A first of its kind analysis of the European Union’s biggest investors finds that they are partly aligned with the Paris Climate Agreement’s climate target of keeping global warming well under 2°C, but were found to be investing too much in coal still.
The new analysis was carried out by the WWF, and published in a new report this week, European Asset Owners: 2°C Alignment and Misalignment of Public Equity Portfolios. The report finds that EU investors have definitely begun to play their part to help achieve the climate targets of the Paris Climate Agreement, but that much more needs to be done. The first of its kind research is intended to “inform and further stimulate the growing conversation about how asset owners’ investment portfolios are aligned with the Paris climate goals.” The report saw the WWF engage with 80 of the 100 largest European asset owners across 12 countries, which together represent around $13 trillion in total assets. 30 of these asset owners provided data to be included in the study.
The report found that, of the 30 asset owners which provided data, almost all of them have cut funding to coal mining, but many of them are still investing too much in coal power, and lagging behind on renewable power.
“Ensuring capital is invested in companies that contribute to a climate-safe future is key to reaching the Paris Agreement targets, reducing climate-related financial risks and maximising returns,” explained Sebastien Godinot, Economist at WWF European Policy Office. “Some asset owners are showing leadership, but more needs to be done to reallocate investments from coal to renewable power.”
The report not only details the progress of asset owners, but seeks to provide a forward-looking analysis that can help asset owners investment decision-making, focusing on the coal mining and electric utilities sectors. WWF believes that their work could be further expanded to other carbon-intensive sectors, such as oil & gas, and automotive, providing further analysis and advice for investors looking to align their investments further to the Paris Agreement targets.
But more disclosure is also needed, which is currently hindered by lack of regulation requiring any disclosure in certain countries.
“Too many asset owners are still not disclosing how their capital investments are aligned with the Paris Agreement,” added Godinot. “We call on the G20 leaders meeting soon in Hamburg to improve this, by adopting the recommendations on climate-related disclosures of the designated Financial Stability Board’s Task Force. These will have to be made mandatory by the EU and member states across the Union and nationally — a crucial move towards making climate alignment assessments by investors the norm.”