Aviva Investors has called for global investment principles to be better aligned with the Paris Agreement goals and for the creation of an International Platform for Climate Finance.
Aviva first proposed the idea last year, with the aim of ensuring global capital is channelled into sustainable parts of the economy and for markets to realise the Paris Agreement.
After discussions with other asset managers, advisory firms, management schools, industry bodies and foundations, Aviva has also proposed the core principles of the UN-affiliated finance initiatives be updated to better align with net-zero ambitions and so they fully support the Paris Agreement goals.
Mark Versey, chief executive at Aviva Investors commented the current international order “pre-dates awareness of the climate crisis and was originally set-up with the primary goals of sustaining world peace and supporting global economic growth”.
“Since then, these frameworks have not been revisited, reconfigured, or redesigned to reflect other issues affecting the world today,” Mr Versey said.
“To these goals, we need to add the challenge of climate change, which represents a growing and catastrophic threat to life on our planet. We believe an International Platform for Climate Finance could play a critical role in harnessing the considerable power of finance to tackle the climate crisis and support long-term net zero objectives.”
The Aviva suggestions, as laid out in its white paper, Harnessing the international financial architecture to deliver a smooth and just transition, are:
1. Invite the OECD to bring forward proposals for convening an International Platform for Climate Finance (IPCF).
2. Recommend that the G20/OECD principles of corporate governance be updated; develop a Convention on Fiduciary Duty and Climate Change; and update the OECD Framework for Consideration of Prospective Members to require net-zero country commitments.
3. Invite IMF Board of Governors to clarify that the IMF’s mandate to promote sustainable growth and financial stability includes consideration of climate risk, and extend its Technical Assistance Climate Change Policy Assessments (CCPAs) to become a required part of all IMF Article 4 economic surveillance work.
4. Invite the World Bank to report back to the G20 Indonesia Summit in 2022 on how it can ensure the Systematic Country Diagnostic and the Country Partnership Frameworks are most supportive of the implementation of NDCs and to invite the International Finance Corporation to update, develop and extend its Environmental and Social Performance Safeguards to be more focussed on transition plans and Science Based Targets (SBTs), as well as Task Force on Climate-related Financial Disclosures (TCFD) requirements.
5. Clarify that the mandates of the Financial Stability Board, Basel Committee and International Association of Insurance Supervisors include the consideration of climate risk. Invite regulatory supervisors to report on how they intend to update regulation to better manage the exogenous and endogenous nature of systemic climate risks, in particular to analyse potential unintended consequences of the structure of banking and insurance prudential requirements.
6. Encourage finance ministries and central banks to participate in, and implement recommendations from, the Coalition of Finance Ministers for Climate Action and Network for Greening the Financial System (NGFS).
7. Invite the United Nations to collaborate with OECD IPCF to convene a UN Finance Assembly, including finance minister participants of Helsinki Principles, central bank governors of NGFS and CEOs of systemically important financial institutions (SIFIs).
8. Replicate the 2021 alignment of the country hosts of the G7 and G20 with UNFCCC COP co-hosts for the future triennial stocktakes and the five-yearly reviews of progress of the Paris Agreement. Importantly, this should be supplemented by the addition of a G77+ country as a third co-host for each of these COPs to maintain the principle of inclusivity.
Steve Waygood, chief responsible investment officer at Aviva commented the international community still “lacks a cohesive strategy to finance the Paris Agreement”, with the world falling short of meeting its targets.
“To deliver that strategy, we need enhanced international cooperation between public and private financial institutions and a mechanism to track progress,” Mr Waygood said.
“We think it’s right to examine international financial architecture, to allow greater focus on raising the amount of private capital invested in climate adaptation and mitigation solutions globally, how this money can best complement public finance, and how public policy, globally, regionally and nationally can help accelerate capital flows. As we stare down the barrel of the climate crisis gun, now seems the time to take a different approach.”
