According to Michel Sapin, the French Minster of Finance, the financial sector is in the midst of a transition. Investors, insurers, and banks are at the center of the climate change activity. In a recent presentation at COP21 Sapin noted, “Climate change has immense opportunities. The future is low emissions.”
Principles for Responsible Investment, an investor initiative in partnership with UNEP and the UN Global Compact, corroborates Sapin and notes that investors must address the climate issue in their investment strategy.The organization promotes investor focus in sustainability as a fiduciary duty to shareholders.
In looking at investment data, it appears that many investors have embraced and take the duty seriously. From the organization’s report on trends in the private sector:
- Private sector commitment to green investing is growing.
- New green bond market exists and it is valued from 50 to 70 billion dollars.
- Carbon price is a reality; presently more that 450 companies have set internal carbon prices.
- Investor behavior is changing; portfolio decarbonization strategy is an accessible example.
- Insurance scaling up both through both issuance and through investment portfolios. Insurers are shifting to low carbon investments
Looking ahead, to promote investor enthusiasm and enable stronger growth, regulatory authorities need to provide clear guidelines and frameworks. Prices need to be established for carbon and we need to stop subsidizing fossil fuels. Presently several carbon prices exist on global level but trading activity could be more efficient if there was an established market and a transparent carbon price. With carbon and greenhouse gas prices topics of discussion at COP 21, perhaps the UN agreement will assist in establishing a global market.