNEP FI Regional Roundtable Europe 2021

UNEP FI is hosting its Regional Roundtable on Sustainable Finance for Europe as a virtual event on 10-11 November 2021, alongside COP26. The virtual event will define the role of banking, insurance and investment in shaping ambitious responsible and sustainable strategies to proactively address the challenges and opportunities of a green recovery whilst transitioning to a low-carbon, inclusive and sustainable future in Europe.

The event will feature 40+ speakers including:

  • Werner Hoyer – President, European Investment Bank (EIB)
  • Günther Thallinger – Member of the Board of Management, Allianz and Chair of the Net Zero Asset Owner Alliance
  • Tracey McDermott – Group Head Conduct, Financial Crime and Compliance, Standard Chartered and Chair of the Net Zero Banking Alliance
  • Renaud Guidée – Group Chief Risk Officer, AXA and Chair of the Net Zero Insurance Alliance
  • Helena Viñes Fiestas – Commissioner of the Spanish Financial Markets Authority and Rapporteur of the EU Platform on Sustainable Finance

Register here

10 November 2021 | 18:30 – 19:30 CET | Official COP26 Event: Net Zero Finance Roundtable – Driving Net-Zero Finance Integrity

In partnership with Climate Policy Initiative (CPI) and the 2 Degree Investing Initiative, UNEP FI will host this side event which will bring together leading experts in the net zero finance space to discuss what is needed to align all finance flows and portfolios with Paris Agreement goals, including: how to strengthen net zero commitments to avoid “greenwashing”; and addressing data gaps. Speakers will be confirmed shortly. Keep checking back for more information. 

 


Other events involving UNEP FI:

4 November 2021 | 09:00-11:00 CET | The leadership of the banking sector in the journey towards 1.5 degrees

Through the industry-led, UN-convened Net-Zero Banking Alliance, banks are stepping up their leadership role on climate change; the defining issue of this century. As banks and their clients adjust their business models, develop credible plans for the transition and implement them, this event will explore what banks need to do and what they need from other stakeholders to pull in the same direction. Speakers will identify the critical actions for banks and other stakeholders need to take in 2022 in order to bend downwards the recalcitrant trajectory of the global emissions curve. More information to follow.

4 November 2021 | 13:00 CET |  The global insurance industry — a key partner in creating more sustainable and resilient societies

Insurers are uniquely positioned to contribute to the fight against climate change, since they play the dual role of providing risk protection and investing in sustainable assets. Join Eric Usher, and high-level speakers  to learn what the world’s insurers are already doing to promote sustainability and resilience and to discuss what policymakers can do to help them achieve more. More information to follow.

4 November 2021 | 14:00 – 15:15 CET |  EIB – Net Zero Banking Alliance partnership event:  The role of banks in facilitating decarbonisation in emerging markets and developing countries

Through the UN-convened Net-Zero Banking Alliance, banks are stepping up their leadership role on the defining issue of this century.  As banks and their clients adjust their business models, develop credible plans for the transition and implement them, this event will explore the particular challenges and opportunities for upscaling investment for climate mitigation in emerging markets and developing countries and how these may be overcome through private sector leadership and public-private collaboration. More information to follow.

8 – 10 November 2021 | The International Economic Forum of the Americas: The Toronto Global Forum

The Toronto Global Forum is an international conference fostering dialogue on national and global issues. It is held under the auspices of the International Economic Forum of the Americas (IEFA). The event will feature CEOs from finance institutions including Desjardins Group, Morgan Stanley, Zurich Insurance Group and JP Morgan Asset & Wealth Management, as well as UNEP FI Head, Eric Usher. Find out more here.

10 November 2021 | The Investor Agenda: Accelerating global investor actions for a net-zero emissions economy

A record number of investors are setting net zero goals, developing climate action plans, engaging companies on transition planning and calling on policymakers to deliver robust policies in line with 1.5°C. Investors representing around 50% of global AUM have signed the Global Investor Statement to Governments to be released to global leaders and the public in advance of COP26 where the Investor Agenda will hold an hybrid event to accelerate global investor actions for a net-zero emissions economy. Register here.

 


Past events:

Net-zero future: credible ambition and pioneering solutions

Bloomberg Philanthropies, the Principles for Responsible Investors and UNEP FI held on 20 October a virtual global roundtable on high-ambition climate action featuring net-zero finance pioneers. Speakers included Michael Bloomberg, UN Special Envoy for Climate Ambition and Solutions, Günther Thallinger, Chair of the UN-convened Net-Zero Asset Owner Alliance, Oliver Baete, CEO of Allianz, Selwin Hart,UN Assistant Secretary-General on Climate Action, Hiro Mizuno, UN Special Envoy on Innovative Finance and Sustainable Investments, Francesco Starace, CEO of Enel, and Hiroshi Shimizu. President of Nippon Life Insurance Co. Watch the event’s recording.

Briefing Ahead of UNFCCC COP26 in Glasgow: Update on Preparations for the UN Climate Change Conference

The Permanent Mission of the United Kingdom hosted a briefing, in partnership with the Geneva Environment Network, on the opportunities and challenges of addressing climate change ahead COP26. Speakers from various facets of the climate agenda have layed out what to expect from the conference and shared insights on the political dynamics, negotiations, and how to take forward the progress to be made in Glasgow to the implementing arm of international climate action in Geneva. Watch the recording.

Early signs of collective progress as banks work to implement the Principles for Responsible Banking

14 October 2021

New baseline report provides a status update on how the global coalition of banks are implementing the Principles, highlighting progress made and challenges to be addressed.

Geneva, 14 October 2021 – A new report summarising the progress made by banks who have signed the Principles for Responsible Banking finds that signatories are showing early signs of collective progress and building the foundations to transform sustainable banking; however, momentum needs to accelerate in some key areas.

Published today by the UN Environment Programme Finance Initiative (UNEP FI), the report sets the first baseline to measure future progress, marking 1.5 years of the Principles’ initial 4-year time horizon. It includes an independent view from the Civil Society Advisory Body, a 12-member body mandated to support signatory banks to implement the Principles and assess progress.

Key findings from the report show early signs of progress including that 94% of banks identify sustainability as a strategic priority for their organisation, 93% are analysing the environmental and social impacts of their activities, and 30% are setting targets, with a strong collective focus on climate and financial inclusion. The report finds early indications of impact on the real economy, with USD 2.3 trillion of sustainable finance being mobilized.[1]

Download full report   Download executive summary   Videos and more

The Principles for Responsible Banking are a crucial framework for the global banking industry to respond to, drive and benefit from a sustainable development economy.” commented Inger Andersen, Executive Director of UNEP.Sustainable finance is about creating prosperity for this and future generations, and this report shows early signs of progress made worldwide, while outlining steps to further accelerate action in critical areas.”

The UNEP FI banking board and secretariat say continued and accelerated action is needed from signatories. Suggested areas of improvement include enhancing the availability and quality of data, setting targets in line with improved impact analysis, and increasing action on critical sustainability issues such as biodiversity loss, equality and human rights.

“The Principles are a four-year journey of unprecedented scale and scope, where banks of all sizes from across the world have together been developing the tools and guidance to support their effective implementation,” said Siobhan Toohill, co-Chair of the UNEP FI Banking Board and Group Head of Sustainability at Westpac. “We must not only continue to build on the momentum evidenced in the first 18 months, but accelerate it to deliver on our commitments.”

Insights from the report will be used by the UNEP FI banking board and secretariat to further develop the work programme to support banks in scaling up their progress and addressing these key challenges. Under the framework, banks must publish their individual progress within 18 months of signing the Principles, and annually thereafter. The next progress report at a collective level is scheduled for 2023.

[1] Source: UNEP FI, as reported by 87 banks.


About the Principles for Responsible Banking

The Principles for Responsible Banking are a unique framework for ensuring that signatory banks’ strategy and practice align with the vision society has set out for its future in the Sustainable Development Goals and the Paris Climate Agreement. The Principles were created in 2019 through a partnership between founding banks and the United Nations, and are designed to bring purpose, vision and ambition to sustainable finance. Signatory banks commit to embedding these Principles across all business areas, at the strategic, portfolio and transactional levels. Over 250 banks representing over 40% of banking assets worldwide have now joined this movement for change and embarked on their 4-year journeys of impact analysis, target setting and reporting.

About the United Nations Environment Programme Initiative
United Nations Environment Programme Finance Initiative (UNEP FI) is a partnership between UNEP and the global financial sector to mobilize private sector finance for sustainable development. UNEP FI works with more than 400 members – banks, insurers, and investors – and over 100 supporting institutions – to help create a financial sector that serves people and planet while delivering positive impacts. UNEP FI aims to inspire, inform and enable financial institutions to improve people’s quality of life without compromising that of future generations. By leveraging the UN’s role, UNEP FI accelerates sustainable finance.

About the United Nations Environment Programme (UNEP)

UNEP is the leading global voice on the environment. It provides leadership and encourages partnership in caring for the environment by inspiring, informing and enabling nations and peoples to improve their quality of life without compromising that of future generations.

For more information, please contact:

Keisha Rukikaire, Head of News & Media, UNEP

Net-Zero Insurance Alliance breaks ground in Africa and Asia as it expands in Europe

13 October 2021

NZIA becomes net-zero insurance gold standard after accreditation by UN’s Race to Zero campaign

13 October 2021—In the run up to the UN Climate Change Conference in Glasgow (COP26), the Net-Zero Insurance Alliance (NZIA) convened by UN Environment Programme’s Principles for Sustainable Insurance Initiative (PSI) has expanded its membership, announcing today five new members from Africa, Asia and Europe as part of its efforts to build a global alliance.

The first NZIA member in Africa is ICEA LION Group (Kenya), a leading East African insurer, while Shinhan Life Insurance (Republic of Korea), one of the largest Korean life insurers, is the first NZIA member in Asia. Meanwhile, the NZIA continues to expand in Europe with three new members: American Hellenic Hull (Cyprus), a leading marine insurer; Hannover Re (Germany), the world’s third largest reinsurer; and NN Group (The Netherlands), one of the largest Dutch insurers. It is expected that the NZIA membership will continue to grow across all regions en route to and after COP26.

“The NZIA is accelerating the race to net zero by welcoming additional insurers and reinsurers from Africa, Asia and Europe,” said Renaud Guidée, Chair of the NZIA and Group Chief Risk Officer of AXA. “Expanding the NZIA’s geographic reach by on-boarding these new members is another step forward on our carbon neutrality pathway. This brings important voices to the table. Diversity of membership makes the NZIA stronger as it is critical to ensure that no one is left behind in the net-zero transition.”

All NZIA members have committed to transition their insurance and reinsurance underwriting portfolios to net-zero greenhouse gas emissions by 2050. They will individually set science-based intermediate targets every five years and independently report on their progress publicly and annually. A company that applies to join the NZIA needs to provide short-term steps that it will take to work towards immediate decarbonisation of its insurance and reinsurance underwriting portfolios.

Furthermore, the NZIA has been accredited by the UN’s Race to Zero campaign, whose criteria requires companies to use science-based guidelines to reach net-zero emissions, cover all emission scopes, include 2030 interim target setting, and commit to transparent reporting and accounting. By meeting the UN Race to Zero criteria, the NZIA also becomes part of the Glasgow Financial Alliance for Net Zero (GFANZ).

