Forum Institutional

Asset owners can help drive the economic change we need. Here's how

Smoke and steam billows from Belchatow Power Station, Europe's largest coal-fired power plant operated by PGE Group, at night near Belchatow, Poland December 5, 2018. Picture taken December 5, 2018.

The climate emergency demands structural economic change - and time is running out Image: REUTERS/Kacper Pempel

Günther Thallinger
Member of the Board of Management, Investment Management, Environmental, Social and Governance (ESG), Allianz SE
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This article is part of: World Economic Forum Annual Meeting
  • Responsibility for climate protection falls especially on those who own and run businesses.
  • Asset owners must play a role in shaping the necessary structural changes.
  • A new, UN-convened alliance of asset owners is showing the way.

'Pacta sunt servanda'; agreements must be kept.

Signatories to the Paris Agreement have consented to “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”.

The agreement binds nations to undertake ambitious efforts to combat climate change. But nations are the sum of individuals. It is us who must act - as private individuals investing on our own behalf, as company leaders managing assets and portfolios, and as politicians responsible for households and stability in society.

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Climate change has made more and more of us understand that capitalism has external limitations. It is no longer possible to just continue. Economic systems will be reshaped, as businesses commit to a sustainable future with a focus on climate protection. The making and meeting of human demand must change - and this will drive fundamental structural changes. We must make this happen in the next five to 10 years. Time is running out.

With ownership comes responsibility

Those who own businesses carry the responsibility for their activities. Insurance companies, pension funds and foundations - so-called asset owners - must not only accept this fact; they must do their bit to promote business evolution and development. They must become truly active investors. Asset owners have to engage with businesses to ensure their target-setting is compliant with the 1.5˚C target of the Intergovernmental Panel on Climate Change (IPCC). Asset owners should, therefore, communicate net-zero emission targets for their entire portfolios. This is relevant for corporates, too, who will get the message that their investors will support the long-term change that is required.

Moreover, asset owners can work together to provide proposals for a reporting standard, ideally by expanding the very strong basis provided by the Task Force on Climate-related Financial Disclosures (TCFD). Expansion here would mean that in addition to climate change-driven capital impacts, they should also focus on real-world impacts (for example, greenhouse gas (GHG) emissions measured in gigatonnes).

Asset owners join forces to bring down emissions

Under the aegis of the UN, Allianz has helped to assemble a group of large asset owners, all of whom have committed to make their investment portfolios carbon-neutral by 2050. This group is called the UN-convened Net-Zero Asset Owner Alliance. The commitment that we have made individually and collectively means that our investment portfolios will reflect a global economy aiming to achieve net-zero GHG emissions in 2050.

By December 2019, the Alliance had grown to 16 large asset owners, who together manage almost $4 trillion in assets under management. And we keep on growing.

Many corporations and their financial partners are taking responsibility - and acting. This allows for optimism that is urgently needed to accept and drive the structural change we so urgently need.

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Related topics:
Forum InstitutionalStakeholder CapitalismClimate Action
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