The Paris climate change agreement has mobilised business and investors to take more action to reduce carbon emissions but to get the estimated $5 trillion a year of investment needed to move to a low carbon economy there needs to be a shift in thinking so that sustainable investment becomes part of mainstream investment speakers at the recent business and climate summit in London said.

António Simões, chief executive of HSBC Bank,  identified three barriers to investment. The first of these – policy uncertainty – had been lifted through the Paris agreement which meant investors knew sustainable approaches were not negotiable but needed to be achieved. The second barrier was a lack of disclosure and transparency related to carbon emissions – improving this was vital to attract investment. He sees the role of the Financial Stability Board’s  Task Force on Climate-related Financial Disclosures as critical to this. It is due to produce a final report by the end of this year that will set out specific recommendations and guidelines for voluntary disclosure by identifying leading practices to improve consistency, accessibility, clarity, and usefulness of climate-related financial reporting. Simões said another barrier that needed removing were the subsidies were still being given to fossil fuels.

Saker Nusseibeh, chief executive of Hermes Investment Management said there was plenty of money around in mainstream funding and investment and shifting this into sustainable investment could be done through a shift in thinking that could now be made following the Paris agreement. He said it was necessary to change the idea of what is good business and through that rethink how to calculate the value of a business which would boost the returns for investors. This could be done Nusseibeh believes by including the negative values of a business, such as the environmental damage it might do, into valuations so that sustainable businesses would be more valuable.

A report by CDP produced for the summit showed whilst leading companies are already engaged in taking climate action, and many more are ready to sign up to make new commitments, there remains a long way still to go to achieve the sub 2°C goal agreed by countries in Paris. The report examined what will be achieved by the plans of five key global business initiatives (RE100; EP100; Science Based Targets; Zero De-forestation & LCTPi) on climate action currently underway and compares this to what could happen if all relevant companies were to sign up to these initiatives and implement their plans.

The report acknowledges that whilst leading companies are already engaged in taking climate action, and many more are ready to sign up to make new commitments, there remains a long way still to go to achieve the sub 2°C goal agreed by countries in Paris..

The study looks at what might be achieved if all relevant companies were encouraged to sign up to the five initiatives. Under such a scenario, it found that business would cut emissions by around 10bn metric tons per year.  This potential Business Determined Contribution is equivalent to what China, the world’s largest emitter, pumps out in total CO2 emissions annually and alone it would take us well over half way to a sub 2°C world.

Last Updated: 3 July 2016