Blog

UN Climate Summit: Business and Investors Lead on Action

Businesses and investors are moving ahead with progressive actions despite policy vacuums.

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.

READ HERE

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.

The Author

Scott A. Mather

CIO U.S. Core Strategies

Gavin Power

Chief of Sustainable Development and International Affairs

Related

Disclosures

London
PIMCO Europe Ltd
11 Baker Street
London W1U 3AH, England
+44 (0) 20 3640 1000

Dublin
PIMCO Europe GmbH Irish Branch,
PIMCO Global Advisors (Ireland)
Limited
3rd Floor, Harcourt Building 57B Harcourt Street
Dublin D02 F721, Ireland
+353 (0) 1592 2000

Munich
PIMCO Europe GmbH
Seidlstraße 24-24a
80335 Munich, Germany
+49 (0) 89 26209 6000

Milan
PIMCO Europe GmbH - Italy
Corso Matteotti 8
20121 Milan, Italy
+39 02 9475 5400

Zurich
PIMCO (Schweiz) GmbH
Brandschenkestrasse 41
8002 Zurich, Switzerland
Tel: + 41 44 512 49 10

PIMCO Europe Ltd (Company No. 2604517) is authorised and regulated by the Financial Conduct Authority (12 Endeavour Square, London E20 1JN) in the UK. The services provided by PIMCO Europe Ltd are not available to retail investors, who should not rely on this communication but contact their financial adviser. PIMCO Europe GmbH (Company No. 192083, Seidlstr. 24-24a, 80335 Munich, Germany), PIMCO Europe GmbH Italian Branch (Company No. 10005170963), PIMCO Europe GmbH Irish Branch (Company No. 909462), PIMCO Europe GmbH UK Branch (Company No. BR022803) and PIMCO Europe GmbH Spanish Branch (N.I.F. W2765338E) are authorised and regulated by the German Federal Financial Supervisory Authority (BaFin) (Marie- Curie-Str. 24-28, 60439 Frankfurt am Main) in Germany in accordance with Section 32 of the German Banking Act (KWG). The Italian Branch, Irish Branch, UK Branch and Spanish Branch are additionally supervised by: (1) Italian Branch: the Commissione Nazionale per le Società e la Borsa (CONSOB) in accordance with Article 27 of the Italian Consolidated Financial Act; (2) Irish Branch: the Central Bank of Ireland in accordance with Regulation 43 of the European Union (Markets in Financial Instruments) Regulations 2017, as amended; (3) UK Branch: the Financial Conduct Authority; and (4) Spanish Branch: the Comisión Nacional del Mercado de Valores (CNMV) in accordance with obligations stipulated in articles 168 and 203 to 224, as well as obligations contained in Tile V, Section I of the Law on the Securities Market (LSM) and in articles 111, 114 and 117 of Royal Decree 217/2008, respectively. The services provided by PIMCO Europe GmbH are available only to professional clients as defined in Section 67 para. 2 German Securities Trading Act (WpHG). They are not available to individual investors, who should not rely on this communication.| PIMCO (Schweiz) GmbH (registered in Switzerland, Company No. CH-020.4.038.582-2) . The services provided by PIMCO (Schweiz) GmbH are not available to retail investors, who should not rely on this communication but contact their financial adviser.

Socially responsible investing is qualitative and subjective by nature, and there is no guarantee that the criteria utilized, or

judgment exercised, by PIMCO will reflect the beliefs or values of any one particular investor. Information regarding responsible practices is obtained through voluntary or third-party reporting, which may not be accurate or complete, and PIMCO is dependent on such information to evaluate a company’s commitment to, or implementation of, responsible practices. Socially responsible norms differ by region. There is no assurance that the socially responsible investing strategy and techniques employed will be successful. Past performance is not a guarantee or reliable indicator of future results.

Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and a low interest rate environment increases this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Investors should consult their investment professional prior to making an investment decision.

This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The Race to Net Zero: Challenges and Opportunities
XDismiss Next Article