“The Net-Zero Insurance Alliance being accredited by the UN’s Race to Zero campaign makes it the gold standard for net-zero insurance commitments in terms of ambition, credibility, accountability and transparency,” said Nigel Topping, the UN’s High-Level Climate Action Champion for COP26. “I urge insurers across the globe to raise their climate ambition by joining the NZIA and become part of the solution. The time for decisive climate action is now.”

“The UN Secretary-General called the latest report of the Intergovernmental Panel on Climate Change a ‘code red for humanity’, so as society’s risk managers, it is also a code red for the insurance industry,” said Butch Bacani, who leads the PSI at the UN Environment Programme. “Insurers that have joined the NZIA are responding to what science is telling us to do in order to limit global warming to 1.5°C and avert catastrophic climate change. This is why the NZIA must be an alliance of the many, not the few, and why net-zero insurance must be the norm, not the exception.”

The NZIA was launched at the G20 Climate Summit in Venice last July by eight leading global insurers and reinsurers as its founding members: AXA (France) (NZIA Chair), Allianz (Germany), Aviva (UK), Generali (Italy), Munich Re (Germany), SCOR (France), Swiss Re (Switzerland), and Zurich Insurance Group (Switzerland). These insurers are building on their climate leadership as investors through the UN-convened Net-Zero Asset Owner Alliance (AOA). They are therefore demonstrating the key role of the insurance industry as risk managers, insurers and investors in supporting the transition to a net-zero economy.

Further announcements to drive climate action will be made by the PSI soon as part of its COP26 plans.

 

Quotes from CEOs of new NZIA members and principal representatives of other NZIA founding members

“Decarbonisation is an urgent necessity but so many questions remain and there is a need for an international roadmap to provide a framework for shipping to undertake this dramatic transition effectively. Therefore, the Net-Zero Insurance Alliance is a pioneering step, enabling insurers and re-insurers to take action and support clients in moving towards low-carbon solutions,” said Ilias Tsakiris, CEO, American Hellenic Hull Insurance Company Ltd.

“We are excited to be part of this seriously overdue initiative to reduce the impact of an unfolding disaster that is already reigning havoc in our beloved continent and beyond. We remain committed towards this cause as we protect and preserve our world for the sake of the here and now and for future generations to come,” said Caesar Mwangi, CEO, ICEA LION Group.

“Climate change is one of the most pressing developments of our time and is impacting our customers and the societies in which we operate. Joining the Net-Zero Insurance Alliance fits our ambition to accelerate the transition to a low carbon economy and is in line with our net-zero commitment for investments. By collaborating with other international (re)insurers, we will be able to deepen our knowledge and increase our impact,” said David Knibbe, CEO, NN Group.

“At Hannover Re, we are constantly strengthening our contribution towards a more sustainable future. By joining the Net-Zero Insurance Alliance, we are taking the next step towards addressing today’s urgent challenges and to support the transformation to a sustainable economy – aligned with strong partners,” said Jean-Jacques Henchoz, CEO, Hannover Re.

“Shinhan Life Insurance (SHL) is proud to be the member of the Net-Zero Insurance Alliance. Considering the urgent needs for combating climate change, SHL is committed to transforming our portfolio in accordance with the target of net-zero greenhouse gas emissions by 2050. SHL and Shinhan Financial Group (a parent company of SHL) will accelerate our efforts to contributing to a more sustainable world in all our businesses,” said Dai Gou Sung, CEO, Shinhan Life Insurance Co., Ltd.

 

Contact information

  • Diana Diaz, Programme Supervisor, UN Environment Programme’s Principles for Sustainable Insurance Initiative
  • Sally Wootton, Communications Lead, UN Environment Programme’s Finance Initiative

 

About the UN-convened Net-Zero Insurance Alliance

The Net-Zero Insurance Alliance (NZIA) was established by a group of leading insurance and reinsurance companies, who are all signatories to the UN Principles for Sustainable Insurance (PSI), under the auspices of the UN Environment Programme’s PSI Initiative, the largest collaboration between the UN and the global insurance industry.

The NZIA was launched at the G20 Climate Summit in Venice in July 2021. NZIA members have committed to transition their insurance and reinsurance underwriting portfolios to net-zero greenhouse gas emissions by 2050, consistent with a maximum temperature rise of 1.5°C above pre-industrial levels by 2100, in order to contribute to the implementation of the Paris Agreement on Climate Change.

www.unepfi.org/net-zero-insurance

 

About UN Environment Programme’s Principles for Sustainable Insurance Initiative

Endorsed by the UN Secretary-General and insurance industry CEOs, the Principles for Sustainable Insurance (PSI) serve as a global framework for the insurance industry to address environmental, social and governance (ESG) risks and opportunities—and a global initiative to strengthen the insurance industry’s contribution as risk managers, insurers and investors to building resilient, inclusive and sustainable communities and economies on a healthy planet. Developed by UN Environment Programme’s Finance Initiative, the PSI was launched at the 2012 UN Conference on Sustainable Development (Rio+20) and has led to the largest collaborative initiative between the UN and the insurance industry.

www.unepfi.org/psi

Net-Zero Asset Owner Alliance backs call to scale-up carbon removal from atmosphere

23 September 2021

Asset owners must immediately scale investment into impactful carbon management and negative emissions technologies both inside and outside of value chains, according to a new position paper from the UN-convened Net-Zero Asset Owner Alliance.

Following the recent special report by the Intergovernmental Panel on Climate Change (IPCC), the Alliance recognizes that fostering rapid and deep cuts to GHG emissions across all systems should remain a primary focus for investors.

The paper highlights how carbon dioxide removal (CDR) solutions – including a mix of land-based carbon sinks, nature-based solutions, and technological carbon removal approaches, complementary to fostering deep cuts to GHG emission across all systems – must be scaled massively and rapidly to align with a 1.5°C pathway. It reports that CDR solutions will need to remove 0.5 to 1.2 Gt of CO2 per year by 2025, and as much as 6 to 10 Gt of CO2 per year by 2050 (compared to global emissions of 42 Gt of CO2 in 2020), alongside decarbonization efforts to keep global average warming to 1.5°C.

The IPCC recently warned that the world is on a 3°C pathway and affirmed that: “All analyzed pathways limiting warming to 1.5°C use CDR to some extent to neutralize emissions from sources for which no mitigation measures have been identified…. The longer the delay in reducing CO2 emissions towards zero, the larger the likelihood of exceeding 1.5°C, and the heavier the implied reliance on net negative emissions after mid-century to return warming to 1.5°C.”

The paper warns that under-investment and failure to develop nascent CDR pathways now risks them not being available as an important resource when needed at scale.

The range of mitigation strategies and tactics laid out in the position paper focuses on abatement, compensation, and neutralization of GHG emissions. While for the next 5-10 years abatement is the top priority within value chains, the Alliance calls attention to compensation, including purchasing of carbon credits.

The NZAOA calls and expects policymakers to fix the carbon-pricing issue as a priority, but – as a complementary measure –will support voluntary carbon markets, which require a significant ‘quality boost’.

The use of carbon credits as complementary instruments to abatement strategies requires an immediate increase in the quality of carbon credits, leading to higher carbon prices. In essence, this means formalizing the use of carbon credits as a market proxy for a global carbon tax. This market proxy will grow, institutionalize, and increase the transparency and integrity of voluntary carbon markets – the best available solution in the absence of rising price corridors and policy support mechanisms.

Günther Thallinger, member of the board of management, Allianz SE, says:

“The importance of carbon dioxide removal techniques and technologies in addressing unabated emissions must not be underestimated. Massive investment in these solutions both inside and outside the value chains of investee companies, combined with a drive toward more mature carbon markets, are now critical to achieving the Paris Agreement goals.

“What we are missing in the mix is strong policy support. Financial incentives, through a price on carbon, subsidies or tax rebates have been vital to accelerating the deployment of sustainable technologies thus far. We believe that the “incentives + mandate” approach must also be applied to the development of CDR technologies and deployment of nature-based solutions.”

Large-scale CDR is a key component of most climate change mitigation pathways that limit global warming to 1.5ºC. The timeline for implementation of CDR technologies will have a significant impact on not only the likelihood of achieving net zero by 2050, but on the ability to course correct in the event of those targets being missed. Investment now, combined with strong policy support for the tightening of a complementary carbon credit market, will drive progress towards our shared goal of an accelerated green transition.

Download the position paper here

About the UN-convened Net-Zero Asset Owner Alliance

The 48 members of the UN-convened Net-Zero Asset Owner Alliance have committed i) to transitioning their investment portfolios to net-zero GHG emissions by 2050 consistent with a maximum temperature rise of 1.5°C above pre-industrial levels; ii) to establishing intermediate targets every five years, and iii) to regularly report on progress.

The Alliance is convened by UNEP’s Finance Initiative and the Principles for Responsible Investment (PRI). The Alliance is supported by WWF and Global Optimism, an initiative led by Christiana Figueres, former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC).

At the 2-year mark, over 40% of the banking sector now committed to the Principles for Responsible Banking

22 September 2021

2 years since launch, we celebrate the Principles for Responsible Banking and the work of signatory banks as they continue along their 4 year journey of implementation. We also welcome new signatories who now number almost 250 banks representing 40% of banking assets worldwide, and take a look forward to the report on collective progress, scheduled for publication in October this year.

The Principles are the world’s leading framework for responsible banking – unprecedented in their scale and scope, bringing banks across the world together to work on the most challenging and critical topics facing humanity and the environment. Since the establishment of the Principles, signatory banks have been working together to build the foundations, tools and industry guidance to forge pathways and guide the financial community towards the vision set out by the UN Sustainable Development Goals and the Paris Climate Agreement. 

Click here for more on this story

Building Foundations Together

Since 2019, the Principles have grown from 132 founding banks to almost 250 banks, representing over 40% of banking assets worldwide. Signatories across six continents have been extensively collaborating to develop tools and guidance, breaking new ground and building industry best-practice across key sustainability topics. 

Guidance, Tools & Commitments

Since the year 1 update, banks have further developed the portfolio impact analysis tool allowing banks to further identify and analyse their key areas of positive and negative impact, as well as a suite of guidance on how to set robust targets on biodiversity, financial health and inclusion and gender equality.

With 2021 a critical year for climate, and ahead of the UN Climate Change Conference (COP 26), signatories have produced leading, science-based guidance for banks on climate target-setting, drafted by banks from the PRB Collective Commitment to Climate Action. With global ambition increasing and science coalescing around a 1.5 degree temperature limit, over 50 signatories have now increased their collective climate ambition, committing to align their investment and lending portfolios with net-zero emissions by 2050 through the industry-led, UN-convened Net-Zero Banking Alliance, launched in April 2021. 

“The growth in signatories to 40% of the global banking sector speaks to the continued strength and relevance of the Principles for Responsible Banking. They remain the leading global framework for banks to integrate sustainability at the heart of their business, addressing the triple planetary crisis of climate, nature loss and pollution, and delivering a more equitable economy for people and planet.” – Eric Usher, Head of UNEP FI

Transparency & Accountability 

2021 has seen founding banks publish their initial reports which highlight measures they have taken on their journey to implement the Principles across their activities over their first 18 months. Signatories also worked together to publish guidance on reporting, and guidance for assurance providers, further standardising and providing clarity to all signatories on these critical topics.

