Consistently Align Financial Flows with Green Outcomes, Deputy Secretary-General Urges Investor Risk Summit, Citing Record Economic Losses from Climate Disasters
Following UN Deputy Secretary-General Amina Mohammed’s remarks, as prepared for delivery, at the 2018 Investor Summit on Climate Risk: Capturing the Global Investment Opportunity in the Paris Agreement, in New York today:
I am pleased to be with you at this important and timely summit on climate risk and to discuss the opportunities that are there for us to seize through decisive climate action.
The destructive force of climate change has been underscored by the recent spate of tragic disasters across the world. 2017 ties 2011 for the highest number of billion-dollar disasters for a single year. The direct economic cost last year of predominantly climate-related disasters, from the Caribbean and southern United States, to South-East Asia and the Pacific, are estimated at nearly $400 billion.
While the news media is transfixed by the short-lived impact of a storm, recovery periods lose the media’s interest. The long-running pain and economic devastation of droughts and floods are often pushed to the edges of our consciousness over the immediacy of a hurricane or a cyclone.
What unites us is that those who are less well off have less ability to recover and rebuild. Those who do not have strong social bonds in a community or communities on the edge of society are less resilient.
The human costs of failing to address climate risks are immense, perhaps immeasurable. But, today, we need to focus on measurable risks, most of all to the economy and the global financial system, and to you as key business actors and partners to address this growing barrier to sustainable development.
You are here today because you have assessed that climate risks impact the bottom line, your investment portfolio. Climate risks impact business models and the integrity of the pensions and savings systems. I also hope you are here because you may conclude that, without addressing this dilemma, climate change poses a systemic macroeconomic risk and a risk to the financial system itself.
I would like to focus my comments today on three areas where I want to urge you to move forward with greater ambition. First, urgency. Many of you here today have pledged to align your investment portfolios towards a below 2°C scenario, in line with the goals of the Paris Agreement.
I welcome Climate Action 100, which involves many of you, and its focus on leveraging the collective power of investors with combined assets of $27 trillion to accelerate the decarbonisation of the world’s most carbon-intensive, publicly listed companies. Here in New York City, a few weeks ago, Mayor [Bill] de Blasio announced plans to divest New York City’s five pension funds from $5 billion in fossil fuel investments out of a total of $189 billion.
Divesting from carbon intensive assets and aligning with the goals of the Paris Agreement is a complex realignment. Your voices need to be clear with regulators, central bankers, finance ministers, board rooms and C-suites for the gathering momentum to continue to gather pace and to become a truly global phenomenon.
Second, consistency. While we see divestment from fossil fuel assets at more than $5 trillion, last year, the global community invested another $825 billion in fossil fuel use. Once again, your voice and the actions you take will speed the pace with which countries improve the consistency and alignment of their approach from their domestic policies, to the behaviour of their national development banks, to their export credit guarantee agencies, to the regulation of their sovereign investment funds, public pension funds and their reaction to moves for transparency.
Which brings me to the third point: transparency. The Financial Stability Board’s Task Force on Climate-Related Risk Disclosure exemplifies the potential for mixing pragmatism and values-alignment in collaborative and innovative approaches for ambitious progress and a sustainable future. I am pleased to see so many companies announcing that they will adopt its principles. I am also pleased to see Governments beginning to enshrine its approach in legislation.
But, it will be you in this room that reward those that are transparent about their risks and the measures they will use to manage them, and those who can address comprehensively how they will address their future business in a 2°C climate scenario.
It is only when we have greater transparency that we will be better able to understand the contours of climate risk and then be able to engage all stakeholders in how to best manage that risk, especially those that sometimes rightfully fear that they will be left behind.
The vehicle for the transformation we need is the Paris Agreement. The Paris Agreement lays a foundation for some of the most ambitious, cooperative action ever conceived in the history of our global community. Governments are building on this foundation, with more than 170 countries having ratified the agreement. Their responsibility is to shape the conditions that will make it easier for you to act – for you to make responsible decisions that support global action on climate change.
[Nationally determined contributions] will provide an entry point at the country level to invest in climate zction. Today, there are more than 1,200 pieces of climate legislation across more than 60 countries, a clear policy signal of the direction of travel. Thirteen per cent of global gross domestic product (GDP) is already covered by some kind of carbon price, and this will increase rapidly as China’s national carbon market is rolled out, the Americas grow their cooperation and Europe takes measures to make its pricing more effective.
Moving rapidly towards a low-carbon, climate-resilient future also requires action on the way finance itself works. Bank of England Governor Mark Carney has argued that to address climate goals we need to “build a new financial system — one that delivers sustainable investment flows”. We fully concur with him. Fixing finance is not a new agenda, but the need to align financial flows with climate-friendly outcomes makes it all the more urgent.
China’s State Council has adopted a set of 35 recommendations by seven ministries to “green” the country’s financial system, the most ambitious commitment of its kind. Challenging the finance system to be bold needs joint action by policy makers, regulators and the market. Finance is key to invest in the future. Together, we need to shape and guide financial systems, regulations and measures to be fit for this purpose. There cannot be one grand plan. This we know. But, there needs to be one grand ambition. We can scale up through the actions of many, and by working together.
Ambition means a concrete commitment to change course, represented through visible action. Ambition means continuous experimentation and innovation, rapid feedback and learning, and pushing the boundaries for scale in line with this commitment. Ambition means acceptance that solutions will come from diverse places, institutions and people, working together.
In September 2019, the Secretary-General has signalled that he will bring together Heads of State and Government, key stakeholders, including you in the room, to ensure that ambition is sufficiently calibrated for 2020 and beyond. Time is against us and I ask that you bring with you all the partners that can make the Paris Agreement a reality. The United Nations will continue to play its many roles in catalysing finance to address climate and other development challenges; and to do this not just at global level, but also at regional, and very important, at the country level.
Globally, we can convene the actors that together can make a difference; bring our deep working knowledge of country contexts across the world; continue our core work on peace and security and humanitarian action to deconflict and de‑risk environments; and work in close partnership on the ground as we support countries to take the actions that will bend the emissions curve and transform growth and development pathways towards a peaceful and sustainable future.
Today, we have the opportunity to show each other and the world that we hear and will respond to the urgent call for climate action by ensuring we each play our role in redirecting finance towards our common ambition in securing a world that leaves no one behind.