Formula One drivers, extreme skiers and tightrope artists may live to take risks, but investment institutions and banks do not generally share their passion.
Yet investors today are staring down the barrel of one of the biggest risk of all to their assets – climate change. And the biggest loss will be felt by those who have invested in materials, utilities, oil and coal.
So explained Jane Ambachtsheer, Global Chair of Responsible Investment for investment group Mercer at a panel debate organised by WWF and hosted by the French permanent representation to the EU on 5 April.
With recent news headlines revealing that investments could lose $2.5 trillion in value due to climate change, experts warning about stranded assets, and thousands of institutions, pension funds, cities and financial groups already pulling their money out of fossil fuels it has become clear that behaviours are rapidly changing in a post-Paris universe.
But if much of the world is waking up to the fire alarm and racing out of the building, the EU is still yawning and wondering where everyone has gone, said WWF’s Sébastian Godinot, speaking at the debate.
“Given all the noise from financial bodies on risk for investors, there has been a surprising silence from the Commission”, he stated, pointing out that the EU’s flagship financial policy – the Capital Markets Union (CMU) action plan – does not once mention climate change.
The European Commission’s Niall Bohan admitted that there is “not much concrete” yet on climate change risk in the CMU plan, pointing to the challenges of the various different policy goals and instruments in play.
He nevertheless acknowledged the urgency of the task at hand, saying it is “put up or shut up time for the European Commission” and that “the financial system itself is in jeopardy if we don’t correct it”.
MEP Sirpa Pietikainen described our current financial regulation incentives as “perverse”.
“We spend more on fossil fuel subsidies globally than our health expenditure, what sense does that make?” she added, pointing out that the public purse currently has to pay for weather impacts and health impacts from fossil fuels.
Economy and Finance Ministers meet on 22 April to discuss the discuss the issue of climate risks for investments.
, capital markets union, climate change, climate risk, ecofin, EU, European Commission, event, finance, france, investors, jane ambachtsheer, MEP, Mercer, Niall Bohan, risky returns, sébastien godinot, Sirpa Pietikainen, wwf