March 2021 also saw the establishment of a new Civil Society Advisory Body; unique forum for meaningful and constructive engagement between wider civil society and the collective of signatories. Composed of 12 organizations each representing a region, a key sustainability topic and a key stakeholder group, the Body is designed to allow the Principles to maintain ongoing relevance with societal needs and ensure a strong level of ambition and transparency is maintained.

“The Principles continue to provide an on-ramp for banks worldwide, at all stages of their sustainability journeys, to accelerate towards achieving the Sustainable Development Goals and the Paris Climate Agreement. Two years in, signatories across six continents have been extensively collaborating to build the foundations for implementation, developing tools and guidance, breaking new ground, and building industry best-practice across key sustainability topics.” – Puleng Ndjwili-Potele, UNEP FI Interim Banking Lead

Looking Ahead

Looking ahead, the first, baseline Collective Progress Report of the Principles is scheduled for publication in mid-October. It will review and analyse the collective progress of all current signatories up to the first reporting cycle (18 months since the Principles were created), and includes an independent review from the Civil Society Advisory Body. The report will highlight the promising progress made, but also the array of existing and emerging challenges to be addressed as banks move forward – an essential tool to inform the strategic priorities of the Principles going forward.

 

Global Investor Statement: Investors urge govts to undertake five priority actions before COP26

14 September 2021

 

14 September 2021 – In the run-up to the most consequential United Nations climate change conference in years, and on the heels of another urgent warning from the world’s leading scientists, a record number of 587 investors with US$46 trillion in assets under management are urging governments to rapidly implement five priority policy actions that will allow them to invest the trillions needed to respond to the climate crisis.

Signatories to the 2021 Global Investor Statement to Governments on the Climate Crisis are issuing the strongest-ever unified call from investors for governments to raise their climate ambition and implement meaningful policies — including mandatory climate risk disclosure, strengthened national commitments, ending fossil fuel subsidies, and phasing out thermal coal — or risk missing out on the enormous investment opportunities in tackling the climate crisis.

“Full implementation of the Paris Agreement will create significant investment opportunities in clean technologies, green infrastructure and other assets, products and services needed in this new economy,” the statement reads.

Following a month that brought more catastrophic weather events around the world, and the alarming predictions of the Intergovernmental Panel on Climate Change that without immediate, rapid, and large-scale emissions reductions, limiting global warming to 1.5 degrees Celsius will be beyond reach. The risks this brings to the portfolios of asset managers and owners are enormous.

Investor signatories to the statement are calling on all governments to undertake five priority actions before the 26th United Nations Climate Conference in Glasgow in November (COP26):

  1. Strengthen their NDCs for 2030 before COP26, to align with limiting warming to 1.5-degrees Celsius and ensuring a planned transition to net-zero emissions by 2050 or sooner.
  2. Commit to a domestic mid-century, net-zero emissions target and outline a pathway with ambitious interim targets including clear decarbonization roadmaps for each carbon-intensive sector.
  3. Implement domestic policies to deliver these targets, incentivize private investments in zero-emissions solutions, and ensure ambitious pre-2030 action through robust carbon pricing, the removal of fossil fuel subsidies by set deadlines, the phase-out of thermal coal-based electricity generation by set deadlines in line with credible 1.5-degrees Celsius temperature pathways, the avoidance of new carbon-intensive infrastructure(e.g. no new coal power plants) and the development of just transition plans for affected workers and communities.
  4. Ensure COVID-19 economic recovery plans support the transition to net-zero emissions and enhance resilience. This includes facilitating investment in zero-emission energy and transport infrastructure, avoiding public investment in new carbon-intensive infrastructure and requiring carbon-intensive companies that receive government support to enact climate change transition plans consistent with the Paris Agreement.
  5. Commit to implementing mandatory climate risk disclosure requirements aligned with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, ensuring comprehensive disclosures that are consistent, comparable, and decision-useful.

The second wave of signatories to the statement are being announced during the United Nations General Assembly, which will be followed by Climate Week 2021 in New York, when countries will be in the spotlight to demonstrate their climate ambition. The initial signatories to the statement, which included 457 investors with $41 trillion assets under management, were announced in June 2021, before the G7 Summit.

Signatories to date include some of the world’s largest institutional investors and asset managers and asset owners. The combined assets under management of the 587 signatories is more than US$46 trillion, representing an estimated 40 percent of all global assets under management. This is the largest collective assets under management to sign on to a global investor statement to governments on climate change since the first statement in 2009.

The statement remains open for additional investors to sign before COP26 in November 2021.

Many nations are already improving their climate policies, including 2030 emissions reduction targets, through updated NDCs ahead of COP26. However, significant climate and finance policy gaps remain in almost all nations, and the world is currently not on a trajectory to limit global warming to 1.5 degrees Celsius, underscoring the need for further ambition.

The statement has been developed by The Investor Agenda’s seven founding partners –– Asia Investor Group on Climate Change, CDP, Ceres, Investor Group on Climate Change, Institutional Investors Group on Climate Change,Principles for Responsible Investment and UNEP Finance Initiative. The Investor Agenda provides a common leadership agenda on the climate crisis for investors that is unifying, comprehensive, and focused on accelerating investor action for a net-zero emissions economy.

The founding partners are calling on investors that support increased government ambition on the climate crisis to sign on to the statement via the Investor Agenda website. They are also encouraging investors worldwide to commit to developing comprehensive Investor Climate Action Plans (ICAPs) and to aligning their investments with the goal of net-zero emissions by 2050 or sooner, with credible interim targets, among other actions. Signing the 2021 Global Investor Statement to Governments on the Climate Crisis would itself qualify as an action taken under the Policy Advocacy component of the ICAPs.

Supporting quotes from the founding partners of The Investor Agenda:

CEO of the Asia Investor Group on Climate Change (AIGCC) and Investor Group on Climate Change (IGCC) (Australia/New Zealand) and Investor Agenda Steering Committee member, Rebecca Mikula-Wright, said: “Our analysis shows that the investment opportunities in the Asian energy sector alone from a Paris-aligned transition to net-zero emissions could reach US$37 trillion by 2050 – a century-defining investment theme. Meanwhile in Australia, stronger climate policies would create around US$46 billion in fresh investment opportunities to 2025. By working with investors to put in place robust policies, strong targets and a clear roadmap to reach net-zero emissions, Asian, Australian and New Zealand governments can unlock these enormous investment opportunities and the jobs, economic growth and competitive advantage they will bring.”

CDP Chief Executive Officer and Investor Agenda Steering Committee member, Paul Simpson, said: “The number and calibre of institutional investors that have signed the 2021 Global Investor Statement shows governments that, if – and only if – the right policy framework and science-based targets are put in place, the ambition and capability are there to put capital behind the transformation required for achieving a net-zero economy. We are seeing once again that there is huge mitigation and adaptation potential waiting to be unlocked – Governments should be using the momentum of corporate progress to advance ambitious, net-zero aligned policies that tackle the broader environmental impact and in turn provide companies and financial institutions with further clarity and confidence. So, it’s critical that COP26 drives an increase in the adoption of robust 2030 targets and net-zero long-term goals for a 1.5°C, resilient future, where climate and nature are tackled on an equal footing.’’

Ceres CEO and President and Investor Agenda Steering Committee member, Mindy Lubber, said: “The stakes could not be higher as we come off another summer of extreme heat, hurricanes, and drought. This is a make-or-break decade for mitigating the climate crisis. Investors must invest more of the trillions under their management into climate solutions and support mandatory climate risk disclosure rules. With the right climate policies in place, massive investments can flow into economies, create jobs and opportunity and accelerate the transition to a more just and sustainable net zero emissions future.”

Institutional Investors Group on Climate Change (IIGCC) CEO and Investor Agenda Steering Committee member, Stephanie Pfeifer, said: “Investors globally are using their influence to call on governments to raise their ambition when it comes to tackling the climate crisis and delivering robust and credible climate policy. These policies are essential to support progress towards a net zero economy and drive future investment in emerging technologies and infrastructure that could help limit global warming to 1.5°C. With COP26 looming, now is the time for governments to take action together.”

Principles for Responsible Investment (PRI) Chief Executive Officer and Investor Agenda Steering Committee member, Fiona Reynolds, said: “The scale of the challenge we now face, to address the causes of man-made climate change and secure the future of our planet, has never been more apparent. Now is the time for all parties to move from commitment to action on climate change. The Global Investor Statement demonstrates the appetite for policy to support the measures being implemented by investors – including steps such as pricing greenhouse gas emissions, ending fossil fuel subsidies and supporting a shift away from high-emitting sources of energy.”

United Nations Environment Programme Finance Initiative (UNEP FI) Head and Investor Agenda Steering Committee member, Eric Usher, said: “The rapid transformation among global investors transitioning to net-zero emission pathways has been extremely encouraging of late, driven in part by action the Investor Agenda is taking through the International Climate Action Plans (ICAPs). To date 27 of the Top 100 global investors defined by total assets worldwide and 86 investors outside of the Top 100 have already committed to issuing an ICAP. To build momentum further we need governments to fully support this transformation by putting in place the right policy frameworks that reinforce the essential climate-focused capital mobilization.”

Major international legal report backs growing institutional investor focus on achieving positive sustainability impacts

21 July 2021

New research provides a legal framework for institutional investors internationally as they seek to address key environmental and social sustainability challenges, and sets out the opportunities for policy reform

21 July, LONDON – Freshfields Bruckhaus Deringer (Freshfields) has today released a new report, A Legal Framework for Impact, commissioned by The Generation Foundation, the United Nations-supported Principles for Responsible Investment (PRI), and the United Nations Environment Programme Finance Initiative (UNEP FI). The report provides the first ever comprehensive analysis of how far the law requires or permits investors to take deliberate steps to tackle sustainability challenges in discharging their duties, described as investing for sustainability impact.

Investors are increasingly focusing on the impact of their activities on the environment and society. This report brings much needed clarity and also looks at the opportunities for policy reform that would better enable investors to have coherence on the legal frameworks to invest sustainably. The jurisdictions covered are Australia, Brazil, Canada, China, the EU, France, Japan, the Netherlands, South Africa, the United Kingdom and the United States.

The report, written by Freshfields, finds that, while there are differences across jurisdictions and investor groups, where investing for sustainability impact approaches can be effective in achieving an investor’s financial goals, the investor will likely be required to consider using them and act accordingly.

It also provides an extensive suite of options for policymakers wishing to facilitate investing for sustainability impact, including changing investors’ legal duties and discretions, such as allowing the pursuit of sustainability goals as long as financial return goals are prioritised, and a presumption in favour of investor collaboration in tackling sustainability challenges.

As such, the report is expected to be the basis of a subsequent three-year programme by PRI, UNEP FI and The Generation Foundation. That work will focus on five key jurisdictions to help foster legal and regulatory environments that are equipped to meet global sustainability imperatives.

“If it was ever possible to approach the goal of earning a financial return in isolation from other valued goals, that time is not now.  This report addresses a vital issue for investors at a time of pressing need to join in tackling humanity’s greatest challenges. It is the outcome of a unique global legal collaboration, and we are delighted to make it available to investors and the international community,” commented David Rouch and Juliane Hilf, the principal authors and partners at Freshfields Bruckhaus Deringer. “We are grateful for the support of our partner firms in jurisdictions where we don’t have a presence and could not have completed the report without their help.”

