HELSINKI, June 16 (Xinhua) -- While the public funding is important in financing the ongoing global effort to curb the climate change, emphasis needs to be put on the private investors who will play a critical role in meeting the financial requirement of Paris Agreement, said a world leading advocate for green investment.
Catherine Howarth, chief executive of ShareAction, a UK-based NGO promoting responsible investment, said an amount of 20 or 30 trillion U.S. dollars out of the over 100 trillion private capital in the world needs to be unlocked in order to enable the success of the climate accord.
The charity is currently running Asset Owners Disclosure Project (AODP), which is well known for its ratings of major institutional investors on their performance in low carbon transition and its success in diverting millions of dollars away from high carbon investments.
"What we are evaluating is how are the big capital owners doing in shifting their portfolios so that they are financing green economy, clean energy, clean cities, green infrastructure," Howarth told Xinhua at a climate conference held in Helsinki this week.
Howarth said she is proud of the worldwide rankings that her organization is doing, which could "create a very helpful competition to be better among the funds," and play an important role "where transparency drives the action commitment and change".
Howarth praised the European pension funds and insurers which appear to be top performers responding to climate risks.
She mentioned the latest ranking of 80 largest insurance companies in the world, where "the Europeans are currently in the lead in terms of climate risk management, the Asians come the next, and the U.S. has the worst performing".
"So I would say the American insurance companies are playing with fire. They are potentially making very imprudent financial decisions," said Howarth.
She believed U.S. President Donald Trump's announcement to withdraw from Paris Agreement does no help as "there are still some incredibly fantastic American companies with great technology and great innovation, but they are doing it despite their government instead of with the support and backing of their government".
The analysis of the index says the most common climate-relevant policy commitments relate to capital allocation to invest in renewable energy assets, reduce exposure to carbon-intensive assets, or increase involvement in the rapidly growing green bond market.
Meanwhile, the report concludes that one third have introduced policies, objectives, and strategies that aim for alignment with the goals of the Paris Agreement on energy transition or have integrated climate risk policy across asset portfolios. The data also shows that the range of asset allocation for low-carbon investments varies from around zero to 3.8 percent.
In an effort to speed up the low carbon transition in the finance industry, ShareAction interviewed 22 best asset owners and published the report Winning Climate Strategies this week, providing practical tools and solutions for others to learn.
Among the remedies are committed leadership from the top and dialogue engagement with stakeholders, said Howarth. "We are very impressed by the investors in the Nordic region. You see some really world class leadership on climate related financial risk management."
Howarth said she is relieved to see these years that the market, not the politics is the driving force of the trend.
"For example in the energy sector, do you want to be investing heavily in the coal plants when cost of renewable energy is falling and it is going to soon be out competing coal. Not only will they be clean, good for people's health, but also they are cheaper as well. So you have invested in coal fired energy stations and suddenly they are loss making. So these are the financial risks of the low carbon transition."
"We have to move quickly. It requires a new way of doing things. Not everyone wants to embrace change in life, but change is coming so you need to be on the head of the train or on the back of the train."
