Funds holding $10T told their ESG goals fall short
THE world’s sovereign wealth funds, representing about $10 trillion in combined assets, will end on the wrong side of history if they cling on to strategies that fail to acknowledge how rapidly the planet is overheating, according to the woman who presided over the Paris Agreement.
Christiana Figueres, the former executive secretary of the United Nations Framework Convention on Climate Change, says wealth funds need to update their strategies and stop just looking for ways to “take advantage” of the increase in global temperatures for economic gain.
“Sovereign wealth funds’ concern with climate change has so far focused overwhelmingly on managing climate risk and taking advantage of the opportunities resulting from the low-carbon transition,” Figueres told Bloomberg. “Given the gravity of the climate crisis, this is no longer sufficient.”
The industry’s failure to meet the moment means that trillions of dollars that could be mobilized to fight rising temperatures are still being channeled into strategies designed mostly to maximize economic returns, according to Figueres. Wealth funds “need to take an active role in reducing their portfolio carbon footprints,” she said.
Her warning comes amid growing anxiety that the investment management industry is using environmental, social and governance strategies as yet another way to generate more money, without making much of a meaningful impact on climate change or social justice. In Europe alone, fund managers have already had to strip the ESG label off $2 trillion in assets in anticipation of more rigorous regulations.
And the wealth management arm of Deutsche Bank AG made headlines earlier this week as it’s probed in the US and Germany amid allegations of greenwashing.
The former UN executive didn’t accuse wealth funds of greenwashing. But she bemoaned what she characterized as the industry’s failure to embrace strategies that commit to a lower carbon footprint. Scientists have made clear that cutting greenhouse gas emissions is the only hope the planet has, if it’s to avoid a climate catastrophe.