“This report is the first of its kind. This detailed legal analysis shows investors they should feel empowered to rethink old investment paradigms by considering risk, return and impact as the pillars of successful investment practice,” commented David Blood, Senior Partner, Generation Investment Management.

“This exciting new project reflects the growing momentum behind sustainable investing around the world, and it will be of great value to PRI signatories,” commented PRI CEO, Fiona Reynolds. “Freshfields have identified a diverse spectrum of actions that investors and policymakers could take to better facilitate investing for sustainable impact, and these are based on an extensive analysis of the unique legal and regulatory conditions they face in their respective jurisdictions.”

“We need an updated financial system that is fit for purpose”, commented Inger Andersen, Executive Director, United Nations Environment Programme. “At present, many leading responsible investors feel constrained by current financial and legal frameworks that were not originally designed to facilitate today’s sustainability goals. This revelatory report offers a new path forward, identifying the current law and modification options to support a transition from predominantly environmental, social and governance-integration to wide-spread investment for sustainability impact.”

Notes to editors

The report is the product not only of the Freshfields’ lawyers around the world but also those of the firm’s StrongerTogether network, a group of partner firms in jurisdictions where it does not have a physical presence.

 

Freshfields Bruckhaus Deringer is a global law firm with a long track record of successfully advising the world’s leading national and multinational corporations and financial institutions on ground-breaking and business-critical challenges. Our team of more than 2,800 lawyers and other legal professionals delivers global results from our 28 offices worldwide. Our commitment, local and multinational expertise and business know-how means our clients can rely on us when it matters most.

The Principles for Responsible Investment (PRI) works with its international network of signatories to put the six Principles for Responsible Investment into practice. Its goals are to understand the investment implications of ESG issues and to support signatories in integrating these issues into investment and ownership decisions. The six Principles were developed by investors and are supported by the United Nations. The PRI does not operate for its own profit; it engages with global policymakers but is not associated with any government; it is supported by, but not part of, the United Nations.

The Generation Foundation is a UK registered charity and was established alongside Generation Investment Management LLP, the sustainable investment firm founded in 2004. Our mission is to drive the urgent transition to an equitable society in which global temperature rises do not exceed 1.5⁰C. We operate a proactive grant-making and research programme that focuses on four priority areas: investor climate action; carbon pricing; gender inclusion and empowerment; and action on economic inequality. For further information, please visit www.genfound.org.

United Nations Environment Programme Finance Initiative (UNEP FI) is a partnership between UNEP and the global financial sector to mobilize private sector finance for sustainable development. UNEP FI works with more than 400 members – banks, insurers, and investors – and over 100 supporting institutions – to help create a financial sector that serves people and planet while delivering positive impacts. UNEP FI aims to inspire, inform and enable financial institutions to improve people’s quality of life without compromising that of future generations. By leveraging the UN’s role, UNEP FI accelerates sustainable finance. https://www.unepfi.org/about/

 

Contact:

Biruktawit Zelalem (biruktawit.zelalem@berlinrosen.com |720-470-6763)

Adel Raslan (adel.raslan@freshfields.com | +44 7515 085223) and Miranda Ward (Miranda.ward@freshfiields.com)

Global insurance and reinsurance leaders establish groundbreaking net-zero alliance

11 July 2021

Geneva/Venice, 11 July 2021—As the G20 gathers in Venice for its Climate Summit, eight of the world’s leading insurers and reinsurers make a historic commitment to play their part in accelerating the transition to a net-zero emissions economy, as required by the Paris Agreement.

The companies have established the Net-Zero Insurance Alliance (NZIA), convened by UNEP Finance Initiative’s Principles for Sustainable Insurance (PSI), and have committed to transition their insurance and reinsurance underwriting portfolios to net-zero greenhouse gas (GHG) emissions by 2050, consistent with a maximum temperature rise of 1.5°C above pre-industrial levels by 2100. Each company decides how it will achieve this objective.

The eight founding members of the NZIA are AXA (NZIA Chair), Allianz, Aviva, Generali, Munich Re, SCOR, Swiss Re and Zurich Insurance Group. They are building on their climate leadership as investors through their membership in the UN-convened Net-Zero Asset Owner Alliance (NZAOA) established in 2019, where all eight NZIA founding members are already individually setting science-based 2025 decarbonisation targets for their respective investment portfolios in line with a net-zero transition pathway. Equally, based on the NZIA Statement of Commitment launched today, these global insurers and reinsurers will individually set science-based intermediate targets every five years and independently report on their progress publicly and annually. They will also advocate for and engage in governmental policies for a science-based and socially just transition of economic sectors to net zero.

“Through the Net-Zero Asset Owner Alliance launched in 2019, insurers and reinsurers are already working towards decarbonising their investment portfolios in line with climate science and the Paris Agreement,” said Thomas Buberl, CEO of the AXA Group, which chairs the NZIA. “With this new Net-Zero Insurance Alliance, we are raising our climate ambition further by using our underwriting, claims, and risk management practices to help ensure and enable the transition to a resilient net-zero global economy.”

The commitments that the Alliance members announced today include concrete approaches that they can take to achieve their net-zero ambition on an individual basis. These include setting underwriting criteria and guidelines for the most GHG-intensive activities within their underwriting portfolios, engaging with clients and potential clients with the most GHG-intensive activities on their decarbonisation strategies and net-zero transition pathways, developing and offering insurance and reinsurance solutions for low-emission and zero-emission technologies and nature-based solutions that absorb GHG emissions, improving claims management in an environmentally sustainable manner, and integrating net-zero and decarbonisation-related risk criteria into their risk management frameworks.

“For generations, the insurance industry has served as society’s early warning system and risk manager by understanding, reducing, pricing and carrying risk. As we approach COP26 in Glasgow, the risks posed by global heating are escalating and the world is a long way from meeting the promises made when the Paris Climate Agreement was forged nearly six years ago,” said Inger Andersen, Executive Director of the UN Environment Programme (UNEP). “Along with governments, the insurance industry and wider financial sector have the power and responsibility to drive progress towards a net-zero economy and a sustainable future for all. Guided by science, I am pleased to see leading insurers embed the net-zero ambition in their core insurance business. I urge the rest of the global insurance industry to respond to the climate emergency and urgently follow the example set by the founding members of this pioneering alliance.”

The NZIA Statement of Commitment is a comprehensive framework and considers the latest available scientific knowledge and associated social impacts, as well as findings of recognised reports such as those by the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency’s (IEA) Net Zero by 2050 report. It includes supporting the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), considering emerging frameworks such as the Task Force on Nature-related Financial Disclosures (TNFD), supporting the UN Sustainable Development Goals (SDGs) and the Post-2020 Global Biodiversity Framework, and signing the UN Principles for Sustainable Insurance (PSI). The Statement also recommends that insurers transition their investment portfolios to net-zero GHG emissions and join initiatives such as the NZAOA for a total balance sheet approach to net zero.

“Having a global financial system where every professional decision takes climate change into account requires harnessing the full role of the insurance industry as risk managers, insurers and investors for climate action,” said Mark Carney, the UN Special Envoy on Climate Action & Finance, the UK Prime Minister’s Finance Adviser for COP26, and Chair of the Glasgow Financial Alliance for Net Zero. “By committing to join the gold standard alliance for net zero, the Net-Zero Insurance Alliance will ultimately make underwriting contingent on underlying companies having credible net-zero transition strategies.”

In the run up to COP26 this November, the NZIA membership is expected to grow to include insurers, reinsurers, brokers and insurance market bodies from across the globe. The NZIA is now getting ready to join the UN Race to Zero campaign in order to become officially part of the Glasgow Financial Alliance for Net Zero (GFANZ) chaired by Mark Carney. GFANZ brings together the leading net-zero initiatives across the financial system.

All GFANZ initiatives, including the NZIA, must be accredited by the UN Race to Zero campaign, and are committed to the highest standards to reach net-zero emissions, including covering all emission scopes, individual interim 2030 targets, and commit to transparent reporting and accounting in line with the Race to Zero criteria. The NZIA will immediately start working with the UN Race to Zero conveners to fulfil their accreditation criteria.

The Net-Zero Banking Alliance (NZBA), established in April 2021 by 43 founding banks, and also convened by UNEP Finance Initiative, has now grown to 53 banks from 27 countries with US$ 37 trillion in total assets – representing almost a quarter of banking assets worldwide1. 10 additional members have joined since launch: ABANCA, AIB, Banco Bradesco S.A., Caixa Geral de Depósitos, Crédit Agricole, Crédit Mutuel, Groupe BPCE, MUFG, Nationwide Building Society and Swedbank.

The Net-Zero Asset Owner Alliance (NZAOA), jointly convened by the Principles for Responsible Investment and UNEP Finance Initiative, which was launched in September 2019 with 12 insurers and pension funds, now has 46 members representing nearly US$ 7 trillion in assets.

Visit the UN-convened Net-Zero Insurance Alliance website.

Download the NZIA Statement of Commitment.

Quotes from the CEOs of the member companies

“As a founding member of this strong network, Allianz strives to accelerate the urgently needed transformation to a 1.5-degree economy. We are pleased to bring in our expertise and join forces to extend the net-zero ambition to the entire insurance market.”

Oliver Bäte, CEO, Allianz SE

“Our whole economy depends on insurance, so a net-zero insurance industry is a fundamental part of helping shift the economy towards protecting the planet. Aviva is proud to be a founding member of this Alliance as part of our own ambition to be net zero by 2040. It takes partnerships like these to tackle the big challenges facing us to build a sustainable future for everyone.”

Amanda Blanc, Group CEO, Aviva plc

 “At Generali, we want to actively support a fair and inclusive transition to a net-zero emissions economy. The UN-convened Net-Zero Insurance Alliance allows us to join forces with institutions and our peers which share this commitment to achieve a greater and longer-lasting impact. United we are stronger!”

Philippe Donnet, Group CEO, Generali

“Munich Re has set ambitious climate targets in 2020 that include the liability side of our business. Being a founding member of the Net-Zero Insurance Alliance underlines our climate commitment. As a leading global re- and primary insurer we will continue to support the transition to net zero through our pioneering risk solutions and pursuing science-based decarbonisation targets.”

Dr. Joachim Wenning, Chairman of the Board of Management, Munich Re

Collective action is the only way we can address the grand challenge of our time: climate change. SCOR is proud to be a founding member of the NZIA, working alongside other industry leaders to support the transformational changes that are critical to society. In doing so, we commit to accelerating the race to net zero and furthering our long-term mission.
Laurent Rousseau, CEO, SCOR

“By co-founding the Net-Zero Insurance Alliance, Swiss Re can work with other reinsurers and insurers to build on its commitment to transition to a low-carbon economy, through its underwriting expertise. We see sustainability as a long-term value driver and the NZIA is an important and logical next step in the race to net zero.”

Christian Mumenthaler, Group CEO, Swiss Re

“Net-zero underwriting is a critical step and furthers Zurich’s climate efforts beyond our own operations and investments. It reinforces our deep commitment to continue to engage with our customers to deliver solutions as we navigate together the transition to a low-carbon world, benefiting future generations.”

