Aligning Financial Portfolios

Transcription

1 Aligning Financial Portfolios - a One Planet Perspective Magnus Emfel Senior Advisor Finance WWF Sweden Cat Holloway / WWF-Canon The Human Footprint on our Planet Living Planet Report 2016 Global ecological footprint by component vs Earth s biocapacity, Source: Global Footprint Network,

2 To avoid catastrophic climate change, global warming must be kept under 2 o C by 2050 RCP: Representative Concentration Pathway IPCC AR5 Synthesis Report, Summary for Policy Makers (2014) 2

3 Are we on track? 420 kg/mwh 100 kg/mwh Mauri Rautkari / WWF World Energy Investment Outlook 2016, IEA 3

4 The Paris NDC s lead to a >3 o C world PwC Low Carbon Economy Index 2017 Responsible investment policy is widespread ASEAN Indonesia - 6 Malaysia - 6 Thailand - 5 Singapore - 4 Philippines 3 Vietnam - 2 Access PRI s policy database at unpri.org/policymap 4

5 and the pace is increasing 5

6 Source: 2018 HLEG Report, page 8 Key HLEG recommendations 1. Common sustainability taxonomy at the EU level 2. Clarify investor duties 3. Upgrade disclosure rules 4. Retail strategy: investment advice, ecolabel 5. Sustainability standards and labels, (e.g. green bonds) 6. Sustainable Infrastructure Europe 7. Governance and Leadership 8. ESAs mandates and horizon FOUR CLIMATE CHANGE SCENARIOS CLIMATE CHANGE SCENARIOS 1. TRANSFORMATION Emissions down by 56% by C warming by CO-ORDINATION Emissions down by 27% by C warming by FRAGMENTATION (Lower Damages) Emissions rise by 33% by C warming by 2100 KEY SIGNPOSTS FOR INVESTORS 4. FRAGMENTATION (Higher Damages) Emissions / Warming same as Frag. (Lower) coupled with assumed higher physical damages. MERCER

7 AGRICULTURE INFRASTRUCTURE 0.25 > <0.25 ENERGY METALS & MINING < VALUES ASSIGNED BETWEEN -1 AND +1 MERCER CLIMATE IMPACT ON RETURNS BY SECTOR AND SUB-SECTOR (MEDIAN ANNUAL RETURN IMPACT ALL SCENARIOS OVER 35 YEARS) MINIMUM IMPACT RENEWABLES ADDITIONAL VARIABILITY RETURN IMPACT FINANCIALS MATERIALS OIL COAL SECTOR MERCER

8 What future is my portfolio aligned with? >4 o 3 o <2 o IPCC AR5 Synthesis Report, Summary for Policy Makers (2014) Portfolio Alignment The objective is to encourage a meaningful shift in Finance to achieve sustainable and resilient economies a meaningful shift in Finance is one that is in accordance with best available science and international agreements, and drives change at speed and scale. 8

9 Scenario analysis for financial portfolios Sustainable Energy Investment Metrics - methodology Climate goal Global CO2 budget Technology scenarios 2 o C benchmark Portfolio companies Plans +5 years Gap analysis Over-/under exposure 17 User portfolio % % Financial Database (e.g. Bloomberg) Equity Securities Debt Securities Parent Company Company network (e.g. Orbis) Comp x Comp y Comp z Comp t Comp w Comp q Asset level data (e.g. Automotive database) 9

10 Mapping assets: automotive (Wards Auto) Engagement with 100 largest European asset owners 23-Feb-18 / 20 10

11 2 o C analysis of European asset owners: coal power 2 o C analysis of European asset owners: renewables 11

12 We have a goal to be aligned with the Paris Agreement. Magnus Billing, CEO, Alecta (Sweden) In 2016 we wrote the Paris Agreement into our investment policy. Andreas Stang, Head of RI, PFA (Denmark) More than 30 public development banks commit to align their financing with the Paris Agreement. One Planet Summit (December, 2017 Science Based Targets initiative The Science Based Targets initiative mobilizes companies to set science-based targets and boost their competitive advantage in the transition to the low-carbon economy. 24 An initiative by In collaboration with 12

13 What is a science-based target? A greenhouse gas emissions reduction target aligned with the latest climate science. Defines how much and how quickly companies need to cut their emissions to ensure they contribute their part to the global effort to prevent dangerous climate change. Gives companies a clear vision of where they need to be in the future, challenging them to transform their business and help create a low-carbon economy where they can thrive. An initiative by In collaboration with Science-Based Target for Financial Institutions - proposed framework components SBT-FI methods SBT-FI Implementation Guidance An initiative by In collaboration with 13

14 Living Planet Report 2014 ISO14097 reporting standard (work in progress) Forward-looking! Science-based! Short and long term! Risks and opportunities! Outcome! 14

15 Want to know more? Test your portfolio! Trygg, grön hamn 15