Press Release

€33 trillion investor group: strong EU climate targets key to economic recovery & future growth

15.09.20

  • Global investors call on EU to commit to ‘no less than 55%’ GHG emissions reduction in 2030 climate target.
  • Report from European investor group highlights action needed to ensure strength and clarity of policy signals to support necessary flows of investment.

Global investors are calling on the European Commission and EU member states to raise Europe’s greenhouse gas emissions (GHG) target to ensure “at least” a 55% reduction in emissions by 20301. This is the minimum level of ambition required to achieve net zero emissions by 2050.

This is the key message of a policy report issued today by the Institutional Investors Group on Climate Change (IIGCC). Representing more than 250 members – mainly European pension funds and asset managers – with over €33 trillion in assets under management, the intervention highlights the importance the investment community is placing on the EU’s approach to climate change leadership.

The European Commission President, Ursula von der Leyen, is set to announce a proposed increased emissions reduction target on Wednesday. The target is of critical relevance to the future competitiveness and growth of member states, including delivery of the EU’s commitment to a sustainable economic recovery to COVID-19.

“The EU has shown it understands climate action and economic growth go hand in hand, and has the full backing of investors in creating a more resilient economic future across member states,” explains Stephanie Pfeifer, CEO, Institutional Investors Group on Climate Change. “Nonetheless, it’s imperative this vision is made real in the form of ambitious climate targets. The policy certainty this provides is critical to unlocking the increased private sector investment required to support clean growth and achieve a net zero future, as the foundation of a truly sustainable long-term COVID-19 economic recovery across Europe.

In relation, the report highlights:

  • “At least” a 55% reduction in emissions is required to limit global warming to 1.5 degrees. A “well above” 55% target is required when taking account of EU global ‘effort sharing’ obligations, in recognising existing historical emissions and economic capability.
  • A high level of ambition for 2030 is needed to support a more orderly and cost-effective transition in achieving net zero emissions, between now and 2050. Especially as delayed action will be harder to achieve.
  • Clarity is required from policymakers on pathways to achieving net zero emissions across specific sectors of the economy. This is related to the importance of concrete, near-term, sector-specific market signals that can guide investors’ decision-making.
  • The importance of further dialogue between investors and European Commission and member state policymakers, on further development and implementation of the EU’s Green Deal policy agenda.

The EU is a global front runner in terms of its commitment to pursuing net zero emissions and demonstrating to a commitment to action on climate change. An ambitious increase in its emissions reduction targets can help boost global ambition in the lead up to COP26 and reinforce European leadership on climate change. This is leadership investors have made clear they expect to see. In December 2019, 630 plus investors managing more than $37 trillion in assets wrote to world leaders stressing the importance and urgency of bolder action on climate change3.

However, if global effort sharing issues were to be considered, a reduction of well above 55%  would be more appropriate by 2030, since the EU has nearly already used its share of the global carbon budget and would arguably need to reach net zero emissions well before 20504.

Investors also stress the importance of ensuring clarity in how net zero emissions will be achieved at a sector level. Sectoral transition pathways can substantially accelerate the mobilisation of private finance towards a net zero future and help strengthen the market signals needed to unlock investment.

Investors commenting on the importance of sufficient ambition from the EU explain:

“Setting ambitious targets for reducing GHG emissions at the EU level is key to facilitating a transition to a green economy, as stipulated in the European Green Deal,” explains Jon Johnson, CEO, PKA. PKA’s members strongly support the green transition, and we are ambitious when it comes to investing sustainably. Setting goals for higher emissions reductions, and providing policy frameworks and support, will encourage even more sustainable investment from the sector as a whole.”

“This report sets out a clear call-to-action. We have to be far more ambitious in order to facilitate a smooth transition to ‘net zero’ and this will only be possible with clear, concrete and sector-specific pathways,” explains Ian Simm, CEO, Impax Asset Management. “We particularly support the call for more collaboration and dialogue between policy makers and the investment community. Although most of the required capital will need to come from the private sector, the pipeline of investment opportunities is still restricted by insufficiently detailed policy goals, inadequate market design and unacceptable levels of risk.”