Mario Greco, Group CEO, Zurich Insurance Group

 

About UNEP Finance Initiative and its Principles for Sustainable Insurance

The United Nations Environment Programme Finance Initiative (UNEP FI) is a partnership between UNEP and the global financial sector to mobilise private sector finance for sustainable development. UNEP FI works with more than 400 members—banks, insurers and investors—and over 100 supporting institutions—to help create a financial sector that serves people and planet while delivering positive impacts. We aim to inspire, inform and enable financial institutions to improve people’s quality of life without compromising that of future generations. By leveraging the UN’s role, UNEP FI accelerates sustainable finance. Read more.

Endorsed by the UN Secretary-General and insurance industry CEOs, the Principles for Sustainable Insurance (PSI) serve as a global framework for the insurance industry to address environmental, social and governance (ESG) risks and opportunities—and a global initiative to strengthen the insurance industry’s contribution as risk managers, insurers and investors to building resilient, inclusive and sustainable communities and economies on a healthy planet. Developed by UNEP FI, the PSI was launched at the 2012 UN Conference on Sustainable Development (Rio+20) and has led to the largest collaborative initiative between the UN and the insurance industry. Read more.

 

About the Glasgow Financial Alliance for Net Zero

The Glasgow Financial Alliance for Net Zero (GFANZ), chaired by Mark Carney, brings together over 250 financial institutions across Race to Zero initiatives from 32 countries, representing over US$88 trillion in assets. These institutions include: 128 asset managers from 21 countries representing US$43 trillion in assets under management; 53 banks from 27 countries with US$37 trillion in assets; and 70 asset owners and insurers from 16 countries with over US$8 trillion in assets under management. Each entity has made its own net-zero commitment with potential overlap across initiatives, institutions and assets.

Read more.

The current members of GFANZ are:

UN-convened Net-Zero Asset Owner Alliance: www.unepfi.org/net-zero-alliance
UN-convened Net-Zero Banking Alliance: www.unepfi.org/net-zero-banking
Net-Zero Asset Managers Initiative: www.netzeroassetmanagers.org
Paris Aligned Investment Initiative: www.parisalignedinvestment.org/

 

Image source: Ashley Fontana

Almost a quarter of global banking assets now in the Net-Zero Banking Alliance

11 July 2021 – The Net-Zero Banking Alliance (NZBA), established in April 2021 by 43 founding banks, and convened by UNEP Finance Initiative, has now grown to 53 banks from 27 countries with US$ 37 trillion in total assets – representing almost a quarter of banking assets worldwide1.

Announced at the G20 Venice International Conference on Climate, the 10 members who have joined since the launch of the Alliance are: ABANCA, AIB, Banco Bradesco S.A., Caixa Geral de Depósitos, Crédit Agricole, Crédit Mutuel, Groupe BPCE, MUFG, Nationwide Building Society and Swedbank.

Eric Usher, Head of the UN Environment Programme Finance Initiative said: “In this critical year for climate, we welcome those banks who have shown leadership by committing to transition their portfolios to align with a 1.5°​C pathway, in line with science. With almost a quarter of global banking assets now in the Alliance, we hope the growth in membership and geographic diversity inspires other banks worldwide to follow suit and take the urgent steps needed to meet the Paris Climate Agreement.

The Net-Zero Banking Alliance recognises of the vital role of banks in supporting the global transition of the real economy to net-zero emissions. All banks who are members of the Alliance have signed the Commitment Statement which is underpinned by the Guidelines for Climate Target Setting.

The Alliance is part of the Glasgow Financial Alliance for Net Zero (GFANZ), chaired by Mark Carney, which brings together over 250 financial institutions across Race to Zero initiatives from 32 countries, representing over US$88 trillion in assets. The current members of GFANZ are the UN-convened Net-Zero Asset Owner Alliance, the Industry-led, UN-convened Net-Zero Banking Alliance and the Net-Zero Asset Managers Initiative.

1. Global banking assets source: FSB Global Monitoring Report 2020

 

UNEP FI welcomes EU Strategy for Financing the Transition to a Sustainable Economy

6 July 2021

On 6 July 2021, the European Union (EU) published its Strategy for Financing the Transition to a Sustainable Economy, showcasing the areas of key development since the Action Plan for Financing Sustainable Growth was published in March 2018.

The publication establishes the strategic priorities and next steps in terms of both legislative and non-legislative actions in the EU with a clear aim to support the EU Green Deal and the path to a carbon-neutral Europe by 2050.

The key elements include:

  • Financing the transition of the real economy towards sustainability: focusing on expanding the EU Taxonomy framework, including for the recognition of transition efforts
  • A more inclusive sustainable finance framework: supporting and empowering citizens, retail investors and SMEs
  • Improving the financial sector’s resilience and contribution to sustainability: the double materiality perspective – reflecting outside-in and inside-out ESG risks at all levels
  • Fostering global ambition: promoting international consensus, deepening the work of the IPSF and supporting third countries’ transition efforts

These recommendations are further narrowed down to a set of six Actions, with 21 concrete deliverables, both regulatory and non-regulatory, covering in detail the topics highlighted above.

The timing of the EU strategy could not be better, coming at a critical moment in terms of global public and private sector engagement ahead of November’s Climate COP26. At UNEP FI – a partnership between UNEP and the global financial sector to mobilize private sector finance for sustainable development – we welcome the leadership of the EU on Sustainable Finance and see it as a complementary effort to reach global goals such as the UN’s Sustainable Development Goals and a net-zero economy by 2050. The regulatory and voluntary efforts to integrate sustainability into financial institutions led  by the EU are setting an example to the rest of the world and we expect to see EU policy reflected in global discussions and spilling over to other regions and jurisdictions.

UNEP’s Executive Director, Inger Andersen said:

“Sustainability is not an “either” “or” option. It is the only way forward as we decarbonise and move to a net-zero future. Good to see the EU strategy for financing the transition to sustainability.”

Antoni Ballabriga, Head of Responsible Business at BBVA, Co-Chair of UNEP FI’s Global Steering Committee said:

“The EC’s Strategy for Financing the Transition to a Sustainable Economy is a solid step forward in the right direction. The ambition of the European Union on sustainable finance, grounded by the landmark Action Plan for Financing Sustainable Growth in 2018 which put the region at the front of the pack, is now solidified by the pace of change in the last years, and the direction of travel outlined in the strategy.

European financial institutions involved in the work of UNEP FI are supportive of the EU’s agenda. We especially welcome the support of the transition of the whole economy, improving the financial sector’s resilience and contribution to sustainability and fostering global ambition. We aim to continue reflecting the strategy in our global actions. Leadership can start from a regional basis, like the one we are committed to continue delivering in Europe, but delivery at a global scale needs action at all levels.”

The conclusion of the strategy reads:

“[This Strategy] builds on the Commission’s collaboration and partnerships with external  private  and  public  initiatives  to  foster  financial  sector  leadership  towards  achieving EU sustainability goals. […]. The Commission calls on all relevant stakeholders, from central banks and supervisors to Member States, citizens, local authorities and financial and non-financial companies, to take action in their respective areas and maximise the impact of this strategy.”

At UNEP FI, we are committed to driving forward the sustainable finance agenda and we echo these words as a call for action and collaboration in Europe and beyond. Read more.

UNEP FI is hosting a webinar with the European Commission, who will be presenting their latest updates on the strategy. Register here.

Net-Zero Asset Owner Alliance argues for binding carbon-price corridor

Today’s global carbon-pricing landscape can and should be transformed in a matter of years and pave the way for 1.5ºC-aligned emissions regulation, according to a new discussion paper from the Net-Zero Asset Owner Alliance, convened by the UN.

Alliance members are committed to leveraging their portfolios to rapidly reduce global greenhouse gas (GHG) emissions and limit global warming to 1.5ºC in a comprehensive, just, and internationally acceptable way that maintains a level playing field across borders.

At present, around 80% of global carbon emissions are not yet covered by carbon-pricing mechanisms like emission-trading schemes or taxes. The paper therefore proposes principles that will see all countries and regions set clear, legally binding net-zero targets, supported by regulated carbon-pricing measures, detailed implementation plans and interim emissions reduction milestones.

Günther Thallinger, Member of the Board of Management Allianz SE and Chair of the Net-Zero Asset Owner Alliance said: “The principles we lay out in the discussion paper seek to accelerate policy and regulatory improvements towards a just transition. Non-regressive and revenue-neutral carbon-pricing instruments – harmonised across borders – will not only unleash massive investment in renewable power systems globally, but boost sectors from construction to transport, which are in urgent need of transition. While we recognise that carbon-pricing is not a universal solution, governments that apply these principles will significantly increase their ability to deliver access to clean, affordable and reliable energy for all citizens.” 

Charles Emond, President and CEO of Caisse de dépôt et placement du Québec (CDPQ), said: “Massive investments are required across industries to reduce carbon emissions. This is particularly true for the production of the building blocks of a greener economy such as chemicals, metals or cement, which are highly carbon intensive. A carbon price corridor giving a clear economic signal as well as more pre-visibility will provide the global environment necessary for companies to make sound investments decisions and for investors to support them in the decarbonization of the real economy.”

The carbon-pricing mechanisms proposed are a hybrid scheme between emissions trading or cap-and-trade schemes (ETS), and carbon taxes or levies. A minimum market price – the floor – can be set to provide certainty to investors and a guardrail against price crashes. A maximum market price – the ceiling – provides a guardrail against rapid increases in prices, preventing backlash that could undermine political support for carbon-pricing more broadly.

Since there is a considerable onus on governments to increase their ambitions for mandatory regulation of emissions, the carbon-pricing mechanism proposed works as a price corridor, where both floor and ceiling rise over time. If carbon-pricing should acceerate net-zero emissions by 2050, a central median estimate of $147 per tonne is required by 2030, according to the OECD’s estimate. This would be almost treble the current price of carbon in the EU which has been trading at around €50 ($59) / per tonne since May.

The hybrid carbon price corridor design provides companies and investors with greater certainty of future price levels for efficient capital allocation, in addition to stable and reliable incentives for stakeholders to adopt or develop low or zero-emission technology.

The recommendations outlined in today’s discussion paper call for a lower carbon budget (the cumulative amount of emissions permitted over a period of time) than the parameters which currently exists, which decarbonise the global economy neither fast nor fast enough to meet the requirements of a 1.5ºC world. Moreover, in many markets where carbon-pricing schemes are operational, the effective prices across the economy vary considerably because of exception rules granted, free allocation of carbon trading permits, and counter-running subsidies for sectors such as fossil fuels and agriculture.

The discussion paper’s principles seek to address these challenges through proposing the carbon-pricing mechanisms as a complementary policy instrument. The Net-Zero Asset Owner Alliance strongly encourages governments to accelerate R&D funding into zero-carbon and carbon-removal technologies, in addition to policies that drive the development and deployment these solutions at industry scale.

As such, carbon-pricing and the headline price corridor mechanism is an important backstop in policy design, acting as an incentive to transition within the carbon-intensive sectors. A combination of policy instruments together will lessen climate transition financial risks, drive future global economic growth by creating millions of new jobs, and most importantly help propel the world towards a just energy transition.

Download the full report from the Alliance resources page

About the UN-convened Net-Zero Asset Owner Alliance

Mmembers of the UN-convened Net-Zero Asset Owner Alliance have committed i) to transitioning their investment portfolios to net-zero GHG emissions by 2050 consistent with a maximum teperature rise of 1.5°C above pre-industrial levels; ii) to establishing intermediate targets every five years; and iii) to regularly reporting on progress. The Alliance is convened by UNEP’s Finance Initiative and the Principles for Responsible Investment (PRI). The Alliance is supported by WWF and Global Optimism, an initiative led by Christiana Figueres, former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC).

