The UN Climate Action Summit 2019, which concluded this past Friday, represented the most significant moment for coordinated global action since the landmark Paris Agreement was announced in 2015.
More than 5,000 delegates and leaders from around the world attended the UN’s special session in New York focused on reducing greenhouse gas emissions that scientists warn could have dire consequences for the planet.
Our biggest takeaway, which was reinforced by UN Secretary-General António Guterres many times, is that the private sector – including corporations and investors – is striding ahead of governments that – with some exceptions – need to significantly accelerate efforts to align public policy with the 1.5-degree-Celsius ambition of the Paris Agreement, in which governments agreed to cap the global average temperature increase this century to below 2 degrees Celsius, and to ideally try to limit the increase to 1.5 degrees Celsius above preindustrial levels.
Secretary-General Guterres stated that because governments are not developing sufficient climate policies, markets are not able to function in ways that will support the climate agenda. He noted that businesses and investors are moving ahead with progressive actions despite policy vacuums.
Reinforcing this theme, the UN announced several important private-sector and investor initiatives:
- 87 major companies — with a combined market capitalization of over $2.3 trillion and annual direct emissions equivalent to 73 coal-fired power plants — pledged to reduce emissions consistent with what many scientists say is needed to limit the worst impacts of climate change.
- An alliance of the world’s largest pension funds and insurers (including PIMCO’s parent, Allianz) – responsible for directing more than $2.4 trillion in investments – committed to achieving carbon-neutral investment portfolios by 2050.
- Major pension funds in Denmark pledged to invest an additional €46.8 billion between now and 2030 to support the green transition.
- Banks representing more than $47 trillion in assets and one-third of the global industry signed the United Nation’s Principles for Responsible Banking. As part of the principles, 130 banks committed to align their business operations and lending activities with the 1.5-degree-Celsius target of the Paris Agreement.
- The UN Global Compact, a high-level business roundtable including PIMCO, announced the launch of a “CFO Network” to engage chief financial officers on the broad sustainability agenda, including climate action and the Sustainable Development Goals (SDGs).
- The UN Private Sector Forum – the largest single business-focused event at the summit –featured a renewed call to action on advancing financial innovation, including SDG bonds in the model of the recent Enel SDG bond issuance, which was repeatedly referenced and discussed during the week’s activities.
While private-sector action garnered much of the attention, there were important announcements and new commitments by UN member states:
- 65 countries and major subnational economies such as California committed to cut greenhouse gas emissions to net zero by 2050, while 70 countries announced they will either accelerate their national action plans by 2020 or have started the process of doing so. These were announced under the so-called Paris Ratchet process.
- Many smaller countries, including Small Island Developing States and Least Developed Countries, were among those who made the biggest pledges, despite contributing the least to the problem.
- France announced that it would not enter into any trade agreement with countries that have policies counter to the Paris Agreement; Germany committed to carbon neutrality by 2050; and 12 countries made financial commitments to the Green Climate Fund, which assists developing countries in adapting to and mitigating climate change.
The more than 5,000 international delegates who attended the summit included youth leaders such as Greta Thunberg, who drove home the urgency of greater action by leaders in an impassioned – though controversial – plenary speech.
Secretary-General Guterres, in closing the summit, said, “You have delivered a boost in momentum, cooperation, and ambition. But we have a long way to go.
“We need more concrete plans, more ambition from more countries and more businesses. We need all financial institutions, public and private, to choose, once and for all, the green economy.”
Learn why we believe ESG investing no longer needs to be an either/or paradox – either financial return or sustainable development. Investors can pursue both.
Scott Mather is CIO U.S. Core Strategies and oversees ESG investing at PIMCO, and Gavin Power is PIMCO’s chief of sustainable development and international affairs.