Financial industry needs to concentrate its efforts to curb climate change in time

There are eight months left until the climate change conference in Paris, which will bring together world leaders to establish a global agreement. Alongside this we need the innovative capabilities of the business sector, combined with the financial industry’s mechanisms to enable us to make the transition to a low-carbon society. These are the thoughts of the Church of Sweden in its latest report on responsible investment, which is being published today.

“2014 was the year that placed the climate issue firmly on the financial industry’s agenda. Pressure is increasing on capital owners and asset managers to serve as an active force for change, and we have noticed that an increasing number are beginning to take action. A rush to invest in green bonds is one example. But the industry needs to concentrate its efforts if it is to be a clear, positive force,” says Anders Thorendal, Chief Financial Officer at the Church of Sweden.

The Church of Sweden began its transition to more climate-friendly asset management back in 2009 by investing in solutions and avoiding oil and coal. The result is outlined in the report Responsible Investments 2014,which is being published today. For several months now the Church of Sweden has also been a member of The Portfolio Decarbonization Coalition, a group of investors that aims to encourage the financial industry to take a more climate-friendly approach. Currently, investors representing USD 35 billion participate, but the target is to attract USD 100 billion ahead of the Paris conference.

The Church of Sweden has identified several obstacles that need to be tackled if more capital is to be invested in sustainable and climate-friendly businesses.

The view of risk is too narrow: The prevailing view of risk within the industry is too narrow, as risk analyses rarely cover issues such as climate, other environmental issues, human rights and anti-corruption. Risk should also be more about failing to achieve the long-term return target than deviating from the benchmark, which is the current standard.

Short-term reward systems: Reward systems in the financial industry are often based on short-term, annual performance. We want to see a move towards more long-term incentives, thereby increasing the chance of sustainable investment decisions.

Need for new investment solutions: The industry needs to find new ways of channelling money to solutions, with the support of legislation. The International Energy Agency estimates that thousands of billions of dollars need to be invested in renewable energy systems each year until 2050 to limit global warming to two degrees. The industry and politicians need to sit down together and find a way forward on this issue.

For questions and interviews, contact Anders Thorendal at anders.thorendal@svenskakyrkan.se, tel: +46 (0)18-16 95 88