Earth Day Paris Agreement Signing Bolstered by Strong Commitments from Major Corporates, Institutional Investors and China

There’s “no doubt” that the international community is determined to take action to fight climate change.

Those were the words of UN Secretary-General Ban Ki-moon on Earth Day, April 22, as 175 world leaders signed the Paris Agreement at United Nations headquarters.

“This is by far the largest number of countries ever to sign an international agreement on a single day,” he noted.

The Paris Agreement was reached by 195 nations at COP21 in December, setting a goal of holding the increase in the Earth’s temperature to well below 2 degrees Celsius. The agreement requires all nations to submit revised climate action plans every five years, and for those plans be more ambitious than the prior ones.

The pledges represent $13.5 trillion of global investment in energy efficiency and low carbon technologies through 2030, according to We Mean Business, a business and investor coalition. And 500 investors representing $3.4 trillion in assets announced divestment from fossil fuels during COP21.

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Strong business engagement and support for putting a price on carbon

A key outcome of the signing ceremony was the demonstration of both intent and action by policy makers worldwide to promote clean energy, sending a signal to the business community that will drive investments in low carbon projects and clean technologies.

There was strong business engagement at the signature ceremony, and UN Global Compact Executive Director Lise Kingo called on companies around the world to set an internal carbon price of at least $100 per metric ton over time.

Keynote speakers at the UN signing event included Anne Stausboll, CEO of the California Public Employees’ Retirement System. Stausboll called the signing “an unmistakable signal to capital markets that climate change is serious business  — and as investors we intend to fully capitalize on the new opportunities ahead.” She said it has “unleashed an unprecedented opportunity for institutional investors worldwide.”

Stausboll also urged regulators to make policy changes that drive capital into new clean technologies and for mandatory climate risk disclosures for public companies.

Another keynote speaker, Paul Polman, the CEO of Unilever, said: “It makes good business sense to capitalize on the transition to a low carbon world.” As evidence that the business community gets it, he cited the Business & Climate Summit last summer, when 6.5 million companies worldwide committed to taking action on climate change.

“If Paris did one thing, it sent a clear signal to the business community that we are going to decarbonize our global economy,” Polman said, adding that putting a price on carbon is “absolutely crucial.”

And Gérard Mestrallet, Chairman and CEO of French electric utility Engie, explained during a panel discussion that Engie currently puts an internal price on carbon, which is then integrated into the company’s investment decision process. That’s what drove the firm’s recent decision to stop investing in coal projects, and it also forced the company to shut down two coal plants and sell two others. It led the firm to “massively transfer investments into low carbon energy generation and energy efficiency projects,” Mestrallet said. Engie now generates  $19 billion in revenue from their energy efficiency business.

And in a reflection of the growing demand for sustainable investing, several major financial services firms recently stepped up their financing commitments and launched new investment products:

– On Earth Day, BlackRock launched the iShares Sustainable MSCI Global Impact ETF, which invests in companies that derive the majority of their revenue from products and services that address at least one of the world’s social environmental challenges, as identified in the UN Sustainable Development goals

– A few days before that, S&P Dow Jones Indices and RobecoSAM launched a new index series that measures the performance of companies in their respective index based on RobecoSAM’s “sustainability score.”  It is the first index family to treat ESG as a standalone performance factor, says the firm.

– Earlier in April, Bank of America landed $8 billion worth of commitments from large institutional investors to its new Catalytic Finance Initiative. The initiative is intended to develop investment structures and de-risking tools for investments into high-impact sustainable investments such as energy efficiency, renewable energy and energy access.

– In March, JPMorgan Chase announced it will no longer finance new “greenfield” coal projects in high income countries due to climate change concerns.

Blackrock also launched a sustainable bond ETF for European investors in January, called the iShares Euro Corporate Bond Sustainability Screened 0-3yr Ucits ETF.

– In December, the New York State Common Retirement Fund allocated $2 billion to a low carbon index equity fund developed by Goldman Sachs Asset Management .

– In November, Goldman Sachs expanded its global clean energy target to $150 billion in financings and investments by 2025, to “facilitate the transition to a low-carbon economy.”

– Early last year, Citigroup announced a “landmark commitment” to lend, invest and facilitate a total of $100 billion within the next 10 years to finance activities that reduce the impacts of climate change and create environmental solutions that benefit people and communities.

China’s Committment

Chinese Vice Premier Zhang Gaoli represented China at the signing ceremony in New York on Earth Day. China and the United States are the world’s two largest economies and two largest greenhouse gas emitters, accounting for 40% of global emissions combined. That makes it particularly significant that the two countries came together to sign the agreement, “continuing the spirit of cooperation on climate change that they began with their first joint announcement on climate change in November 2014,” Alvin Lin, climate and energy policy director at the National Resources Defense Council’s China Project, wrote in a blog post. 

During the signing ceremony, China announced that it will finalize domestic legal procedures to ratify the Paris Agreement prior to the G20 Hangzhou summit in September this year.

“We will launch a national emission trade market, substantially increase forest carbon sink. We will put in place a strict accountability system for environmental protection and ensure the implementation of all targets,” Zhang said during the signing ceremony, according to Xinhua News Agency.

And Liu Zhenya, Chairman of the State Grid Corporation of China, a featured speaker during the signing ceremony, reflected on China’s strong clean energy commitment in his comments. “The extensive development of fossil energy is the major contributor to climate change,” he said, adding that it is “imperative for us to shed the over-reliance on fossil fuels, by replacing oil and coal and to create a better energy consumption model.”

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