| By Elena Johansson
The 26th UN Climate Change Conference of the Parties (COP26) will mark a decisive point for investors supporting a net-zero emissions pathway, an expert at AXA Group has said.
Céline Soubranne, Chief Corporate Responsibility Officer at AXA, which is a member of the UN-convened Net-Zero Asset Owner Alliance (AOA), explained that the initiative’s influence, with combined over $6.6 trillion in assets under management, is limited.
“The AOA alone is just one piece in the larger puzzle of the transition,” she said, making the COP26 event in Glasgow this year crucial.
“Investors certainly have an influence on investee firms, but these will also shift towards low-carbon business models with the help of all stakeholders, and, of course, when they identify and develop business models that make this transition both possible and profitable,” she explained.
Speed of change
Different uncertainties around the net-zero transition pathways exist.
Sean Kidney, CEO of the Climate Bonds Initiative (CBI), explained that while there was consensus on the transition itself among most parties around the world, the speed of change was still under discussion.
He spoke at a joint event by the Inevitable Policy Response (IPR), the Principles for Responsible Investment (PRI) and the CBI last week.
“The debate is, is this [green future] going to be in 2030 or 2060?
“If we don’t [transition] rapidly enough, we lose our window — which is this decade’s window in the Intergovernmental Panel on Climate Change’s (IPCC’s) world — to affect change and to stop catastrophic climate change,” he said.
Meanwhile, Kidney warned investors of an upcoming “revolution” if the 2030 global commitments made by major economies will be implemented.
“If you are an investor or asset manager, one thing you can be 100% certain of, there is a tsunami coming [to achieve the 2030 commitments]. The question is, will we ride the tsunami or get swamped by it?”
He said that the Inevitable Policy Response 2021 Policy Forecast allows investors to get a picture of what this change will look like.
The IPR, which was commissioned by the Principles for Responsible Investment (PRI) in 2018, is a project which aims to prepare institutional investors for the portfolio risks and opportunities associated with a forecast acceleration of policy responses to climate change.
Speaking at the webinar, Mark Fulton, Programme Director at the Inevitable Policy Response, said that investors will need to understand how credible the regional pathways to net zero will be.
“If you want to align your portfolio with net zero 1.5 [degrees], then you got to decide how you will look at that regionally; and then of course it is a much complex question with global supply chains.
“How much extra do we require out of the EU to get a convincing rapid 1.5 [degrees]; how much more out of the US; how much more of China?” Fulton asked, pointing also to the immense emissions coming from the Chinese coal fleet.
The IPR plans to release an updated Forecast Policy Scenario report which will contain more regional granularity in the second half of 2021. It will also publish a new 1.5-degree Required Policy Scenario, building on the International Energy Agency’s net zero work.
AXA’s 1.5 degrees pathway
French insurer AXA follows the target setting protocol of the AOA.
Soubranne explained that the members of the AOA developed science-based and medium-term 2025 pathways to achieve climate neutrality by 2050.
“This implies a sharp decrease in carbon emissions until 2050, and the few remaining emissions are offset by some carbon capture and sequestration. We decided to retain only the IPCC’s P1, P2 and P3 scenarios, which achieve climate neutrality without excessive recourse to carbon offsets,” she said.
AXA has committed to reducing its carbon emissions by 20% between 2019 and 2025.
Regine Richter, energy campaigner at NGO Urgewald, explained: “AXA’s coal policy is pretty comprehensive since they tackle coal plant developers, define absolute thresholds and have a clear phase-out date for coal by 2030 for the EU/OECD and 2040 for the rest of the world, which is in line with the 1.5-degree limit.”
To achieve its target, the insurer is also planning to take more steps in other carbon-intensive sectors, beyond previous divestments in coal and oil sands, according to Soubranne.
She admits however that we “rely on the assumption that some of our holdings, especially those with climate commitments approved by the Science Based Targets initiative, will decarbonise”.
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