UNEP FI’s suite of impact analysis tools now covers investment portfolios and real estate

30 June 2021

Geneva, 30 June 2021 – UNEP FI has launched two new tools for impact analysis; the Real Estate Impact Analysis Tool and the Investment Portfolio Impact Analysis Tool. The two new tools join the Portfolio Impact Analysis Tool for Banks and the Corporate Impact Analysis Tool (launched in 2020) to offer a suite of tools developed to enable financial institutions to holistically identify and assess the impacts associated with their portfolios, clients and investments, based on UNEP FI’s unique holistic impact methodology.

The Investment Portfolio Impact Analysis Tool was developed to complement the Bank Portfolio Impact Analysis Tool, in order to enable signatories to the Principles for Responsible Banking to meet their requirements under Principle 2 on impact analysis. In 2019, the core group of banks involved in the development of the Principles for Responsible Banking conducted a gap analysis for the implementation of the Principles, revealing the need for impact analysis tools that can help signatories meet the requirements on scope, context, salience and intensity.

Investors and real estate companies across Asia Pacific are thinking more broadly about their contribution to the built environment, both in terms of the environmental impact of real estate but also how it responds to societal needs. The impact-based approach embedded in the Impact Analysis Tool supports practitioners in better understanding the range of issues they can influence, and then setting strategy, executing investments, and measuring outcomes – Calvin Lee Kwan, Head of Sustainability, Link REIT

Whilst the Bank Portfolio Impact Analysis Tool focused on consumer, business, corporate and investment banking, it did not cover investment portfolios. With the Investment Portfolio Tool, the holistic impact methodology can now be applied consistently across the bank.

The Real Estate Impact Analysis Tool builds on the UNEP FI Positive Impact Real Estate Investment Framework Model Framework, developed by the UNEP FI Property Working Group in 2018, based on the UNEP FI Impact Radar. The Tool enables single asset analysis or fund/portfolio level analysis, and is applicable for both new developments and exiting assets. The Tool is also compatible with GRESB.

How do the Tools work?

Users are required to input data about the nature, content and context of their portfolios. A set of in-built impact mappings is then combined with this data to help users identify the most significant impact areas of the portfolio and to reflect on their current impact performance, thus setting the basis for strategy development, engagement and target-setting.

The holistic impact methodology that underpins all of the tools is based on five core principles that set it apart:

  1. Holistic – positive and negative impacts are considered across the three pillars of sustainable development
  2. Objective – the analysis is based first and foremost on the impact drivers that are specific to each object of analysis
  3. Contextualised – real/actual needs on the ground are considered as an integral part of the analysis
  4. Practical – the impact mappings (i.e. the taxonomies) are based on existing norms (e.g. ISIC, GICS, PRI, GRESB)
  5. Transparent & Comparable – all tools are open source and all aspects of the tools are transparently displayed

The impact analysis tools are live resources, co-constructed with practitioners and designed to evolve over time in order to constantly improve user experience and benefits.

Find out more about the tools, how they relate to each other and more about our work on impact analysis here.

Financing a sustainable blue economy: recommended exclusions list published

17 June 2021

Recognising the importance of a healthy ocean for achieving the UN Sustainable Development Goals, UNEP FI has developed a recommended exclusions list to help financial institutions to lead a sustainable blue recovery.

Based on the market-first practical guidance for financial institutions, Turning the Tide, UNEP FI’s recommended exclusions list for a sustainable blue economy provides financial institutions with an overview of activities to exclude from financing due to their damaging impact on the ocean and high risk. By examining various ocean-related activities, the document identifies unsustainable financial flows in the blue economy and covers five main sectors: seafood, ports, maritime transportation, marine renewable energy, and coastal and marine tourism.

The list has been developed to offer financial institutions an easy to use, at-a-glance overview of the activities to exclude from financing in order to rebuild ocean prosperity, regenerate ocean health and take part in a sustainable blue economy. It can be used as a tool and reference for assessing a company or financing activities, and for managing risks.

Verification is a critical step in assessing any financing activity, and indicators of critical actions or behaviour as well as ways to verify them are suggested in the document. These can be applied by financial institutions aiming to align their business practices and strategy with the Sustainable Development Goals, specifically goal 14: life below water.

Turning the Tide, from which the recommended exclusion list was developed, was written by UNEP FI in partnership with more than 50 leading financial and supporting institutions. Published in March 2021, it provides detailed guidance on sustainability in the blue economy for financial institutions. The full report can be downloaded here.

Download the recommended exclusions list

 

About the Sustainable Blue Economy Finance Initiative:

The UN-convened Sustainable Blue Economy Finance Initiative underpinned by the Sustainable Blue Economy Finance Principles helps financial institutions align their investment, underwriting and lending activities with the UN Sustainable Development Goal 14: life below water. It provides them with guidance and frameworks to ensure that each signatory takes part in rebuilding ocean prosperity and regenerating ocean health. Read more.

UNEP FI and PRI launch joint programme to boost leadership in responsible investing

1 June 2021

Geneva, Tuesday 1 June. The UN Environment Programme Finance Initiative (UNEP FI) and the Principles for Responsible Investment (PRI) are today launching a joint programme that will accelerate leadership in responsible investment.

The Investment Leadership Programme (ILP) will bring together groups of responsible investors to work on initiatives that are considered ambitious, but not yet ready for mainstream investment adoption. They will bring these to a point where they can be taken forward by the wider investment community. PRI and UNEP FI have agreed criteria that initiatives within the programme will have to meet ensuring each one exemplifies responsible investment leadership and best practice.

“This new programme is our response to the urgent need for stronger, collaborative and accelerated action on sustainable development” said Eric Usher, UNEP FI Head. “We are taking our close relationship with PRI a step further and together providing the platform for leading responsible investors to move faster than the mainstream on delivering the UN Sustainable Development Goals (SDGs) and the Paris Climate Agreement.”

 

UNEP FI and PRI have already collaborated on a number of initiatives that are setting the norms for sustainable finance practitioners and driving ambition across the industry. For more than 15 years, they have worked closely together including on the landmark project, Fiduciary Duty in the 21st Century – funded by the Generation Foundation – which clarified the legal responsibility investors have to include ESG matters in their decision-making. This project has contributed to the growing momentum of the sustainable finance movement, prompting a shift from a legal case to a regulatory case, with ESG being clarified in law and regulation in major jurisdictions, such as the UK and EU.

The UN-convened Net-Zero Asset Owner Alliance – a collective of some 40 insurers and pension funds with nearly US$6 trillion in assets which UNEP FI and PRI co-launched in September 2019 – is already demonstrating leadership and spurring action across the finance industry. The Alliance is driving real-world change by using their ownership in companies across the world to advocate and request decarbonisation targets from these companies. The group sparked the development of other net-zero alliances, demonstrating how investor leadership can catalyse action across the financial industry including the Net-Zero Asset Managers Initiative , the UN-convened Net-Zero Banking Alliance and UN-convened Net-Zero Insurance Alliance.

“Leading investors can better effect change if they speak to policymakers and their investee companies with one powerful voice, “said PRI’s CEO, Fiona Reynolds. “The ILP will enable a collaborative, ambitious style of engagement from responsible investors and, by developing guidance and thought leadership on policy and regulatory change, it will inform investor action to help realise a truly sustainable global economy.”

 

Bringing together PRI and UNEP FI investment leadership initiatives consolidates action by the investment industry on sustainability and amplifies the voice of responsible investors. The ILP will also aim to connect investors to policy makers and inform policy change that will enable investors to play a key role in transforming investor behaviour. In the first instance, this will occur in five key jurisdictions of the new Legal Framework for Impact project in partnership with the Generation Foundation. Engagement with policymakers on key ‘reform areas’ will be a main objective of the 3-year project. The ability to readily bring together recognized leaders in the investment space with key policymakers will enable bold action across a range of sustainability issues. The Legal Framework for Impact and the Net-Zero Asset Owner Alliance are the first two initiatives that will be part of the ILP.

Working with UNEP FI’s network of banks and insurers through collaborative working groups or developing joint tools, will enable leading investors to work with others to catalyse change across the entire finance industry.

The ILP will be managed by a dedicated secretariat under the shared oversight of the two parties. It will encourage further knowledge transfer across the banking and insurance sectors with the aim of contributing to building a financial system that is equipped to act on sustainability challenges.

Visit the website.

 

About the Investment Leadership Programme

The Investment Leadership Programme is a joint initiative from UNEP FI and PRI that builds on a 15-year history of collaboration. Initiatives within the Programme will bring together groups of responsible investors to work on projects that are considered ambitious, but not yet ready for mainstream investment adoption. They will bring these to a point where they can be taken forward by the wider investment community. The Programme will play a key role in issuing guidance and policy recommendations to drive leadership and best practice for responsible investors.

For more information and to arrange interviews, please contact:

Duncan Smith, at PRI or Sally Wootton at UNEP FI.

 

Net-Zero Asset Owner Alliance adds 5 new members managing $900 billion

27 May 2021

The UN-convened Net-Zero Asset Owner Alliance announced the addition of five new members managing nearly one trillion US dollars of assets between them.

UK-based joiners include the country’s largest long-term savings and retirement business, Phoenix Group, the country’s largest life insurer, L&G Group, and Rothesay, the UK’s largest pensions insurance specialist.

Germany’s largest pension group under public law Bayerische Versorgungskammer (BVK) and Asia and Africa-focused insurance group Prudential plc also join today, expanding Alliance membership to 42 asset owners managing a combined US$6.6 trillion of assets.

Alliance members commit to transitioning investment portfolios to net-zero greenhouse gas emissions by 2050, consistent with a maximum temperature rise of 1.5°C above pre-industrial levels, considering the best available scientific knowledge, including the findings of the IPCC. Members will establish and report on intermediate targets every five years.

By joining, the new members support the Alliance’s contributions to the Glasgow Financial Alliance for Net Zero (GFANZ) and the Race to Zero campaigns, convened by UN Special Envoy on Climate Action and Finance Mark Carney.

Alliance Chair and member of the board of Allianz Guenther Thallinger says: “We welcome the significant commitment this cohort of new asset owner members are making and the example they are setting. We hope they will encourage other investors to act urgently to align their investment portfolios with a 1.5°C scenario and to play their role in meeting the Paris Agreement.”

Phoenix Group CEO Andy Briggs says: “We are delighted to have become a signatory to the UN-convened Net-Zero Asset Owner Alliance. In becoming a member, we have joined a global group of asset owners who are committed to setting and reporting regularly on targets to ensure we achieve UN aligned net-zero emissions.

“As the UK’s largest long-term savings and retirement business we understand the role that our business needs to play in creating a sustainable and green future, which is why we were among the first large UK insurers to make a clear commitment to help tackle climate change in line with science-based targets, pledging to be net-zero carbon by 2025 in our operations and by 2050 for our investment portfolio. Whilst Phoenix is the largest UK asset owner making this commitment today, we are pleased to be doing this alongside four other financial organisations today and we stand ready to collaborate across our industry to achieve our net-zero goals.”

