EFAMA supports COP21 aims:
Asset management industry is committed to helping investors achieve their green investment goals
Global warming undeniably greatly impacts the environment, the economy, modern societies and future generations. According to the Intergovernmental Panel on Climate Change, most of the observed increase in global average temperatures since the mid-20th century is very likely due to the observed increase in greenhouse gas emissions 1. EFAMA supports the goal of the next Conference of Parties (COP 21) to find a new international agreement which would aim to keep global warming below 2 degrees Celsius. In this context, we would call on policy makers to ensure a stable regulatory framework which would provide the private sector, including the investment community, with a longer pattern of confidence to allow the necessary capital flows towards transitioning to a lower carbon intensive world.
Asset managers, as fiduciaries for their clients (retail or institutional investors), invest in the best long-term interest of their investors / clients and are aware of the environmental, social and governance (ESG) criteria, including climate change challenges, which can influence investment performance. Many of the industry’s investors feel a responsibility to take part in addressing this issue by being more selective in their investments. In listening to its clients and providing them with investment solutions to achieve their objectives, the European asset management industry contributes to efforts limiting climate change and is committed to supporting the global target of raising USD 100 bn p.a. in climate finance by scaling up their climate investment activities in accordance with investor demand 2.
Asset managers are offering investment solutions for investors who want to address climate change
Asset managers are increasingly developing a range of responsible investment products for institutional and retail investors and offering investment solutions contributing favourably to the fight against climate change by, for example:
• Widening the supply of thematic green funds
• Developing the supply of low carbon portfolios
• Innovating with new investment solutions favouring energy transition (green bond, impact bonds, climate bonds…)
• Scaling up blended finance through public-private partnership funds for climate change mitigation and adaptation
Asset managers are incorporating climate risk when reporting to clients
Dialogue with clients, especially with institutional asset owners, has supported the mainstreaming of ESG considerations, including climate change, in portfolios. Asset managers are committed to transparency and are developing practices to measure and report activities for managing the impact of climate change on portfolios.
In addition, asset managers seek to take into account elements of climate change risk in investment decisions by, for example:
• Developing climate change analysis applied to portfolio management with an emphasis on the CO2 performance of issuers before investment, or using broker research reports on climate change analysis which is then applied to the portfolio
• Engaging as shareholders on behalf of their clients with investee companies
• Identifying, measuring and reporting on minimum CO2 savings of alternative sustainable investments
Asset managers are also adopting transparency standards (for example, certification and labelling) which can create a better awareness of the market in relation to climate change criteria in the investment processes and have started to develop proprietary carbon accounting methods for alternative investments.
Asset managers’ engagement with companies in their portfolios can influence how companies manage climate change challenges
The more widespread engagement by asset managers and asset owners with investee companies on climate change criteria has contributed to raising standards and transparency on tackling climate change.
Asset managers are progressively improving transparency practices and helping companies consider climate risk as important for their future by, for example:
• Reinforcing dialogue with companies to improve their management of the climate change risk and favour the data release of CO2 impact of their businesses and products to measure their efforts for a reduction of CO2 emissions
• Supporting initiatives such as Carbon Disclosure Project (CDP), Institutional Investors Group on Climate Change (IIGCC), Global Real Estate Sustainability Benchmark (GRESB) which aim to improve CO2 reporting by companies
Consideration of climate change criteria in portfolio management and efforts to prove materiality of RI strategies, i.e. the extent to which they affect corporate financial performance, has created more awareness amongst companies of the financial sector’s commitments in this field.
EFAMA hopes a new global agreement, with new commitments on greenhouse gas emissions post 2020, can be successfully negotiated in Paris. The asset management industry remains committed to helping investors achieve their green investment goals. By allocating the necessary capital flows towards a lower carbon intensive world, our industry continues to play its part in the global effort to solve one of the most pressing issues of our generation.
2 Decision adopted by COP16 Cancun Conference: “Recognizes that developed country Parties commit, in the context of meaningful mitigation actions and transparency on implementation, to a goal of mobilizing jointly USD 100 billion per year by 2020 to address the needs of developing countries“
EFAMA is the representative association for the European investment management industry. EFAMA represents through its 26 member associations and 63 corporate members about EUR 19 trillion in assets under management of which EUR 12.6 trillion managed by 56,000 investment funds at end June 2015. Slightly less than 30,000 of these funds were UCITS (Undertakings for Collective Investments in Transferable Securities) funds. For more information about EFAMA, please visit www.efama.org
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