“2020 looks set to be yet another year of physical climate change records of all the wrong sorts,” said Ingrid Holmes, Head of Policy and Advocacy at the International business of Federated Hermes. “As climate change impacts accelerate, the need for highly ambitious EU 2030 targets in line with net zero emissions by 2050, policy measures to enable the private sector to step up to deliver those goals and a focus on social factors to enable an inclusive transition of the sort envisaged by the European Green Deal has never been more important. We urge the EU to act.”

“The EU now needs to adopt a 55% emissions reduction target and set clear net zero transition pathways at sector level, which would provide clarity to the investment community and a much-needed push for the rest of the world to follow suit. This should in turn guide public policy and public spending, including green procurement, at EU and member-state levels, especially in the recovery from COVID-19,” adds Helena Viñes Fiestas, Global Head of Stewardship and Policy at BNP Paribas Asset Management. “The millions of euros of grants and credits that the EU is about to make to companies should be conditional on their commitment to meeting the emissions targets of net zero by 2050 and halving emissions by 2030, as set out in the recently developed, science-based EU Taxonomy.”

“The report sets out very clear recommendations, which will help direct capital flows into the transition of the European economy”, says Udo Riese, Head of ESG in Allianz Investment Management SE. “It is of utmost importance that the transition will be accelerated by joining forces between the public and the private sector.”

“Every day we increasingly see how our society is in a climate emergency with firenados, extreme floods and droughts around the world while the economic benefits and investment opportunities of renewable energy and renovating buildings are becoming even more important to create jobs in areas hard hit by pandemic lock-down policies,” adds Roelfien Kuijpers, Head of Responsible Investments, DWS. “Europe must lead the world by strengthening targets and policies, to ensure that all generations have a prosperous and liveable world.”

“Over the past year the European Commission has continued to show global leadership in tackling the immense challenges that climate change poses to us all. There has been overwhelming support, including from investors like LGIM, for the European Green Deal and the steps taken to ‘green’ the COVID-19 recovery plan,” said Alexander Burr, ESG Policy Lead, Investment Stewardship, LGIM. “Achieving net zero isn’t going to be easy and the clock has already started ticking. Setting a 55% reduction target for 2030 is ambitious but now non-negotiable, as is setting net zero sector pathways for companies to align their strategies and for investors to direct capital behind. European policymakers must continue to take bold regulatory steps and demonstrate to governments globally what action is needed if we are to put ourselves on a path to achieve the goals set out in the Paris Agreement.”

The report makes clear a high level of ambition in emission reduction through to 2030 can support a more orderly transition to achieving net zero emissions, and better distribution of efforts between now and 2050. It will also support a less costly transition by encouraging innovation to happen sooner, avoiding carbon intensive lock-in and reducing the potential for stranded assets. Analysis shows a 55% reduction in emissions by 2030 is entirely possible by upscaling mature technologies and accelerating the market development of others. Further reductions above 55% are possible with additional technology-based efforts and/or combining these with lifestyle changes (e.g. modes of travel, fleets of sharing vehicles, dietary changes, consumption and production patterns).

Given zero emissions means effectively decarbonizing all economic activities, ‘net zero transition pathways’ for each sector of the European economy – with concrete, near-term, sector-specific market signals – will be important to help adequately guide investor decision-making. The report sets out more detail on what the transition pathways should cover to ensure investors have necessary clarity on related policy signals and timetables.

The report also highlights an EU’s energy efficiency target to over 40% in final energy consumption by 2030 (an increase from the current target of 32.5%), and a renewables target of over 40% in final energy consumption by 2030 (an increase from the current target of 32%), are also necessary in line with the broader net zero policy objective.

– Ends –

Media Contact:

Tom Fern, Head of Communications, IIGCC

E-mail: tfern@IIGCC.org

Mobile: +44 (0) 7867 360 273

Notes to Editor:

See here for a version of the report.

  1. This is emissions reductions from 1990 levels.
  2. See ‘A Sustainable Europe Investment Plan’, January 2020, European Commission.
  3. See here for the related announcement and here for the statement sent to governments.
  4. See ‘A possible 2050 climate target for the EU’, New Climate Institute and Climate Action Tracker for the EU.

About IIGCC

The Institutional Investors Group on Climate Change (IIGCC) is the European membership body for investor collaboration on climate change and the voice of investors taking action for a prosperous, low-carbon future. IIGCC has more than 250 members, mainly pension funds and asset managers, across 16 countries, with over €33 trillion in assets under management.

For more information visit www.iigcc.org and @iigccnews.