Nigel Wilson, CEO at L&G CEO, says: “Joining the Net Zero Asset Owners Alliance is important to Legal & General. We are committed to net zero by 2050 and to key quantifiable reductions to our carbon footprint along the way. The financial sector needs to move from pledges to actions, and NZAOA will play an important role in that process.”

Addy Loudiadis, CEO at Rothesay says: “It is vital that the insurance industry works together to deliver a clear pathway to net zero and that we champion the regular reporting needed to keep our efforts on track. We are pleased to join the Net Zero Alliance and support its work which we see as a fundamental part of our commitment to providing our policyholders with security for the future.”

André Heimrich, CIO at Bayerische Versorgungskammer – the first pension group to join from Germany – says: “Given the urgency with which climate change is to be tackled, asset owners such as ourselves want to use their investment strategies on a worldwide scale to help limit global warming to a maximum of 1.5 °C in accordance with the Paris Climate Agreement. For us, sustainability has long been a key focus, and we will render our contribution to achieving a climate-neutral economy.”

Prudential plc CEO Mike Wells says: “Any future climate crisis will disproportionately affect the communities we serve in Asia and Africa. As a steward of long-term capital and a protector of people’s lives, we need to use our scale and expertise to drive decarbonisation at pace – and to do so in a way which is just and fully inclusive, is engaged with our stakeholders and delivers green growth which benefits everyone. Prudential intends to play the fullest possible role in the transition to the net-zero future which is essential if global temperature rises are to be controlled.”

(Prudential plc is not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America, nor with the Prudential Assurance Company Limited, a subsidiary of M&G plc, a company incorporated in the UK.)

About the Net-Zero Asset Owner Alliance

The 42 members of the UN-convened Net-Zero Asset Owner Alliance have committed i) to transitioning their investment portfolios to net-zero GHG emissions by 2050 consistent with a maximum temperature rise of 1.5°C above pre-industrial levels; ii) to establishing intermediate targets every five years; and iii) to regularly reporting on progress. The Alliance is convened by UNEP’s Finance Initiative and the Principles for Responsible Investment (PRI). The Alliance is supported by WWF and Global Optimism, an initiative led by Christiana Figueres, former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC).

Aligning financial portfolios with biodiversity goals: discover the new addition to the ENCORE tool

26 May 2021

In a critical decade for climate and nature, banks and investors can now explore their portfolio’s impact on species extinction risk and ecological integrity, and take immediate action to reverse biodiversity loss.

  • New UN-backed ENCORE biodiversity module has been launched, enabling financial institutions to explore to what extent their financial portfolio indirectly drives species extinction risk and impacts ecological integrity. 
  • Focused on the mining and agriculture sectors which are particularly exposed to biodiversity risks, the tool includes guidance for engagement, enabling financial institutions to take immediate action to transition these sectors towards a nature-positive future.
  • Analysis using the new module suggests that:
    • Over 40% of mining activity globally occurs in ecoregions with strong declining trends in ecological integrity. 
    • 50% of the mining sector’s potential for reducing species extinction risk lies with just over 2% of mines globally. Ambitious biodiversity management within these locations is crucial for avoiding species extinctions.
    • Over 60% of the global potential for reducing species extinction risk across all land area falls within cropland. 
  • The module allows financial institutions to identify pathways to increase positive impacts within agricultural and mining portfolios, as well as transition mining portfolios to a low energy future.
  • Over 30 financial institutions have taken a pioneering role in the development and testing of the module (full list in ‘notes to editor’).

Geneva, 26 May 2021: New ENCORE biodiversity module launched today by the Natural Capital Finance Alliance a collaboration between the UN Environment Programme World Conservation Monitoring Centre, the UN Environment Programme Finance Initiative and Global Canopy, enables banks and investors to analyse the potential impact of their financing and investment activities in agriculture and mining on biodiversity loss, in particular species extinction and the loss of ecological integrity. 

Financial institutions face escalating risks from nature loss. US$44 trillion of economic value generation, over 50% of global GDP, is moderately or highly dependent on nature and its services, but the world’s ecosystems have declined by 47% globally on average compared to their earliest estimated states, with 1 million species at risk of extinction. This creates material risks and opportunities for banks, asset owners and asset managers, as they invest in and lend to companies facing increasing physical, market, regulatory and reputational threats associated with biodiversity loss.

Biodiversity loss is fast rising up the global policy agenda with an ambitious post-2020 global biodiversity framework expected to be agreed by governments in Kunming in October 2021. Momentum is building and leading financial institutions are increasingly taking biodiversity into account, seeking ways to align financial flows to global biodiversity goals. Over 30 financial institutions took a pioneering role participating in the development of the ENCORE biodiversity module.

The new module lies at the cutting-edge of sustainable finance, allowing financial institutions to take immediate action, activate stakeholder engagement, and transition their portfolios towards a nature-positive future. Banks and investors can use the module to map their current exposure, and explore future scenarios, identifying potential pathways to increase positive impacts within agricultural and mining portfolios, as well as transition mining portfolios to a low energy future. The module provides guidance on company engagement, enabling financial institutions to work with stakeholders in high-priority areas to adapt production practices with the aim of making them nature-positive. 

The ENCORE biodiversity module is an extension of the free-to-use, online ENCORE tool (‘Exploring Natural Capital Opportunities, Risks and Exposure’) which assists the finance sector in visualising the links between the economy and nature. ENCORE allows banks, investors and insurers to identify nature-related risks, opportunities and exposure in their activities by setting out how each industry and sub-industry depends and impacts on nature. The ENCORE tool and biodiversity module are available by signing up here.

 

Corli Pretorius, Deputy Director, UN Environment Programme World Conservation Monitoring Centre said:

“Financial institutions are increasingly aware that biodiversity loss is an urgent issue they must tackle. The challenge has been to gain a more granular understanding of how biodiversity risks and opportunities show up in specific portfolios. Now, financial institutions can use the new module to understand the biodiversity risks and opportunities in their portfolios; they can prevent or account for the negative impacts on nature, while directing investments to better outcomes for people and planet.” 

Eric Usher, Head of the United Nations Environment Programme Finance Initiative said:

“The ENCORE biodiversity module lies at the cutting edge of sustainable finance, allowing financial institutions to take material action to pivot the real economy towards a nature-positive future. Replenishing and rebuilding biodiversity is an urgent global priority and those financial institutions which show market leadership by being early movers may have a considerable competitive advantage.”

Niki Mardas, Executive Director of Global Canopy, said:

“Data is key to unlocking finance sector action on biodiversity loss, and the missing link that financial institutions tell us they urgently need to shift their financing and investment away from nature-negative activities and towards nature-positive ones. The ENCORE tool has already been used by key finance sector players, like the Dutch Central Bank, to explore nature-related risks across entire markets. Now the new ENCORE biodiversity module enables individual financial institutions to take further targeted action in sectors like agriculture and mining which have high impacts and dependencies on nature.”

Karine Siegwart, Vice-Director of the Swiss Federal Office for the Environment, said: 

“Switzerland is committed to becoming a leading sustainable financial market place. With the ENCORE tool the financial sector globally is provided a unique tool with a powerful lever for halting biodiversity loss. We are proud to be supporting such critical efforts towards aligning financial flows with biodiversity targets“.

 

NOTES TO EDITOR

 

Media Contact: Miranda Barham |  miranda@mirandabarham.com |  +44 (0)7899 030304

 

Financial Institutions which participated in the development of the ENCORE biodiversity module:

 

Access Bank, AMERRA Capital Management LLC, APG AM, Bank of Montreal (BMO), Banque Socredo, Barclays, BNDES, BNP Paribas Asset Management, BT Financial Group, Citi, Credit Suisse, Development and Investment Bank of Turkey (Türkiye Kalkınma ve Yatırım Bankası A.Ş.), Development Bank of Southern Africa (DBSA), First Rand, Fondaction, GLS Bank, Hermes, ING, Jyske Bank, Kasikornbank, Land and Agricultural Development Bank of South Africa (Land Bank), NAB, National Bank of Canada, Natixis, NatWest Group, Nedbank, Piraeus Financial Holdings, Scotiabank, Sudameris Bank S.A.E.C.A., Swiss Re, UBS

 

This module uses goal-relevant metrics, but does not currently provide an explicit link to the potential post-2020 global biodiversity framework, as this is currently being deliberated and will be formally agreed at the 15th Conference of the Parties to the Convention on Biological Diversity (CBD COP-15). This module will be updated in accordance with the final negotiated text of the post-2020 global biodiversity framework once available.

 

About the ENCORE tool

The ENCORE tool (‘Exploring Natural Capital Opportunities, Risks and Exposure’) is a free, online resource which helps global banks, investors and insurance firms assess the risks that environmental degradation, such as pollution or destruction of forests, causes for financial institutions. The tool was developed by the Natural Capital Finance Alliance, and has been made possible with funding initially from the Swiss State Secretariat for Economic Affairs (SECO) and the MAVA foundation, and subsequently from the Swiss Federal Office for the Environment (FOEN), which has funded the development of the ENCORE biodiversity module. Work to support the development of ENCORE has also been undertaken by PricewaterhouseCoopers LLC and the Norwegian University of Science and Technology (NTNU).

 

About the Natural Capital Finance Alliance

The Natural Capital Finance Alliance (NCFA) is a finance sector led initiative, providing expertise, information and tools on material aspects of natural capital for financial institutions, including ENCORE. The NCFA secretariat is run jointly by the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC), the UN Environment Programme Finance Initiative (UNEP FI) and Global Canopy.

https://naturalcapital.finance

Twitter: @NatCapFinance | Linkedin: Natural Capital Finance Alliance

 

About UNEP-WCMC:

The UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) is a global Centre of excellence on biodiversity. The Centre operates as a collaboration between the UN Environment Programme and the UK-registered charity WCMC. Together we are confronting the global crisis facing nature.

https://www.unep-wcmc.org

Twitter: @unepwcmc | Linkedin: UNEP-WCMC

 

About UNEP FI:

The UN Environment Programme Finance Initiative (UNEP FI) is a partnership between UNEP and the global financial sector to mobilize private sector finance for sustainable development. UNEP FI works with more than 350 members – banks, insurers, and investors – and over 100 supporting institutions – to help create a financial sector that serves people and planet while delivering positive impacts.

https://www.unepfi.org

Twitter: @UNEP_FI | Linkedin: UN Environment Programme Finance Initiative

 

About Global Canopy:

Global Canopy is a data-driven think tank that targets the market forces destroying nature by providing innovative open-access data, clear metrics, and actionable insights to companies, financial institutions, governments and campaigning organisations worldwide. 

www.globalcanopy.org

Twitter: @GlobalCanopy | LinkedIn: Global Canopy 

Banks are finally out of the blocks in the race to net-zero – Eric Usher on Financial News

21 May 2021

The following op-ed was published in Financial News on 17 May 2021.
You can view the original article here.

BANKS ARE FINALLY OUT OF THE BLOCKS IN THE RACE TO NET ZERO

New net-zero commitments by leading banks can help carve the way to a green global economy

The financial sector is finally picking up the pace in its response to the climate emergency. Central banks are taking steps to better assess climate-related risks, and asset managers responsible for over a third of the world’s assets, including giants like Vanguard and BlackRock, committed to set a net zero path. Similarly, through the UN-convened Net-Zero Asset Owner Alliance, Wespath (US) and the Church Commissioners for England laid out plans to reduce the carbon intensity of their investment funds by 35% and 25% respectively by 2025, adding to the likes of insurance heavyweights Allianz and AXA and bringing to  a total  20 of the 37 member asset owners that have set targets.

