Reinsurer Swiss Re has warned that society will fail to reach the Paris Agreement target of limiting global warming without more action from investors and other financial market players.
As part of its latest Responsible Investments publication, Swiss Re stressed that long-term investors have “an important role to play in achieving the net-zero emissions target and can have an amplifying impact with their substantial collective asset base.”
Key takeaways from the report included a focus on targeted security selection rather than abandoning industries altogether, as well as reductions in carbon emissions for listed equities and corporate bonds.
By 2020, Swiss Re already engaged with 48% of its portfolio companies and targets to engage with the top 20 emitters at least once a year to support them in aligning their business models toward a 1.5°C pathway.
And with approximately $80 trillion in assets under management, it believes that long-term investors can meaningfully accelerate the transition to a net-zero emissions economy.
“Climate change remains the biggest challenge we face as a society,” said Guido Fürer, Swiss Re’s Chief Investment Officer. “If temperature increases stay on the current path, the world stands to lose around 14% of total economic value from climate change by mid-century.”
“We know the economic benefits of investing in a net-zero economy far outweigh the costs. It’s time for investors to step up and close the climate finance gap,” Fürer continued.
“With carbon intensities approximately 30% below the market benchmark, Swiss Re’s investment portfolio is well on track. But in order to make net-zero emissions by 2050 a reality, multi-stakeholder actions and engagement with the real economy are essential. We cannot afford to wait.”
Claudia Bolli, Swiss Re’s Head Responsible Investing, also commented: “With more than ten years of experience in responsible investing, we want to share our findings and expertise with other institutional investors. In order to select the appropriate actions with the most meaningful impact for our portfolio as well as the real economy, we have been very focused on understanding the portfolio risks associated with the transition to a net-zero emissions economy.”
“These can range from changing consumer behaviour to technological developments to asset impairments due to regulatory changes. We also need to understand how best to measure the progress we’re making, because only what gets measured, gets done.”