However, the banking sector has risked falling behind in the race to net zero by 2050. One report in March showed that less than half (45%) of banks took action to align lending portfolios last year.

Now, the global banking community has taken a significant step in catching up. Convened by the UN, the industry-led Net-Zero Banking Alliance (NZBA) was founded in late April by 43 banks from 23 countries across 5 continents, with assets of US$28.5 trillion – and the membership ranks continue to swell. This is an unprecedented commitment by banks to play their important role and do their part in decarbonising the real economy in line with the scientific call for action to limit global average temperature increase to maximum 1.5°C over pre-industrial levels by the end of the century. The NZBA is joining the UN Race to Zero campaign, and forms an integral part of the new Glasgow Financial Alliance for Net Zero, chaired by UN Special Envoy on Climate Action and Finance, Mark Carney. 40 of the NZBA founding members are also signatories to the UN Principles for Responsible Banking – the leading framework establishing the norms for sustainable finance.

Tougher standards

From lending to investment portfolios, this new commitment will see rapid decarbonisation, based on robust, science-based methodologies, across banking assets. Given the urgency required for climate action it also, importantly, binds signatories to set and report against interim targets in line with the science for 2030 or sooner and so make a significant contribution to this critical decade of action.

The commitment is designed to ensure that banks engage with their clients’ decarbonisation reforms, promoting real economy transition across multiple high-emissions sectors. To this end, signatory banks will set transparent goals which account for their areas of most significant climate impact – the most GHG-intensive and GHG-emitting areas in their portfolios – within 18 months of joining the coalition. Within 36 months, they will set targets for all, or a substantial majority of nine carbon-intensive sectors: agriculture; aluminium; cement; coal; commercial and residential real estate; iron and steel; oil and gas; power generation; and transport.

Careful consideration has been given to establishing realistic and constructive timeframes with the founding members. The model is designed to avoid disincentivising banks which are at an early stage of their decarbonisation journey, while respecting the scientific decarbonisation scenarios to limit global temperature increase to 1.5°C by the end of the century. Inevitably, some banks have already set comprehensive targets, while others have made little progress as yet towards decarbonisation. A bank just now embarking on this journey needs time to undertake their portfolio assessment, build an emissions profile of their lending portfolios and investment activities, establish a baseline and develop realistic targets, while aligning with all other UN Sustainable Development Goals to the extent possible. Allowing a period of up to 18 months from signing to set targets makes the commitment accessible to banks that are just out of the starting blocks on their journey to reduce operational and attributable emissions across their balance sheet.

Tackling fossil fuels

The Alliance does not go as far as some campaigners might like and demand an immediate divestment from the fossil fuel sector, however it does compel members to prioritise high-emitting sectors, and immediately begin aligning their lending and investment portfolios with science-based pathways to net-zero by 2050 or sooner. They will do so according to the Guidelines for Climate Target Setting for Banks, which has been developed by banks who signed the Collective Commitment to Climate Action and underpins the Alliance. Based on the science, these guidelines require all NZBA members to set scenario-based intermediate targets for 2030 at the latest, across multiple carbon-intensive sectors of the economy. This is expected to lead to significantly reduced lending to those GHG-intensive and high emissions industries which do not have an accelerated decarbonisation transition plan in place.

Decade of action

We are at the start of the decade of action where setting and achieving demanding climate targets will accelerate the transition to a net-zero economy and lead to transformational real world impact. A study of 300 large corporates that committed to science-based targets in the last five years found they were reducing emissions at an even faster rate than that demanded by a 1.5°C pathway.

The global pandemic has shown how quickly industries can adapt when faced with disruption. It’s time for the banks and the wider finance sector to play their critical role in mobilising the trillions of dollars needed to transition to a global zero emissions economy and deliver the Paris climate goals.

Eric Usher is Head of the UN Environment Programme Finance Initiative, which convenes the Net-Zero Banking Alliance, the UN-convened Net-Zero Asset Owner Alliance and has announced its intention to convene the Net-Zero Insurance Alliance.

New ICAP framework drives investor action on climate crisis, accelerating transition to net-zero

20 May 2021

The founding partners of The Investor Agenda released today a new tool to enable institutional investors to step up action to tackle the climate crisis and accelerate the transition to a net-zero economy.

The Investor Climate Action Plans (ICAPs) Expectations Ladder and Guidance provides investors with clear expectations for issuing and implementing comprehensive climate action plans, including steps investors can take to support the goal of a net-zero emissions economy by 2050 or sooner. The framework aims to help investors navigate existing expectations and initiatives on climate change. It is inclusive and unique in that it sets out expectations for investors wherever they may be on their climate journey.

The release of the ICAPs Expectations Ladder and Guidance comes amid increasing global momentum of investors committing to work with their portfolio companies and policymakers to reach net zero emissions by 2050 or sooner, and to set interim reduction targets for 2025 and 2030.

The founding partners of the Investor Agenda, which are AIGCC, CDP, Ceres, IIGCC, IGCC, PRI, and UNEP FI, have been mobilizing investors to make net-zero commitments through a number of Investor Agenda-endorsed initiatives including the Net Zero Asset Managers initiative, Paris Aligned Investment Initiative, Science Based Targets initiative and United Nations-convened Net Zero Asset Owner Alliance. A net-zero emissions economy by 2050 or sooner is necessary to deliver on the goals of the Paris Agreement and limit average global temperature rise to no more than 1.5-degrees Celsius.

Eric Usher, Head of the UNEP Finance Initiative, said:

“We have seen tremendous growth in net-zero commitments from investors, however we need to move past commitments to concrete action and targets. UNEP FI is working with leading investors through the United Nations-Convened Net-Zero Asset Owner Alliance to cascade net-zero progress throughout the financial system and real economy, as well as with large investors who are just starting their climate action journey. The ICAPs Expectations Ladder and Guidance will help all investors take meaningful action, whether it is their first step or an additional enhancement, across sustainability, engagement and asset allocation.”

The ICAPs Expectations Ladder

The ICAPs Expectations Ladder summarises the key climate actions investors can take right now in the four interlocking areas of the Investor Agenda: investment, corporate engagement, policy advocacy, and investor disclosure. Governance is a cross-cutting theme across all four areas. The areas include: 

  • Investment: Manage climate risks in investor portfolios and shift capital to value-creating businesses set to succeed in a net-zero future.
  • Corporate Engagement: Engage companies to drive climate action and demonstrate real progress in line with a 1.5-degree Celsius future. 
  • Policy Advocacy: Advocate for policies aligned with delivering a just transition to a net-zero economy by 2050 or sooner. 
  • Investor Disclosure: Enhance investor disclosure to help stakeholders track investor climate action in line with a 1.5-degree Celsius pathway. 

Investors can use the ICAPs Expectations Ladder in several ways including: 

  • Assessing their current approach to managing climate change risk and opportunity
  • Publishing a standalone ICAP
  • Embedding elements of the ICAPs into their climate change strategies and disclosures.
  • Communicating their current activities and future plans to stakeholders

The accompanying ICAPs Guidance enables investors to interpret the ICAPs Expectations Ladder. It can be used by  investors to self-assess where they are on the ladder to understand the specific climate actions they can take to strengthen their approach and make further progress.

The Investor Agenda will measure progress on how many investors are developing and implementing climate action plans aligned with the Expectations Ladder, with the hope that at least 50% of all major investors will issue an ICAP or incorporate elements of the Expectations Ladder into their plans, reports and strategies in the next year and that all major investors have an ICAP with net-zero targets in the next five years. 

Partner CEO quotes

Rebecca Mikula-Wright, Executive Director of the Asia Investor Group on Climate Change and member of the global Steering Committee of the Investor Agenda, said: “The ICAPs Expectations Ladder and Guidance sets out a clear pathway for investor integration that leads to an ultimate goal of net zero that must be reached, wherever an investor may be on that journey. It will assist Asian investors on how they can take meaningful action to reduce their climate risk exposure and increase their allocations to the transitional investment solutions that are needed to address the climate crisis. By publishing a clear and robust climate action plan using the ICAPs framework, and acting on it, Asian investors can be better positioned to seize the enormous investment opportunities that are being created by the transition to net zero.”

Paul Simpson, CEO of CDP and member of the global Steering Committee of the Investor Agenda, said: “It is crucial for the business world to demonstrate leadership on climate action and readiness for bolder policy in the run up to COP26 and beyond. This means setting ambitious and credible science-based targets and seizing the power of transparency and disclosure. The ICAPs Expectations Ladder and Guidance is forward-looking. It provides clear information to the capital markets for aligning their investment portfolios with the goal of net zero emissions by 2050 or sooner. We are thrilled that this new tool is now available to investors around the world.”

Mindy Lubber, CEO and President of Ceres and member of the global Steering Committee of the Investor Agenda, said: “We call on all investors to publish climate action plans and join investors around the world in building a more just and inclusive net-zero economy.  The ICAPs Expectations Ladder and Guidance will drive a positive climate ambition loop by sending a clear signal to investors, companies, governments and regulators that investors support ambitious climate action plans and policies, which can in turn unlock further climate action.”

Stephanie Pfeifer, CEO, Institutional Investors Group on Climate Change and member of the global Steering Committee of the Investor Agenda, adds: “Climate change poses a serious financial risk for investors. Moreover, they have a key role to play in driving the transition to a net zero economy and helping avoid the otherwise devastating impacts the climate crisis entails. All investors need to take action. The ICAP Expectations define the practical steps required to set and deliver on clear plans to achieve their goals, whether they are just getting started or well on the way to being aligned with the goals of the Paris Agreement.”

Emma Herd, Chief Executive Officer of the Investor Group on Climate Change and member of the global Steering Committee of the Investor Agenda, said: “Investors across Australia and New Zealand are currently grappling with how to best move from the ambition to the implementation required to reach net zero emissions across their portfolios in a way that ensures ongoing sustainable returns to their beneficiaries and clients. The ICAPs Expectations Ladder and Guidance is a critical guide for that journey that will help accelerate meaningful action to reduce climate risks, while also providing clarity and transparency.”

Fiona Reynolds, CEO of the Principles of Responsible Investment, said: “Just as it is not enough for governments and business to sign net-zero commitments without also setting out the details of how they plan to get there, investors must also step up and demonstrate the actions they are taking to address climate risk both in the near term and longer term to 2050. The Investor Agenda’s ICAPs Expectations provides a framework for investors to develop robust plans for how they will transition their portfolios to net-zero and in doing so, investors can demonstrate real leadership. Ambition across the board is critical – but without commitment and action it won’t be enough to move the needle on net-zero.” 

The ICAPs Expectation Ladder and the Guidance publications are made possible by a grant from the ClimateWorks Foundation, a funding partner of The Investor Agenda.

About The Investor Agenda
The Investor Agenda is a common leadership agenda on the climate crisis that is unifying, comprehensive, and focused on accelerating investor action for a net-zero emissions economy. The founding partners of The Investor Agenda are seven major groups working with investors: Asia Investor Group on Climate Change, CDP, Ceres, Investor Group on Climate Change, Institutional Investors Group on Climate Change, Principles for Responsible Investment and UNEP Finance Initiative. For more information, visit theinvestoragenda.org and follow @InvestorAgenda